Charan v Nationwide News Pty Ltd (Costs Ruling)
[2018] VSC 89
•1 March 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2015 06476
| ATKINSON PRAKASH CHARAN | Plaintiff |
| V | |
| NATIONWIDE NEWS PTY LTD | Defendant |
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JUDGE: | J FORREST J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 25 February, 29 February 2018 |
DATE OF RULING: | 1 March 2018 |
CASE MAY BE CITED AS: | Charan v Nationwide News Pty Ltd (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 89 |
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COSTS – Defamation – Defence of substantial truth established – Calderbank offers – Hazeldene principles - Indemnity costs – Whether offers were genuine offers to settle the case – Inadequate period of time allowed for acceptance of a number of the offers – Plaintiff able to respond to one offer – Whether the plaintiff’s refusal of settlement offer requiring him to pay a sum of money, in the circumstances at the time of the offer, was unreasonable – Defamation Act 2005 (Vic), s 40(2).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | T J Mullen | Stephens Lawyers |
| For the Defendant | M J Collins QC with R L Enbom | M + K Lawyers Pty Ltd |
HIS HONOUR:
Introduction
In a judgment of 25 January 2018,[1] I held that Mr Charan had been defamed by Nationwide in an article published in the Australian on 20 November 2015, but that Nationwide had established the substantial truth of the defamatory imputations.
[1]Charan v Nationwide News Pty Ltd [2018] VSC 3.
It is not in issue that Nationwide is entitled to its costs on a standard basis. However, a number of Calderbank (or in this State, Hazeldene[2]) offers were made that, when combined with s 40 of the Defamation Act 2005 (Vic) (the Act), Nationwide says should lead to an order for indemnity costs in its favour.
[2]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435.
Ultimately, I have decided that the majority of the offers were not genuine offers to settle the case, and that only one requires any real consideration as to its effect.
The circumstances surrounding Nationwide’s defence are somewhat complicated but bear directly on whether it can avail itself of the provisions of the Act or the offers made by it.
Background to the commencement of the trial
Mr Charan issued this proceeding on 22 December 2015. Nationwide filed its defence on 21 March 2016 and, whilst denying that the article contained defamatory imputations, made no allegation of justification (either at common law or under s 25 of the Act).
In October 2016, Nationwide sought to amend its defence to plead justification. Leave was granted by an Associate Justice on 5 October 2016, who said as follows in relation to the application:
… the defendant would be severely prejudiced if the application was refused. Indeed, refusing the application would mean that the trial would be conducted on an almost artificial basis, with there being a rather large elephant in the room. It may well be that the plaintiff’s position, that he had no knowledge of or involvement in the allegedly unscrupulous activities of companies of which he was a shareholder and/or director is vindicated at trial. However, given the evidence advanced by the defendant in support of the application, the defendant ought to be able to test this at trial. The prejudice to the plaintiff is real, but at least partly reparable with an adjournment and an appropriate order for costs.[3]
[3]Ruling of Daly AsJ, 5 October 2016, [4].
On 16 December 2016, Nationwide filed what it described as ‘consolidated particulars of truth’.
In December 2016 and January 2017, Nationwide served on Mr Charan’s solicitors a number of witness statements and provided numerous documents underpinning the justification defence.
On 14 February 2017, Nationwide filed a second set of ‘consolidated particulars of truth’.
On 21 February 2017, I determined an application brought by Mr Charan in relation to Nationwide’s reliance on these particulars. I said:
First, I am satisfied that each of the new matters introduced by the February particulars are relevant to the justification defence. Each goes to the conduct of Mr Charan in his management of Community Training Initiatives (“CTI”) and associated companies prior to the sale of his shares in ACN, the company which floated in December 2014. If made out, then that evidence may substantiate one or more of the allegations of justification covered in the February particulars.
