Zimmerman v Perkiss

Costs in defamation proceedings

1. The starting point is s 40 of the Act, which 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."
2. Section 40 defines "settlement offer" to mean any offer to settle the proceedings made before the proceedings are determined, including an offer to make amends and, by implication, the offers made during the 28-day concerns notice period.
3. As well as s 40, there are provisions the making of offers of compromise pursuant to UCPR rr 20.26 and 20.27. The interaction between s 40 of the Act and the offer of compromise/Calderbank system is discussed in Nationwide News Pty Ltd v Vass [2018] NSWCA 259 and Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2 ("Zoef (No 2)"). There was an offer of compromise made by the plaintiff (for $30,000) made after the serious harm hearing was set down, but the parties agree that this is irrelevant to the costs application.

The concerns notice and the Calderbank offer

1. The concerns notice sent to the defendant on 6 January 2022 commenced as follows: "1. Published matter to third parties We are instructed that on Tuesday, 12 October 2021 at 12:13 PM and 9:13 PM, you authored and published multiple direct messages to Ms Sarah McPherson of Albion Bark Lodge on the website www.facebook.com (collectively, the "Messages"). We enclose a copy of your Messages for ease of reference. Our client also instructors that the messages were sent to her current employer. Further, and as a matter of common knowledge, Facebook acts as a communications service: section 144 of the Evidence Act 1995 (NSW). It can reasonably be inferred that people to whom the Messages were sent would read the Messages."
2. The concerns notice went on to set out particulars of identification, imputations of concern, a claim for misleading or deceptive conduct, and then to make the following request: "5. Request Our client instructs us that it [sic] has suffered financial loss resulting from difficulty procuring alternative employment (which may be ongoing), purchase of equipment for new employment, humiliation and damage to reputation within the dog grooming industry and future employers. Written offer to make amends In light of this, our client requests that you provide our office with a written offer to make amends to our client pursuant to section 15 of the Act on or before 5:00 pm on Monday, 24 January 2022, incorporating the following; 5.1 An offer to publish a message/s on the website www.facebook.com to Sarah McPherson of Albion Bark Lodge a reasonable correction of the Statements and Imputations of Concern and an apology in relation to those Statements and Imputations of Concern; 5.2 An offer to tell any known parties, as identified by our client, to whom the defamatory matter was published that the matters were defamatory of our client; and An offer to pay expenses reasonably incurred by our client up until the date of this letter and expenses which will be reasonably incurred by our client in considering any prospective offer provided by you in the amount of $4,100.00 (including GST). Cease and desist Further, our client requests that you: 5.4 Immediately remove the messages from the website www.facebook.com; and 5.5 Otherwise undertake to cease and desist from making any further publication, including in writing or orally, often concerning our client to any other person as at and from the date of this letter. Please treat this letter as a concerns notice for the purposes of section 12A of the Act. Should you not attend to the above in full, we will seek instructions to commence legal proceedings against you, without further notice. The relief sought may, without limitation, include action for damages and/or otherwise injunctive relief. Costs incurred associated with the commencement of said legal action and interest accrued will be payable by you in the event that said legal action is successful. We reserve all of our clients rights."
3. The precise date on which this letter was received is uncertain. It was apparently also sent by email to the defendant's daughter, who sought legal advice from Mr Csapo after the letter was received by her mother, but I have no certainty as to the dates. Mr Csapo obtained instructions from both the defendant and her daughter, and managed to reply shortly before the 28-day period expired, namely on 3 February 2022.
4. In his reply, Mr Csapo set out all of the facts and matters concerning the allegation of stolen scissors, as follows: "I confirm I act for Kim Perkiss who has provided me your letter dated 6 January 2022. Background My client is an employee of Perky Pooches, the former employer of your client. My client is also the mother of the owner of Perky Pooches, Tiarne Perkiss. My client has no ownership or financial interest in Perky Pooches other than as an employee. Perky Pooches is a business offering the services of dog grooming and similar. The vision of the services includes the use of certain implements, including scissors specific to the purposes of dog grooming. Some employees bring their own tools to work and often leave them at the premises overnight and when the employees are not present. In doing so, my client understands the business takes on liability for the tools. Theft of the scissors On Monday, 20 September 21, your client left the premises of Perky Pooches with scissors belonging to another employee (Annette) in her bag. My client is aware that Tiarne Perkiss had discovered the scissors were missing and that your client had admitted that they were in her bag. The scissors in question had been at the premises for over five years and she never took them home. My client is aware that your client left work at about 1:45 PM after spending an extended lunch in the lunchroom and having a discussion with Tiarne. Unbeknownst to my client until discussing the matter with Tiarne following the receipt of your letter, Tiarne had reviewed the CCTV security footage and noted that another employee, Caitlin, remove the scissors and place them