Capilano Honey Ltd v Dowling (No 5)

[2021] NSWSC 653

Supreme Court

New South Wales

Medium Neutral Citation:

Capilano Honey Ltd v Dowling (No 5) [2021] NSWSC 653

Hearing dates:

On the papers

Decision date:

11 June 2021

Jurisdiction:

Common Law

Before:

Button J

Decision:

(1)   The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Capilano Honey Ltd on the ordinary basis.

(2)   The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Dr Ben McKee on an indemnity basis.

Catchwords:

COSTS — defamation and injurious falsehood claims — whether costs should be awarded on ordinary or indemnity bases in respect of each claim

Legislation Cited:

Defamation Act 2005 (NSW), s 40

Cases Cited:

Capilano Honey Ltd v Dowling (No 2) [2018] NSWCA 217

Capilano Honey Ltd v Dowling (No 4) [2021] NSWSC 264

Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25

Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2

Category:

Costs

Parties:

Hive and Wellness Australia Pty Ltd (First Plaintiff)
Dr Ben McKee (Second Plaintiff)
Shane Dowling (Defendant) (self-represented)

Representation:

Counsel:
M A Cowden (Plaintiffs)

Solicitors:
Addisons Lawyers (Plaintiffs)

File Number(s):

2016/299522

Publication restriction:

Nil

Judgment

Introduction

1. On 26 March 2021, I returned verdicts and entered judgments for the plaintiffs, and gave reasons for doing so, in Capilano Honey Ltd v Dowling (No 4) [2021] NSWSC 264. Costs were reserved, after which affidavit evidence and written submissions were received from all three parties with respect to the question. This judgment resolves the question of costs, and concludes the litigation.

2. In this judgment, I adopt the same abbreviations as in the substantive judgment, and this latter judgment should be read in conjunction with the former.

3. As I understood the written submissions, there was no real dispute as to the liability of the defendant to pay the costs of the plaintiffs on the ordinary basis. And even if I am wrong in my understanding of the position of the defendant, in any event, the plaintiffs having succeeded in their claims, in my opinion there is no reason why costs should not follow the event, at the least on the ordinary basis.

4. The real dispute that remains for my consideration is whether the defendant should be liable to pay indemnity costs to the plaintiff Capilano (which succeeded in its claim for injurious falsehood) or the plaintiff Dr McKee (who succeeded in his claim for defamation).

5. I shall be brief in my determination of those questions, not least because I believe that the enquiry is, with respect, an arid one: on the evidence, there is no prospect whatsoever of the defendant being in a position to meet the costs of the successful plaintiffs on either basis. Having said that, I have borne steadily in mind that the impecuniosity or otherwise of the defendant is irrelevant to the question of costs: Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25.

Indemnity costs for Capilano?

6. As can be seen from the substantive judgment, I ordered damages in the sum of $25,000 in favour of Capilano against the defendant, the tort of injurious falsehood having been established by it. A necessary part of the establishment of that tort was my satisfaction that the defendant had acted with malice.

7. Counsel for Capilano submitted that indemnity costs were appropriate in this case. She submitted that departure from the usual state of affairs was warranted, for the following reasons. The defendant persisted in groundless accusations against Capilano over a period of years. No defence was filed with regard to the claim of injurious falsehood. In accordance with my substantive judgment, the defendant was at the least partly motivated by ulterior animus. The unreasonable conduct of the defendant in his litigation was motivated by the same state of mind, and permits his conduct to be characterised as an abuse of process. In the absence of affirmative evidence from the defendant that the Honey purveyed by Capilano was unsafe, especially when faced with the plethora of evidence from his opponent that it was safe, the outcome of this aspect of the litigation was inevitable. Finally, during the course of the litigation, the defendant either refused to comply with court orders, or pressed interlocutory applications that were also doomed to failure.

8. In written submissions, the defendant asserted that in a previous phase of the litigation between the parties, pertaining to an appeal by the plaintiffs against the decision of a primary judge to revoke certain interlocutory injunctive orders against the defendant, the Court of Appeal not only upheld a primary costs order in his favour, but held that the plaintiffs were not entitled to costs on the basis that they refused to proceed with the matter for a number of years: Capilano Honey Ltd v Dowling (No 2) [2018] NSWCA 217.