Second, whilst I regard it as unfortunate (indeed unfortunate in the extreme) that this trial may have to be adjourned as a result of the amendment, this is not a case in which there is any protracted delay between the publication and the trial date. Indeed, Associate Justice Daly noted in her ruling of 5 October 2016 that “a trial date in late February 2017 is still only 14 months after the date of issue of the proceeding. This is not an undue delay in this Court, or others no doubt”. I assume that any adjournment would be for a relatively short period of time, so it would still mean that Mr Charan would be able to get his case heard within 16 months or so of the publication. Whilst I accept that Mr Charan will naturally be disappointed that he has not had the opportunity to vindicate himself at the earliest point of time, he will have the opportunity to do so in the near future.
Third, there is, in my opinion, a reasonable explanation proffered by Mr Quill in his Affidavit as to the basis of the new matters contained in the February particulars. Nationwide has obtained information from a number of sources, including material provided under subpoena and an undisclosed source. Moreover, the information contained in the particulars does not come as a total surprise to Mr Charan –witness statements have been filed and a number of the allegations now contained in the February particulars are within some of those witness statements (see the schedule to Mr Quill’s Affidavit annexed to these reasons). I accept that once the witness statements were received it was open for Mr Charan’s solicitors to investigate the accuracy or otherwise of those statements. If they were ignored, as Ms Klaric’s affidavit might suggest for tactical reasons, then that was a forensic decision made by Mr Charan’s lawyers. I should make it clear, however, that some of the statements were not received by the lawyers until mid-February, and so the opportunity to undertake further investigation into those matters was limited.
Having considered the matters contained in both affidavits, I am satisfied that Nationwide’s solicitors have acted reasonably in their prosecution of the defence of justification.
Fourth, I am unable to discern any true prejudice to Mr Charan, other than the forensic disadvantage of having to meet a broader case than that which he previously had to meet. He will be given the opportunity, if he so wishes, to prepare his defence to the allegations and in particular to confer with witnesses and consider what other documents he may wish to rely upon at the trial.
Once leave was granted to plead the justification defence, it was inevitable that further investigations would be carried out by Nationwide. The trial dates of November and December were untenable, and submissions based upon the number of adjournments need to be viewed in this light.
…
It follows that Nationwide should be permitted to file its February particulars, but on certain conditions. The first is that it is inevitable that the trial will be adjourned, and I will give priority to any suggestion made by Mr Charan’s lawyers as to the fixing of an adjourned trial date. The second is that, absent exceptional circumstances, Nationwide should not be allowed to amend its particulars of justification again. …[4]
[4]Charan v Nationwide News [2016] VSC 66, [29]–[34], [37].
Mr Charan declined the opportunity to adjourn the trial, and the opening of his case by senior counsel commenced on 23 February 2017.
Mr Charan gave evidence over some thirteen days, namely 23, 24, 27 and 28 February 2017, 1, 2, 6, 7, 8, 9 and 10 March 2017, 23 August 2017, and 24 August 2017.
The principles to be applied
Section 40 of the Act states:
40Costs 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.
Recently, the Court of Appeal restated the Hazeldene principles in the following terms:[5]
[5]Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141, [234]–[235] (footnotes omitted).
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2], the Court of Appeal held that the rejection of a Calderbank offer is a matter to which the court should have regard when considering whether to order indemnity costs. The Court said that the critical question is whether the rejection of the offer was unreasonable in the circumstances. The Court emphasised that the discretion with respect to costs must be exercised taking into account all relevant considerations and that, in deciding whether the rejection of a Calderbank offer was unreasonable, the court should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.
Relevantly for the purposes of this application, the Court refused to lay down a general rule that the maker of a Calderbank offer should not be entitled to a special costs order unless the offer sets out, with some reasonable specificity, the basis for the offeror’s contention that the offeree should accept the compromise. The Court instead agreed with the following reasons of Redlich J in Oversea-Chinese Banking Corporation Ltd v Richfield Investments Pty Ltd:
Any attempt to prescribe the reasoning which must accompany [a Calderbank] offer should be resisted. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer. The extent to which the weakness of a party’s position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer.