in your client's bag. Nevertheless, as far as my client is aware, your client did not inform Tiarne of this and did not return the scissors and left the premises with them. My client does not know what happened to the scissors after your client left the premises with them. My client is aware that the premises have CCTV security cameras. Time off work My client is aware that your client did not return to work thereafter and provided medical certificates stating she was "unable to attend for medical reasons". Given the vagaries of that comment, my client assumed that she took time off on the basis of your client being stressed about being caught and questioned over the scissors. Due to staffing arrangements, my client was left with the responsibility of taking up the slack left by your client not returning to work. Your client's father returned your client's key for the premises on 28 September 2021. My client is aware that your client resigned on 8 October 2021 and failed to provide the required two weeks' notice. My client is aware that Perky Pooches paid your client the full amount she would have received had she provided two weeks' notice, even though this was not required. Some weeks later your client's mother attended Perky Pooches to return your clients uniform, including a grooming jacket. She shook the items at my client through the glass viewing window and slam [sic] them on the front counter as no one was able to attend to her, as the salon was very busy at that time. When my client asked, "Who was that?", A fellow staff member said, "That was Katie's mum. She was looking for a fight with you and I was going to video it." Your client's subsequent employment On 12 October 2021, my client observed on Facebook a post relating to your client's new employment with Albion Bark Lodge. As far as my client was aware, the issue of the stolen scissors had not been resolved and believed it was her responsibility to inform your client's new employer of the circumstances. It was at that time that my client sent the messages alleged. The messages contain the truth as my client understood it at that time, having not been involved with any of the further interactions between Tiarne and your client. Messages Within an hour of posting the messages, my client "unsent" the messages, meaning that they were permanently removed and deleted from both the messaging system within Facebook and the receivers messaging system within Facebook. As far as my client is aware, only Sarah of Albion Bark Lodge received the messages, and then only for a very short period of time. Your client's alleged loss My client does not accept that your client has suffered any financial loss from difficulty procuring alternative employment, purchase of equipment for new employment, humiliation or damage to reputation within the dog grooming industry and future employers. Your client has continued her employment with Albion Bark Lodge and has publicly posted photos wearing the same boots and clothing (other than uniform) as she wore at Perky Pooches. Mutual customers of Perky Pooches and Albion Bark Lodge have attended upon Perky Pooches and said to my client "Sarah and Katie say 'hi'". This occurred as recently as just before Christmas 2021. The two businesses are complementary in that one provides dog grooming services and the other provides dog "day care" services. The messages were private and limited to Sarah of Albion Bark Lodge and were removed shortly thereafter, and as far as my client is aware your client maintains her employment with Albion Bark Lodge."
5. He went on to make the following offer of "resolution": "Resolution As far as my client was aware, the matter was finalised (but for the unresolved issue of the stolen scissors, which is ultimately a matter for the owner of Perky Pooches to resolve), in particular given the greetings passed through mutual customers, and my client is very surprised to have received your letter. In the circumstances, given that the messages contained the truth as my client understood at the time they were sent, their near immediate removal, your client's assumed ongoing employment in the industry (noting the geographical proximity between our respective clients' place of employment), and the communications passed from your client and her employer to my client through mutual customers, it is submitted that this matter has already been resolved and did not require this action by your client. My client does undertake not to make any further publication, including in writing or orally, of and concerning your client to any other person unless required to as part of any police investigation, or unless required to as part of her employment with Perky Pooches. Accordingly, I look forward to confirmation that your client will cease any further action and this matter is resolved."
6. There was no reply by the solicitors for the plaintiff, who commenced proceedings without any further notice. In response to an enquiry from the solicitor for the defendant as to whether they had received his lengthy letter, the solicitors for the plaintiff replied: "We confirm that we received your letter. The letter failed to address the serious and significant issues raised in our correspondence in a meaningful or helpful manner. As a consequence, our client has commence proceedings against your client. For your convenience we attach a copy of the sealed statement of claim that will be served on your client shortly."
7. Neither solicitor referred in terms to "serious harm" in the correspondence. However, there is no admission from either party that they were unaware of the impact of the new provisions for concerns notices. These new provisions were aimed at keeping minor matters out of court, and not at winning or losing. This is directed not only to the notice period but the litigation generally. In particular, however, the concerns notice procedure was intended to be "the pre-eminent mode of dispute resolution": Georges v Georges [2022] NSWDC 558 at [60] per Abadee DCJ.
