Callan v Chawk (Costs)

Case [2023] FCA 1198

FEDERAL COURT OF AUSTRALIA

Callan v Chawk (Costs) [2023] FCA 1198

File number(s): NSD 785 of 2021
Judgment of: HALLEY J
Date of judgment: 10 October 2023
Catchwords: COSTS – application to vary costs order – where applicant entitled to an award of indemnity costs from 11.00 am on 4 August 2022 – where costs to be determined on a lump sum basis – where costs order is not to be stayed pending determination of appeal in the proceeding – where pre-judgment interest for the period up to 3 August 2023 is to be fixed in the amount of $6,873.78
Legislation: Federal Court Rules 2011 (Cth) rr 1.35, 25.14, 40.02
Cases cited:

Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112

Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (No 2) (1991) 30 FCR 548

Callan v Chawk [2023] FCA 898

Camm Cattle Company Pty Ltd v Acumen Finance Pty Ltd(No 3) [2021] FCA 1611

Colagrandev Kim [2022] FCA 409

Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1

Gill v Ethicon Sárl (No 8) [2020] FCA 771

Hardingham v RP Data Pty Limited (No 2) [2021] FCAFC 175

JMC Pty Ltd v Commissioner of Taxation (Costs) [2023] FCAFC 95

Lorbek v King [2023] VSCA 111

Seven Network Limited v News Limited (2007) 244 ALR 374; [2007] FCA 1489
Division: General Division
Registry: New South Wales
National Practice Area: Other Federal Jurisdiction
Number of paragraphs: 39
Date of last submissions: 15 August 2023 (Applicant)
7 September 2023 (Respondent)
Date of hearing: Determined on the papers
Counsel for the Applicant: Ms S Chrysanthou SC with Mr N Olson
Solicitor for the Applicant: Company Giles
Counsel for the Respondent: Mr J Catlin
Solicitor for the Respondent: Boadicea Legal Services Pty Ltd

ORDERS

NSD 785 of 2021
BETWEEN:

DR PETER CALLAN

Applicant
AND:

ZACHARIAH CHAWK

Respondent

ORDER MADE BY:

HALLEY J

DATE OF ORDER:

10 OCTOBER 2023

THE COURT ORDERS THAT:

1.Orders 2 and 3 of the orders made on 3 August 2023 be vacated.

2.The respondent is to pay pre-judgment interest on the award of damages in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth) and in accordance with paragraph 2 of the Federal Court of Australia Interest on Judgments Practice Note (GPT-INT) for the period from 16 October 2020 to 3 August 2023 in the sum of $6,873.78.

3.Pursuant to r 25.14 and r 40.02(b) of the Federal Court Rules 2011 (Cth), the respondent is to pay the applicant’s costs on an ordinary basis up to 11.00 am on 6 October 2023 and thereafter on an indemnity basis, in lump sum amounts to be determined by a Registrar of this Court.

4.The applicant, as the costs applicant, is to file and serve a costs summary no longer than 5 pages, together with any documents that the applicant wishes to serve with that costs summary by 4.00 pm on Monday, 23 October 2023

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AGLC
Callan v Chawk (Costs) [2023] FCA 1198
Case
[2023] FCA 1198
Decision Date

CaseChat Overview and Summary

Dr Peter Callan filed an application seeking a variation of a costs order in relation to a defamation proceeding against Zachariah Chawk. The matter was heard by the Federal Court of Australia, with the Honourable Justice Bromberg presiding. The primary issue before the court was whether the respondent should be ordered to pay indemnity costs to the applicant from specific dates and whether the costs should be determined on a lump sum basis. Additionally, the court was tasked with fixing the amount of pre-judgment interest owed by the respondent and deciding whether to stay the costs order pending the determination of an appeal.

The court examined the legal principles under the Federal Court Rules 2011, particularly Rule 25.14(3) which entitles an applicant to indemnity costs if their judgment is more favourable than an offer not accepted by the respondent. The court also considered Rule 1.35, which provides a discretionary power to make orders inconsistent with the rules, subject to certain conditions. The court found that the applicant was entitled to indemnity costs from 11.00 am on 4 August 2022, as the judgment obtained was more favourable than the offer made on that date. However, the court decided to exercise its discretion under Rule 1.35 to order that costs be paid on the ordinary basis up to 11.00 am on 6 October 2022, and thereafter on an indemnity basis. The court also determined that costs should be assessed on a lump sum basis and fixed the pre-judgment interest at $6,873.78. The court ruled against staying the costs order pending the outcome of the appeal.

The court's decision resulted in the following orders: vacating certain parts of the previous costs order, fixing pre-judgment interest at $6,873.78, ordering the respondent to pay the applicant's costs on an ordinary basis until 6 October 2022 and on an indemnity basis thereafter, and setting deadlines for the filing of costs summaries and responses by both parties.

Orders

Orders of the court

1. Orders 2 and 3 of the orders made on 3 August 2023 be vacated.

2. The respondent is to pay pre-judgment interest on the award of damages in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth) and in accordance with paragraph 2 of the Federal Court of Australia Interest on Judgments Practice Note (GPT-INT) for the period from 16 October 2020 to 3 August 2023 in the sum of $6,873.78.