In Defteros v Google Inc (Costs)[6], John Dixon J, after setting out the terms of s 40 of the Act, stated:
[6][2017] VSC 189, [3], [4].
To recover indemnity costs, the defendant must establish four matters:
(a)the plaintiff must have been unsuccessful in a defamation proceeding;
(b)costs in the proceeding are to be awarded to the defendant;
(c)the defendant made a settlement offer, as defined, to the plaintiff; and
(d)the plaintiff unreasonably failed to accept that settlement offer.
If these elements are satisfied, an entitlement to an order for indemnity costs arises, unless the plaintiff is able to satisfy the court that the interests of justice require otherwise.
It is items (c) and (d) that require consideration here, particularly as the majority of the offers relied upon by Nationwide were offers that required Mr Charan to either abandon his claim or abandon his claim and pay a sum of money to Nationwide.
In VWA v O’Brien (Costs Ruling), I extracted several authorities concerning ‘offers to capitulate’[7]:
[7][2017] VSC 68, [8]–[10] (footnotes omitted).
In Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2), the Court of Appeal made the following observations as to an offer which does not represent a genuine compromise and therefor fails the reasonableness test:
There is authority to the effect that where the offer does not involve a genuine compromise but is in fact either an invitation to capitulate or a derisory or nominal offer, it would not be unreasonable for the losing party to have rejected it.
In Berrigan Shire Council v Ballerini & Anor (No 2) Callaway JA observed that the treatment of Calderbank offers comes down to the question of whether the rejection was unreasonable in the circumstances. In that case, the offer was an offer to walk away. Callaway JA characterised it as a demand to capitulate that could reasonably be rejected.
In the case of Truenergy Pty Ltd v Dispute Resolution Panel (No 2) Cavanough J considered that in order for a Calderbank offer to be taken into account by the court, it should be attractive in all the circumstances and not merely comprise, in effect, a demand to capitulate.
In the recent case of Pepe v Platypus Asset Management Pty Ltd (No 2) Almond J held that offers of $65,000 and $90,000 (inclusive of costs) were properly rejected in circumstances where the claim was in excess of one million dollars.
In our opinion and in the circumstances of this case, it was not unreasonable for the Commissioner to reject the offer made on 18 March 2011. The offer, in effect an offer to walk away, in our opinion amounts to a demand to capitulate. A reduction of $5000 from a costs order may realistically be regarded as de minimis in the circumstances. The offer does not represent (in financial terms) a serious endeavour to resolve the proceeding. It was, given the amount involved in the case, no more than a token offer.
In addition to the cases referred to by the Court of Appeal in Commissioner of State Revenue, there are other recent decisions of trial judges in this state in which walkaway offers have been treated as no more than an offer to capitulate and not a genuine offer which has been unreasonably refused.
In Nilumbik Shire Council v Victorian YMCA Community Program Pty Ltd, the Court of Appeal considered whether there was error on the part of a trial judge who, applying the principles stated by the Court of Appeal in Hazeldene and Commissioner of State Revenue, declined to make an order as to solicitor-client costs on the basis that the offer was an invitation to capitulate or derisory. Tate JA said as follows:
In my view it cannot be concluded that the judge failed to take account of the relevant principles governing an award of costs in a context in which a Calderbank offer or an Offer to Contribute has been made and rejected. Her Honour’s reasons make it apparent that she was live to the criteria expressed in Hazeldene and engaged in a careful dissection of the facts in applying them to determine that the rejection of the offers was not unreasonable. The judge was particularly conscious, quite properly, of the need to assess the reasonableness or otherwise of the rejection of an offer at the time, and in the circumstances, in which it was rejected, and not with the benefit of hindsight or through the prism of a subsequent appellate determination.