8. Mr O'Connor submits that the plaintiff's failure to proactively engage in the negotiation process is a fatal defect in terms of the policy behind the concerns notice procedure. Failure to reply, coupled with the disdainful terms of the dismissal of Mr Csapo's follow-up email of 23 March 2022, is contrary to the purpose of s 12A.
9. Ms Hall submits that the misconduct of the defendant in sending the messages at all is compounded by her refusal to offer to publish a reasonable correction and apology as requested in paragraph 5.1 of the plaintiff's concerns notice. I also note the response does not refer to the request for payment of costs in the sum of $4100.
10. The second offer made by the defendant was a Calderbank offer dated 10 May 2022. As is often the case with Calderbank offers, it contains a great deal of factual information and for that reason I set the contents of this letter out in full: "Perkiss & Zimmerman - Defamation Matter We refer to the above proceedings and to the court's recent order listing the matter for hearing of the defendant's application pursuant to section 10A(5) Defamation Act (the Act). We refer to the following facts and matters which ought not be in dispute: 1. Perky Pooches is a dog grooming business located at Oak Flats. 2. Albion Bark Lodge is a business which provides "doggy day-care" services. Albion Bark Lodge is located in Albion Park, which is a neighbouring suburb to Oak Flats. 3. Perky Pooches and Albion Bark Lodge have a number of shared clients. 4. In 2021 the Defendant was employed at Perky Pooches. 5. In 2021 the Plaintiff was also employed at Perky Pooches. 6. In about late September 2021, specialised scissors valued at about $1,000 used to groom dogs at Perky Pooches went missing. 7. The Plaintiff was approached by the owner of Perky Pooches (Tiarne Perkiss) as to the whereabouts of the scissors. 8. The Plaintiff then stopped coming to work at Perky Pooches. 9. On 8 October 2021 without returning to work, the Plaintiff formally resigned from her employment at Perky Pooches. 10. On 12 October 2021 Albion Bark Lodge issued a post on Facebook announcing that the Plaintiff was their new employee. 11. On being informed of the fact the Plaintiff was an employee of Albion Bark Lodge, on 12 October 2021 the Defendant sent a direct message via Facebook Messenger to the owner of Albion Bark Lodge (since understood to be Sarah McPherson (Ms McPherson), - which is the representation relied on in the proceedings - at the time believing the Plaintiff had stolen the scissors. 12. The Defendant only sent a direct message on Facebook Messenger to Ms McPherson, the owner of Albion Bark Lodge - she did not post the message on Facebook in any public-facing manner. As such, the message was sent by the Defendant for the sole purpose of the message only being read by Ms McPherson. 13. At the time the Defendant sent the message to Ms McPherson, the owner of Albion Bark Lodge, the Defendant believed the Plaintiff had stolen the scissors and was informing the owner for the purpose of warning her. 14. Early on the morning of 13 October 2021, within 7 or 8 hours after the message was sent to Ms McPherson, the Defendant cancelled (or "unsent") the message. 15. The Concerns Notice issued for the Plaintiff dated 6 January 2022 was sent approximately three months after the Defendant sent the message to Ms McPherson dated 12 October 2021. 16. In the three months from 12 October 2021 to 6 January 2022 when the Concerns Notice was sent, the Plaintiff sent messages through shared clients to say "Hi" to the Defendant on a number of occasions. 17. In the three months from 12 October 2021 to 6 January 2022 when the Concerns Notice was sent, the Plaintiff remained employed by Albion Bark Lodge. 18. In the five months since the Concerns Notice was sent on 6 January 2022, the Plaintiff has remained employed by Albion Bark Lodge. 19. Despite the message being sent by the Defendant on 12 October 2021 to Ms McPherson, the owner of Albion Bark Lodge, the Plaintiff has retained her employment with Albion Bark Lodge for the past eight months. The Defendant says that having regard to the above-mentioned facts and matters, the Plaintiff will not in the circumstances be able to demonstrate that she has suffered, or is likely to suffer, any harm, let alone serious harm, for the purposes of s10A of the Act. Accordingly, the Defendant offers to settle the proceedings on the following terms: 1. Within 7 days, the Defendant will issue a written apology to the Plaintiff and will send a message to Ms McPherson to inform her that she sent the message dated 12 October 2021 in error. 2. The proceedings be otherwise dismissed. 3. Each party is to bear their own costs of the proceedings. Given the timetable for preparation of evidence and submissions for the hearing of the Defendant's s 10A application, the Defendant's offer is open for written acceptance by the Plaintiff until 5.00pm on Friday,13 May 2022. The Defendant's offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333, The Defendant reserves her rights to tender a copy of this letter on any application for costs of the proceedings, including any application for indemnity costs, should this offer be rejected and the Defendant obtains a determination by the Court more favourable than the terms of this offer."
11. This offer was on for a very short time, but was made at a particularly significant moment in the litigation, as Mr O'Connor points out in his written submissions, in that it was made 5 days after the court had ordered, on 5 May 2022, that the serious harm element in s 10A should be dealt with as a preliminary issue. There was no response and the offer lapsed.
12. The final point to note in relation to s 40 is that, while the plaintiff's offer of compromise in June 2022 was stated by the parties to be irrelevant, it is still evidence that the plaintiff did make an offer, a factor in the plaintiff's favour in relation to s 40: Trkulja v Yahoo! Inc LLC (No 2) [2012] VSC 217 at [12] (Kaye J).