3. Pursuant to r 25.14 and r 40.02(b) of the Federal Court Rules 2011 (Cth), the respondent is to pay the applicant’s costs on an ordinary basis up to 11.00 am on 6 October 2023 and thereafter on an indemnity basis, in lump sum amounts to be determined by a Registrar of this Court.

4. The applicant, as the costs applicant, is to file and serve a costs summary no longer than 5 pages, together with any documents that the applicant wishes to serve with that costs summary by 4.00 pm on Monday, 23 October 2023.

5. The respondent, as the costs respondent, is to file and serve a costs response no longer than 5 pages, together with any documents that the respondent wishes to serve with that costs response by 4.00 pm on Monday, 6 November 2023.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

These reasons for judgment assume a familiarity with the Judgment and they should be read in context with it.B. BACKGROUND Dr Callan made the following offers in the course of the proceedings, none of which was accepted by Mr Chawk, on the following dates:(a)23 November 2021: Judgment for Dr Callan (no damages), an undertaking to take down the Review and to permanently refrain from republishing it, or other matter carrying the same or similar imputations, and payment of Dr Callan’s costs in the sum of $30,000 (First Offer);(b)2 August 2022: Judgment for Dr Callan in the sum of $50,000 plus costs (Second Offer); and(c)6 October 2022: Judgment for Dr Callan (no damages) and payment of his costs as agreed or assessed (Third Offer).C. INDEMNITY COSTSC.1. Legal principles Rule 25.14(3) of the Federal Court Rules 2011 (Cth) (Rules) provides:25.14 Costs where offer not accepted…(3)If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:(a)before 11.00 am on the second business day after the offer was served—on a party and party basis; and(b)after the time mentioned in paragraph (a)—on an indemnity basis. As the Full Court of this Court relevantly explained in JMC Pty Ltd v Commissioner of Taxation (Costs) [2023] FCAFC 95 at [6] (Bromwich, Thawley and Hespe JJ):Rule 25.14 does not expressly or implicitly turn on whether a rejection of an offer was “reasonable”. Rather, it turns on the question whether the judgment “is more favourable than the terms of the offer”. Where the judgment “is more favourable than the terms of the offer” the applicant “is entitled” to indemnity costs in accordance with the terms of r 25.14(3). Rule 1.35 of the Rules provides a discretionary power to make an order that is “inconsistent” with the Rules. It provides:1.35 Orders inconsistent with RulesThe Court may make an order that is inconsistent with these Rules and in that event the order will prevail. If the Court were to make an order that a party that had received an offer from an applicant that was less favourable than the judgment achieved by the applicant, pay the costs of the trial on the ordinary basis rather than the indemnity basis, it would be “inconsistent” with r 25.14. The party seeking an order under r 1.35 that is inconsistent with r 25.14, bears the onus of establishing that the inconsistent order should be made: JMC at [8]. The Full Court of this Court stated in JMC in the following passages:10The discretion in r 1.35 is confined by the requirement that it be exercised judicially having regard to the purpose for which it was conferred. It has been said that the discretion to make an order inconsistent with the Rules must “be exercised for proper reasons which will generally only arise in exceptional circumstances”: Lodestar at [27]. This is undoubtedly correct, although care must be taken not to transform or confine the broad statutory discretion by permitting judicial descriptions of the circumstances in which the discretion might be exercised to become constraints not sourced in the statute or glosses on the terms of the statute: Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [22].11In exercising the discretion under r 1.35 to make an order inconsistent with r 25.14, the reasonableness of the rejection of the offer will be relevant. It is most unlikely that an order inconsistent with r 25.14 would be made where the rejection of an offer was not reasonable. On the other hand, merely establishing that the rejection of an offer was reasonable at the time of rejection is not necessarily sufficient.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 3 August 2023, I gave judgment for the applicant, Dr Peter Callan, in the sum of $50,000, plus interest and delivered reasons for judgment: Callan v Chawk [2023] FCA 898 (Judgment or J). I also made orders that the respondent, Zachariah Chawk, pay Dr Callan’s costs as agreed or taxed (Costs Order) and that Mr Chawk pay pre-judgment interest for the period from the start of the limitation period until the date the orders were made (Interest Order). Dr Callan now seeks a variation to the Costs Order to provide that (a) Mr Chawk pay his costs on an indemnity basis from three alternative dates on a lump sum basis, and (b) a revised interest order that provides that pre-judgment interest for the period from 16 October 2020 up to 3 August 2023 be fixed in the amount of $6,873.78 (Costs Application). Mr Chawk opposes any order that he pay costs on an indemnity basis or that costs be determined on a lump sum basis. Mr Chawk also seeks a stay of any costs order pending the final determination of the appeal that he has filed from the Judgment. At a case management hearing held on 8 September 2023, after the exchange of submissions as to costs, the parties agreed that the Costs Application should be determined on the papers. In the course of the case management hearing, the parties also made oral submissions addressing a stay application made by Mr Chawk and the lump sum orders sought by Dr Callan. I note that the submissions of Dr Callan were supported by an affidavit of Bronte Callaghan, a solicitor employed by Company Giles, the solicitors for Dr Callan, sworn on 15 August 2023. For the reasons that follow, I have determined that:(a)Mr Chawk should pay Dr Callan’s costs on the ordinary basis up to 11.00 am on 6 October 2023 and, thereafter, on an indemnity basis (Revised Costs Order); (b)Dr Callan’s costs should be determined on a lump sum basis;(c)an order should be made fixing Dr Callan’s entitlement to pre-judgment interest in the amount of $6,873.78 (Revised Interest Order); and(d)there should be no stay of the Revised Costs Order. These reasons for judgment assume a familiarity with the Judgment and they should be read in context with it.B. BACKGROUND Dr Callan made the following offers in the course of the proceedings, none of which was accepted by Mr Chawk, on the following dates:(a)23 November 2021: Judgment for Dr Callan (no damages), an undertaking to take down the Review and to permanently refrain from republishing it, or other matter carrying the same or similar imputations, and payment of Dr Callan’s costs in the sum of $30,000 (First Offer);(b)2 August 2022: Judgment for Dr Callan in the sum of $50,000 plus costs (Second Offer); and(c)6 October 2022: Judgment for Dr Callan (no damages) and payment of his costs as agreed or assessed (Third Offer).C. INDEMNITY COSTSC.1. Legal principles Rule 25.14(3) of the Federal Court Rules 2011 (Cth) (Rules) provides:25.14 Costs where offer not accepted…(3)If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:(a)before 11.00 am on the second business day after the offer was served—on a party and party basis; and(b)after the time mentioned in paragraph (a)—on an indemnity basis.