These decisions do not mean that an offer to capitulate or to walk away will necessarily fail because of its terms. Rather, the reasonableness of the offer turns on the circumstances which surround it, and particularly whether it was truly designed to settle what may be a hopeless case. This is consistent with what was said by the New South Wales Court of Appeal in Leichardt Municipal Council v Green:[8]
It is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise.[9]
And then:
Accepting that such an offer as was made is capable of being a genuine offer of compromise, the next step is to consider whether the particular offer in the circumstances represented a genuine attempt to reach a negotiated settlement, rather than merely to trigger any costs sanctions.[10]
[8][2004] NSWCA 341, [21]–[37], [48]–[51].
[9]Ibid, [23].
[10]Ibid, [39].
The offers relied upon by Nationwide
The table below, based on a Nationwide aide memoire, summarises the offers made by Nationwide to Mr Charan, and vice versa.
Offer Date and time of offer Offeror Terms of offer Notes Expiry Length of time offer open 1 1 December 2015 Nationwide Nationwide pay $4,000 compensation for Mr Charan’s costs None stated 2 23 September 2016 Nationwide Both parties walk away Coincided with Nationwide’s amended application to plead justification determined on 5 October 2016 4pm on Wednesday 28 September 2016 3 business days 3 23 September 2016 Mr Charan Nationwide pay $80,000 compensation plus indemnity costs 5pm on Monday 3 October 2016 6 business days 4 3 February 2017 Nationwide Mr Charan pay $100,000 as contribution towards Nationwide’s costs After outlines of evidence filed; and documents produced on subpoena 4pm on Wednesday 8 February 2017 3 business days 5 6 February 2017 Mr Charan Nationwide pay $120,000 compensation plus standard costs, and apology 5pm on Friday 10 February 2017 4 business days
6 8 February 2017 Nationwide Mr Charan pay $120,000 as contribution towards Nationwide’s costs After outline of Peter Cage filed; documents produced on subpoena 1pm on Friday 10 February 2017 2 business days 7 13 February 2017 Nationwide Mr Charan pay $150,000 as contribution towards Nationwide’s costs After Mr Charan’s request for Nationwide to withdraw outline of evidence of Peter Cage, outlines of evidence filed; documents produced on subpoena 1pm on Wednesday 15 February 2017 2 business days 8 16 February 2017, 4:59pm Nationwide Mr Charan pay $600,000 as contribution towards Nationwide’s costs Four days before start of trial; after revelation of Mr Charan’s ownership interest in Diabetes II, and correspondence between Mr Charan, Mr Brown, and Mr McAllister 2pm on Friday 17 February 2017 21 hours 9 22 February 2017, 6:53pm Nationwide Mr Charan pay $700,000 as contribution towards Nationwide’s costs Day three of trial 2pm on Friday 24 February 2017 44 hours
Consideration
As Hazeldene and the subsequent decisions that I have reviewed demonstrate, there are a number of considerations relevant to this application. However, as I see it, the terms of s 40(2) and the Hazeldene criteria lead to two primary questions on this application:
(a)whether any of the offers made by Nationwide were, in truth, genuine offers of settlement; and
(b)if so, was Mr Charan’s refusal of the offer, in the circumstances that applied at that time of the offer, unreasonable.
There was no question that the offers made by Nationwide were sufficiently clear and spelt out to Mr Charan the consequences of a failure to accept the compromise of his claim.
It was accepted that Nationwide carried the onus of proof on each issue. But if the criteria were satisfied, then the Court must, in accordance with s 40(2), award indemnity costs unless it is in the interests of justice to do otherwise.
Were any, some, or all of the offers of Nationwide genuine offers to settle the case?
Offer 1 was made on 1 December 2015, a couple of weeks after the article was published. At the time there was no suggestion of a justification defence, and the amount offered for a clear defamatory imputation was inadequate, notwithstanding the apology. It was not unreasonable of Mr Charan, at that time, to refuse the offer. As I indicated in discussion with counsel, this offer can be put to one side.