The plaintiff's submissions

1. Ms Hall submits that the starting point should be that these were false allegations, maliciously made and never corrected, and that the plaintiff was unsuccessful because of a factor outside her control, namely whether the evidence of Ms McPherson was accepted. An established exception to the general rule of costs following the event occurs where the successful party's conduct brought about the litigation: Ritter v Godfrey [1920] 2 KB 47. At 66, Eve J stated: "… The judge must eliminate from consideration the conduct constituting the alleged cause of action, and must then enquire whether the defendant has so conducted himself ante litem motum (1) as to induce in the plaintiff's mind the reasonable belief that there is no valid defence to the claim, or (2) has so Ms conducted himself as to have goaded the plaintiff into a litigation on which he would never have embarked but for such misconduct".
2. Ms Hall also draws to my attention the concept of a party doing what is called "a wrong to the public" (at 61 per Atkin J), which she submits and extended conduct which is not criminal but is deplorable. Ms Hall submits that the deplorable nature of the defendant's conduct entitled the plaintiff to act as she did in the course of the concerns notice proceedings and that she should not be penalised for failing to explore resolution of the proceedings out of court. The plaintiff was entitled to be angry and indignant about the lies told about her, maliciously, in circumstances where it could have cost her job and, if the allegation became widespread, impacted on her career.
3. Ms Hall submitted that the plaintiff's solicitors were entitled to disregard the reply dated 3 February 2022 on the basis that there was a failure to provide a correction at least of what was clearly a malicious and mischievous statement. The defendant could have offered to do so, and should have done so. There was no need for a letter from the solicitors for the plaintiff in reply requesting that this be done; this was a step that the defendant could have taken unilaterally.
4. As to the Calderbank offer, viewed on Calderbank principles, Ms Hall submitted that it was not unreasonable of the plaintiff to have rejected the offer, for the following reasons: 1. The plaintiff rejected the offer at a time when the reasons why she was ultimately unsuccessful could not have been known or predicted, in that she lost her case due to an assessment of reliability and credibility about a witness, Ms McPherson. 2. The offer lacked a genuine element of compromise and was essentially a 'walk away" offer. It was essentially an invitation to surrender. 3. It was not open for a reasonable period in that it was served by email on 10 May 2022 at 3:54 PM and is expressed to be open only until 5 PM on 13 May 2022. Evidence had yet to be served and no submissions had been prepared and the plaintiff's ability to assess the reasonableness of the offer without this material and without sufficient time was significantly impeded. 4. This was the first time the question of serious harm was to be determined and assessment of prospects in terms of legal merit would have been particularly difficult.
5. Alternatively, Ms Hall submits that there should be no costs order because these proceedings were akin to a "test case", in that this was the first time a hearing on the issue of serious harm would take place.

What costs orders should be made?