9. The defendant also placed reliance on the following passage in the headnote of that judgment (addressed at [91]-[92] therein):

“[i]t was open to the trial judge to place significant weight on the applicants’ [that is, the plaintiffs before me] delay in pursuing the proceedings when determining whether the orders should be revoked. Her Honour was correct to reject as inadequate the applicants’ explanation that they had focused their resources on pursuing related proceedings against a third party”.

10. I understood the submission to be that, in light of the conduct of the plaintiffs criticised by the Court of Appeal, neither of them was in a position to criticise his conduct of the litigation, not least as a self-represented litigant.

11. Turning to my determination of the question of the basis of costs in favour of Capilano, the question is finely balanced. On reflection, however, I am not affirmatively satisfied that there should be departure from the usual order. That is for the following reasons.

12. First, establishment of malice is significant but not determinative. Were it otherwise, indemnity costs would always be ordered against an unsuccessful defendant in proceedings for injurious falsehood (or any other tort that features malice as a necessary element).

13. Secondly, and relatedly, it is one thing for me to have characterised the conduct of the defendant vis a vis Capilano as being motivated at the least partly by ulterior animus. It is another thing to go so far as to characterise his conduct of the litigation as an abuse of process. I do not do so.

14. Thirdly, his assertedly unacceptable conduct with regard to breaches of orders throughout the proceedings and various interlocutory applications was able to be reflected in costs, and other, orders pertaining specifically to those other aspects of the matter. Speaking generally, I think that I should confine my assessment to how the defendant conducted the phase of the litigation that unfolded before me.

15. Fourthly, that was hardly lacking in imperfection. Even so, I think that I should be slow to base an order for indemnity costs upon the conduct of a self-represented litigant, not least one who reasonably possibly believed in the righteousness of his cause.

16. In short, Capilano has not satisfied me that there should be departure from the usual position; it will have its costs on the ordinary basis.

Indemnity costs in favour of Dr McKee?

17. As my substantive judgment shows, I ordered damages in favour of the plaintiff Dr McKee in the sum of $150,000.

18. In support of indemnity costs in this context, counsel for Dr McKee repeated all that she had said in favour of Capilano, and which I have summarised above. But she also invited attention to s 40 of the Defamation Act 2005 (NSW). Referring to Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2, she submitted in short that the statutory position is that I must order indemnity costs against the defendant if I am satisfied that he unreasonably failed to make a settlement offer that was a reasonable one at the time it was made, unless the interests of justice require otherwise. (I interpolate that there was no evidence of a settlement offer having been proposed by Dr McKee.)

19. Engaging with that proposition immediately, and reflecting upon any settlement offers put forward by the defendant that may have been reasonable ones at the time that they were made, I respectfully think that the offer made by the defendant in early 2020 whereby, in order to settle this and related litigation, Dr McKee and others would pay the defendant $100 million, can be put to one side.

20. And in light of the state of the pleadings, the evidence, and the principles with respect to proving defamation, I am satisfied that the failure of the defendant to make a reasonable settlement offer can be characterised as unreasonable.

21. The result of my characterisations is that I need only reflect on the question of whether the interests of justice require departure from that statutory “default position” of indemnity costs in favour of Dr McKee.

22. Reflecting on that question, I have borne in mind all the factors that led me to refuse to order indemnity costs in favour of Capilano. But here, the “onus” is reversed. Not only that, from 26 July 2019, the date upon which Fagan J struck out the vast majority of the then-defence of the defendant in a judgment that has not been promulgated on Caselaw, and refused him leave to replead, the defamation proceedings brought by Dr McKee were overwhelmingly likely to be determined against the defendant. And yet they were fully litigated by him.

23. In my opinion, the defendant has not affirmatively established that the interests of justice call for an order other than indemnity costs in favour of Dr McKee.

Conclusion

24. In summary then, although the interest of the plaintiffs were closely aligned, and the two claims proceeded simultaneously, I have arrived at different outcomes with regard to the question of costs, based upon the differing “onuses”, and the special statutory provision pertaining to the defamation claim of Dr McKee.

Orders

25. I make the following orders:

1. The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Capilano Honey Ltd on the ordinary basis.

2. The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Dr Ben McKee on an indemnity basis.

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Decision last updated: 11 June 2021