In my view, offers numbered 2, 6, 7, 8 and 9 were not genuine offers to settle the case. As I mentioned earlier, the fact that an offer is one to capitulate with a contribution to the opponent’s costs does not, of itself, necessitate a finding that it is not a genuine offer to settle a case. It must be analysed in the circumstances of the case as a whole and, in particular, the apparent strength of the case at that time.
However, an offer that requires a lay person (notwithstanding the best of legal advice) to withdraw his or her claim and, in the case of the last four offers, make a significant payment of money where he or she has been clearly defamed needs careful consideration. Offers 6, 7, 8 and 9 not only required payment of large sums of money (increasing virtually by the day) by Mr Charan, but also gave him only a very short period of time in which to decide whether to accept or reject the offer. The maximum period allowed by these offers for acceptance was a totally inadequate two business days—in the case of offer 6, it was 2 business days; offer 7, 2 business days; offer 8, 21 hours; and offer 9, 44 hours. Offer 2 was a walk away offer without the payment of a sum of money, but it only permitted Mr Charan three business days for a decision and was made prior to Nationwide being granted leave to rely upon the justification defence.
True it is, that Nationwide could not make this form of offer (i.e. walk away or walk away with a payment towards its costs) as an offer of compromise under Order 26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules). But there is a part of those rules that is relevant to this determination. For good reason, the Rules give a plaintiff or defendant 14 days in which to make the decision whether to accept the offer or proceed with the case. That period of time for consideration, it may well be thought, was fixed because litigation is a tricky business and to many individuals, who come across the court process only once in a while (if that), making such a decision requires thought, advice and reflection.
I see no reason to place Mr Charan in a different position. There is no suggestion that he was an experienced litigant and, here, he was in the midst of trial preparation or the actual trial when these four offers were made. Notwithstanding my finding as to his credibility and his conduct before and during the trial, he is still entitled to a reasonable period of time in which to consider the offer.
Equally as important, I think that the imposition of such stringent time limits reflects the lack of any genuine intention on the part of Nationwide to settle the case. I conclude by reference to the nature of the increasing amounts (in the case of the last four offers), and the limited time for acceptance (in the case of all the offers), that it is far more likely offers 2, 6, 7, 8 and 9 were motivated by Nationwide’s desire to protect its position on costs, rather than to settle the case.
I therefore conclude that offers 2, 6, 7, 8 and 9 were not genuine offers to settle the case, substantially because of the very tight time limits. I would also have held that offer 4 with a time limit of three business days, fell into the same category; however, that offer unlike the others, generated a response from Mr Charan within the stipulated period. That, it seems to me, indicates that Mr Charan was in a position to consider the offer and points to the time limit alone not being determinative of whether the offer was a genuine attempt to settle the case.
Offer 4 is contained in a letter of 3 February 2017; Nationwide’s lawyers identified the following matters for Mr Charan’s consideration:
(a)that a list of witnesses had been filed;
(b)that the outline of Nationwide’s witnesses’ evidence had been filed;
(c)the tenor of the documentary evidence which had been provided to support the justification defence.
It referred specifically to:
(a)the audit reports;
(b)the three student ‘witnesses’; and
(c)the evidence of the former employees and contractors corroborated by a significant body of documentary evidence.
In other words, the contents of the letter identified much of the material relied upon in the judgment to uphold the justification defence.[11]
[11]For example, [2018] VSC 3, [371]–[450] (in relation to the audit reports); [622]–[643] (in relation to the three student ‘witnesses’); [266]–[271], [522]–[559], [579]–[596] (in relation to Ms Ebejer); [273]–[275], [562]–[567], [602]–[613] (in relation to Mr Cage).
The letter, wildly optimistically as it turns out, identified a 15-day hearing and estimated that, by the end of the hearing, Nationwide’s costs would be close to $1 million.