1. Section 10A, adapted from s 1 of the Defamation Act 2013 (UK), was enacted as a reform to discourage the bringing of cases likely to result in modest damages awards, where the costs were out of proportion to the damages. Its purpose has been widely discussed. In Newman v Whittington [2022] NSWSC 249, Sackar J sets out the history of this important reform, with its emphasis on early non-litigious resolution. This decision, handed down on 24 February 2022, was available to both parties. There were, in addition, articles, Parliamentary speeches and practitioner seminars about the new legislation and the importance of the new concerns notice process. I set out links to the explanation given by the Attorney-General for New South Wales, Mr Mark Speakman SC MLA in his Second Reading Speech (at https://www.parliament.nsw.gov.au/Hansard/Pages/HansardResult.aspx#/docid/HANSARD-1323879322-111420/link/63) (for a YouTube link, see https://www.facebook.com/watch/?v=336492017350972).
2. Mr Speakman SC MLA's careful and clear analysis of the purpose of the concerns notice process is not an account of complex legal principles but of common-sense measures designed to discourage the "defamation nation" proliferation of minor claims over social media or similarly trivial publications. He explains the importance of these reforms to discourage what he calls "the increasing use of defamation law for trivial and vexatious matters, including neighbour disputes and instances where individuals sue for comments made on digital platforms" where the claims are "relatively minor and with low damages but result in disproportionately high legal costs for both the plaintiff and the defendant". This is not only financially crippling for any ordinary Australian family caught up in a defamation claim but also, as Mr Speakman SC MLA points out, is "placing a substantial burden on court resources".
3. The whole purpose behind the concerns notice procedures set out in ss 12A and 12B of the Act is to encourage the parties in dispute to attempt resolution of the proceedings without going to court. The solicitors for the defendant sought to participate in that process but the solicitors for the plaintiff never responded or sought to take part in the debate.
4. One explanation for not replying that was not touched upon by either party is that the 28-day period was about to expire when the defendants solicitors said their response on 3 February 2022. I was not provided with any explanation as to any reasons for delay, such as the time of year, but I think it noteworthy that Mr Csapo clearly took very extensive instructions and set out a great deal of information in his reply.
5. Can it be said that the obligation to enter into settlement negotiations is one that stops on the 28th day of the notice period? This is likely to be a common problem in cases such as this, where a considerable amount of detail may be required before advice can be given, as 28 days is not a long period of time for an ordinary member of the community with little experience of court proceedings to obtain legal advice, particularly over a holiday period.
6. The answer lies in the observations made 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. This was the case here. As the contents of the correspondence set out above makes painfully clear, the facts of this case always fell within the parameters of what Hunt J, in Lazarus v Deutsche Lufthansa AG (1985) 1 NSWLR 188 at 190 called "a tempest in a teacup".
7. In those circumstances, while there are compelling arguments about the malicious and untruthful statements being such as would inflame the plaintiff to commence proceedings, the plaintiff's solicitors never engaged in any meaningful way in the negotiation process required by s12A after sending their concerns notice. Whether the 28 day period had expired or not, the focus should always have been to resolve these issues without commencing court proceedings.
8. Ms Hall is on surer ground in relation to the Calderbank offer, in that it is a walkaway offer open for a very limited time, although it does include an apology. However, little time was necessary, in circumstances where a preliminary hearing on serious harm had just been set down and where the difficulties of proving serious harm, particularly given the failure to specify these in the statement of claim, should have been at the forefront of both parties' minds.
9. By reason of the failure of the solicitors for the plaintiff to engage in the process envisaged by the concerns notice procedure and the Calderbank offer served after s 10A was raised, as well as the factors in s 40, I am satisfied that the plaintiff should not only pay the defendant's costs of the proceedings, but should do so on an indemnity basis. Notwithstanding the wrongful conduct of the defendant in sending the messages, no adjustment to those costs should be made to allow for asserted misconduct. As Mr Speakman SC MLA points out in the Second Reading speech, social media abounds with publications of this nature.
10. This brings me to the final argument put by Ms Hall, namely that these proceedings were akin to a test case and that there should be no costs order as a result of the novelty of the issue.
11. As noted above, there has been extensive discussion in the legal profession about the changes to the legislation and how these will impact upon the conduct of litigation in the future. While there are complexities in the amendments to the legislation, the introduction of a procedure designed to promote non-litigious resolution is not a topic about which members of the legal profession are inexperienced or uncertain.
12. This was always a very minor case. Even without a cap on damages, publications to one person have frequently been awarded modest sums: see, for example, the award of $5,000 in Cush v Dillon; Boland v Dillon (2011) 243 CLR 298; [2011] HCA 30. In those circumstances, it was unwise of the plaintiff to commence these proceedings without better evidence than she had, and even more unwise for her to continue them when she could have settled the matter at a very early stage, when her costs were still manageable.
13. Finally, although both parties addressed me on an "all or nothing" basis, I gave consideration as to whether a percentage of the costs should be deducted in relation to the issues raised by Ms Hall. I am satisfied, however, that this is a clear case for the making of an indemnity costs order for the whole of the proceedings.

Order: 1. The plaintiff to pay the defendant's costs of these proceedings on an indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2022