Ratio Decidendi

Legal Principle Established

Mr Chawk also seeks to rely more generally on the findings in the Judgment ruling out malice and aggravated damages and an offer to settle the proceedings dated 31 August 2022, by way of the payment of $5,000 towards Dr Callan’s costs. C.3. ConsiderationC.3.1. First Offer I am not persuaded that Dr Callan has demonstrated that Mr Chawk’s failure to accept the First Offer was sufficiently “imprudent” or “unreasonable” to warrant an award of indemnity costs from 11.00 am on 24 November 2021, given (a) Mr Chawk was only given one day to accept the offer, (b) the relatively early stage of the proceedings, (c) the absence of any evidence of any accompanying explanation of the weakness of Mr Chawk’s defence, and (d) the offer was not made under Pt 25 of the Rules, so no presumption otherwise arises that indemnity costs should be awarded because the Judgment obtained by Dr Callan was more favourable than the offer. C.3.2. Second Offer The Second Offer was made under Pt 25 of the Rules and the Judgment obtained by Dr Callan for $50,000, together with pre-judgment interest, now calculated in the sum of $6,873.78, was objectively more favourable than the Second Offer. It follows that, at least, on a prima facie basis, Dr Callan is entitled to an award of indemnity costs from 11.00 am on 4 August 2022. On balance, I am satisfied, however, that an order pursuant to r 1.35 of the Rules should be made that is inconsistent with r 25.14(3) that Mr Chawk pay Dr Callan’s costs on the ordinary basis up to 6 October 2022. I have come to that view for the following reasons. First, the Second Offer was only marginally less than the judgment achieved by Dr Callan and then only by taking into account pre-judgment interest. Second, as submitted by Mr Chawk, damages in defamation proceedings are essentially evaluative and inherently difficult to predict, attempts to determine likely damages necessary to vindicate reputations from perceived similar cases are inherently challenging and of limited assistance. Third, the extent of the compromise was not substantial, particularly given the limited publication of the offending Review. Fourth, the findings in the Judgment relied upon by Dr Callan to establish imprudence or unreasonableness need to be assessed against the qualifications and matters advanced by Mr Chawk that I refer to at [18] and [19] above. C.3.3. Third Offer The position with respect to the Third Offer is fundamentally different. It was an exceptionally generous offer given the judgment ultimately achieved by Dr Callan. Other than a requirement to pay costs on an ordinary basis, it was effectively an offer to accept a judgment with no financial implications for Mr Chawk. I, therefore, do not accept that any order should be made under r 1.35 that is inconsistent with r 25.14 with respect to Dr Callan’s costs after 11.00 am on 6 October 2022. The matters relied upon by Mr Chawk, other than the proposition that damages in defamation proceedings are essentially evaluative and inherently difficult to predict, are, at best, of peripheral relevance to whether an order should be made under r 1.35. Many may well be relevant to the grounds of appeal that Mr Chawk may be proposing to advance in his appeal from the Judgment, in particular the references to findings in other cases that are alleged to be inconsistent with the findings made in the Judgment. These are matters that may well have to be considered by the Full Court of this Court in the appeal. Any expectations by Mr Chawk of his prospects of success based on allegedly analogous cases and understanding of the law, however, cannot provide any substantive support for the proposition that he acted reasonably in rejecting the Third Offer. Of course, if Mr Chawk is ultimately successful in his appeal, any costs orders made at first instance will need to be revisited.