Nationwide then made the following offer:
1.Your client pays to our client the fixed sum of $100,000 as a contribution to its legal costs to date;
2. Both parties otherwise bear their own legal costs of the proceeding;
3.Our client will not enforce its costs order against your client in relation to the failed strike out application;
4.Your client discontinues the proceeding against our client with no order made as to costs; and
5.The parties provide mutual and full releases in relation to the issues surrounding the publications complained of and the proceeding, in the form of a formal Deed of Settlement and Release.
Mr Charan’s lawyers replied on 6 February 2017 :
1.We refer to your settlement offer dated 3 February 2017. We are instructed to reject that offer.
2. We are very confident that our client’s defamation claim will succeed.
3.We are also very confident that, for the reasons previously expressed (most recently in our letter dated 9 December 2016, which you have again failed to address, which reasons are supported by recently subpoenaed documents), your client’s pleaded justification defence will fail; its only consequence being a significant increase in the time and costs associated with this litigation, embarrassment (for both parties and some witnesses) and a substantial award of aggravated damages against your client.
4.In response to your comments about whether our client has anything to gain from pursuing his claim, we fear you misapprehend our client’s position. Our client does not hope to gain from these proceedings. Rather, the approach you and your client have taken to this litigation means that our client now has no choice but to answer the very serious baseless allegations against him, whatever the financial cost. While he would rather not be in this position, he is confident that when he does, he will be vindicated, and that your client will eventually have to pay some or all of his costs.
The counteroffer contained in this letter was in the sum of $120,000 with costs on a standard basis, and an apology to be published on page 2 of the Australian newspaper.
Importantly, in light of my other findings, even though the time allowed for acceptance of the offer was tight and the offer required the payment of a sum of money, it was nevertheless able to be considered and responded to by Mr Charan. As I mentioned earlier, this demonstrates that Mr Charan treated this offer seriously notwithstanding his rejection of it.
Equally as importantly, the contents of Nationwide’s letter put Mr Charan squarely on notice that there was a large body of material available to it (much of which ultimately was adduced at trial) which went to the heart of the justification defence.
These factors satisfy me that offer 4 should be treated as a genuine offer of settlement.
Was it unreasonable for Mr Charan to reject offer 4?
Two points now need to be resolved:
(a)whether the offer, which required the payment of $100,000 by Mr Charan and withdrawal of his claim, should have been considered by him; and
(b)if so, whether it was unreasonable for Mr Charan to reject the offer, which involved a payment of money to Nationwide, albeit that he was the plaintiff and had been defamed.
As to the first issue, I am satisfied that, in the scheme of things, this was an offer that merited reasonable consideration. True it is, that Mr Charan was the plaintiff in the proceeding and he had, on any view, been defamed by the publication. That said, once the justification defence was alive, the question of whether Mr Charan could succeed in the claim was very much in play. By February, as Nationwide’s letter of 3 February 2017 pointed out, there was a large amount of information available to Mr Charan which needed to be processed by him. The case had got stronger by the day, if not by the week. I am satisfied that, by 6 February 2017, an offer to pay a contribution to Nationwide’s costs but leaving it to meet a substantial part of its own costs required serious consideration. This is particularly so, given that it was abundantly clear that this was going to be a no holds barred trial, where both parties would expend hundreds of thousands of dollars in addition to having already incurred a significant amount of pre-trial costs.
Having reached the conclusion that the offer required consideration, the remaining question is whether it was unreasonable for Mr Charan to reject the offer. I accept the submission made by counsel for Mr Charan that the lawyers were still endeavouring to piece together, exactly, the case that they had to meet at trial. Numerous documents and witness statements had been supplied and needed to be considered. The second consolidated particulars of truth had not yet been filed, although they merely inserted details into the existing particulars which were apparent from the material which had been provided by Nationwide. I accept counsel’s submission that, even at the time of the opening of Nationwide’s case, counsel did not have a complete handle on the case that had to be met. To some extent, this was of their client’s own making, as Mr Charan declined the opportunity to adjourn the case.
Notwithstanding the lack of complete knowledge on the part of his lawyers as to the intricacies of the defence, I think that there is merit in Nationwide’s submission that the person who must have known the real force of the allegations contained in the letter of 3 February 2017, was Mr Charan. The terms of the letter spelt out the material Nationwide proposed to adduce and the difficulties facing Mr Charan in responding to Nationwide’s justification defence. The substance of the matters contained in the letter (which were ultimately established at trial and underpinned much of the defence of Nationwide) had to be within Mr Charan’s knowledge. They are carefully identified and, as the documents show and to use the words of his former partner, Mr Brown, any investigation of the workings of the company and its documentation would demonstrate that Mr Charan’s “fingerprints are all over everything”.[12]
[12][2018] VSC 3, [163].
Nationwide’s letter spelt out, in clear terms, the material that it proposed to rely upon at trial and then gave Mr Charan the opportunity to get out of the case, albeit by paying a premium, but in the scheme of things a very small one given the combined costs that would be incurred if the trial went to verdict. It is to be borne in mind that Nationwide also offered to bear its own costs in relation to one of Mr Charan’s interlocutory applications, in which Nationwide was represented by senior counsel. When this is taken into account I think a reasonable person in Mr Charan’s position, armed with his own unique knowledge of the ‘dodgy’ practices at CTI and the prospective duration of the trial (even if only estimated at fifteen days), would have accepted the offer and finalised the litigation. Mr Charan did the opposite: he considered the offer, rejected it and provided a counter offer.
I am conscious that, in reaching this decision, it is unusual for a court to treat an offer to capitulate and pay money as being genuine and to hold that a party acts unreasonably in rejecting such an offer. But this case is highly unusual, as I hope my reasons for judgment demonstrate.
In summary, this was a genuine opportunity for Mr Charan to settle the case and avoid being liable for the massive costs order which would have inevitably followed the success of the justification defence. It was unreasonable for him to reject the offer, notwithstanding that it was an offer to capitulate. I think that Nationwide is entitled to indemnity costs: the remaining question being when should they run from.
Prima facie, section 40 would require payment of indemnity costs from the time of the initiation of the proceeding. However, that would be contrary to the interests of justice. Mr Charan’s liability for indemnity costs should commence on 6 February 2017—when he elected to reject the offer from Nationwide. To hold him liable for indemnity costs prior to that date would be unfair, because of the moving feast of Nationwide’s defence and the provision of material substantiating it. As I have said, it is the contents of the letter of 3 February 2017 which he considered and rejected that triggers the liability for indemnity costs..
In reaching a determination as to whether to restrict Nationwide’s entitlement to costs on this basis, I think it should be borne in mind that Nationwide’s costs before 6 February 2017 will be covered by an award of costs on a standard basis. A number of earlier decisions concerning Hazeldene offers emphasised, correctly, the considerable difference between indemnity costs and party/party costs—and that the purpose of the offer was to endeavour to provide recompense for a party who, notwithstanding a genuine attempt to settle the proceeding, would be significantly out of pocket despite victory in terms of bettering the offer made to his or her opponent. That position, whilst still relevant, is not as significant as it used to be. A standard costs order since 1 April 2013 now encompasses both the party/party costs, and solicitor/client costs.[13] The gap between that allowance and indemnity costs is considerably less than that between party/party and indemnity costs as existed prior to April 2013.
[13]Rule 63.30 of the Rules.
Orders
Subject to hearing from counsel, I propose to make the following orders:
1.That there be judgment for Nationwide.
2.That Mr Charan pay Nationwide’s costs on a standard basis up until 6 February 2017, and thereafter on an indemnity basis.
3.That Nationwide’s senior counsel’s brief fee be certified at $9,000 per day.
4.That Nationwide have leave pursuant to rule 63.34 of the Rules to apply to the Costs Court for a variation of costs (whether generally or pursuant to r 63.34(3)).
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