Cornes v The Ten Group Pty Ltd (No 2) - [2012] SASCFC 106

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
CORNES v THE TEN GROUP PTY LTD & ORS (NO 2)
[2012] SASCFC 106
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Gray and The Honourable Justice Blue)
19 September 2012
DEFAMATION - ACTIONS FOR DEFAMATION - COSTS
The appellants appealed to the Full Court against a finding of a trial Judge that words broadcast were defamatory and an order for indemnity costs pursuant to s 38 of the Defamation Act 2005 (SA). The appeal was dismissed leaving the question of the costs of the appeal to be determined. The respondent sought costs on an indemnity basis pursuant to s 38 of the Defamation Act 2005 (SA).
Held:
Kourakis CJ, Gray and Blue JJ:
1. Section 38 of the Defamation Act 2005 (SA) is confined to defamation proceedings at first instance, leaving the Court with its general discretion as to costs in appellate proceedings. Section 38 therefore does not apply to the present proceedings.
2. Even if s 38 does apply to the present proceedings, the interests of justice require an order not be made that the appellants pay the respondent’s costs on an indemnity basis.
3. The appellants are to pay the respondent’s costs of appeal on a party/party basis.
Defamation Act 2005 (SA) Sections 38, 38(2)(a) ; Supreme Court Act 1935 (SA) Section 40(1); Defamation Act 1974 (NSW) Section 48A; Supreme Court Civil Rules 2006 (SA) Rules 263, 264, 264(2), 264(5)(b), referred to.
Australian Securities and Investments Commission v West [2008] SASC 111; (2008) 100 SASR 496; Channel Seven Sydney Pty Ltd v Mahommed (No 2) [2011] NSWCA 6; Davis v Nationwide News Pty Ltd [2008] NSWSC 946; Flower and Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134; Haddon v Forsyth (No 2) [2011] NSWSC 693; Pascoe Ltd v Lucas [1999] SASC 519; (1999) SASR 246; Pope v Pope [2001] SASC 26; Sheahan v Northern Australia Land & Agency Co Ltd [1995] SASC 5363, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"defamation proceedings" "proceedings"

CORNES v THE TEN GROUP PTY LTD & ORS (NO 2)
[2012] SASCFC 106
Full Court: Kourakis CJ, Gray and Blue JJ
THE COURT:

On 24 August 2012, this Court dismissed an appeal by the Ten Group and Mr Molloy against a judgment of a Judge of this Court in favour of Mrs Cornes for defamation.[1]   The trial Judge had entered judgment for $85,000 damages together with interest of $8,000 and ordered that Network Ten and Mr Molloy pay Mrs Cornes’ costs on an indemnity basis.[2]
[1]    Cornes v The Ten Group Pty Ltd & Ors [2012] SASCFC 99.
[2]    Cornes v The Ten Group Pty Ltd & Ors [2011] SASC 104; Cornes v The Ten Group Pty Ltd & Ors (No. 2) [2011] SASC 141.
Mrs Cornes applies for costs of the appeal on an indemnity basis. Channel Ten and Mr Molloy do not resist an order for costs on a party/party basis, but oppose an order that the costs be assessed on an indemnity basis.
This Court has inherent and statutory jurisdiction under Section 40(1) of the Supreme Court Act 1935 (SA), reflected in Rules 263 and 264 of the Supreme Court Civil Rules 2006 (SA), to make such order for costs on appeal, in the exercise of its discretion, as it considers appropriate. As a general rule, costs are awarded as between party and party,[3] but the Court has a general discretion to award costs on the basis of an indemnity.[4] Circumstances in which costs have been ordered on an indemnity basis (usually at first instance) include using the proceedings for an improper purpose,[5] vexatious or unreasonable conduct of the proceedings[6] or where a party, properly advised, should have known that it had no chance of success.[7]
[3]    Supreme Court Civil Rules 2006 (SA) r 264(2).
[4]    Supreme Court Civil Rules 2006 (SA) r 264(5)(b).
[5]    Flower and Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 at [35]-[38] and [64] per Lee, Hill and Sundberg JJ.
[6]    Pope v Pope [2001] SASC 26 at [41]-[43] per Bleby J (Doyle CJ and Duggan J agreeing); Australian Securities and Investments Commission v West [2008] SASC 111; (2008) 100 SASR 496 at [216] per Gray J.
[7]    Sheahan v Northern Australia Land & Agency Co Ltd [1995] SASC 5363 at [23]-[24] per Mohr, Olsson and Nyland JJ; Pascoe Ltd (in Liq) v Lucas [1999] SASC 519; (1999) 75 SASR 246 at [313]-[321] per Lander J (Millhouse J and Duggan J agreeing).
Mrs Cornes does not rely upon the general discretion of the Court in support of her application for costs on an indemnity basis. Rather, she relies upon section 38(2)(a) of the Defamation Act 2005 (SA) (“the Act”).
Section 38 of the Act provides:
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.
The Act is part of a scheme of uniform Defamation Acts enacted in the various jurisdictions in Australia. Section 38 of the Act was modelled on section 48A of the Defamation Act 1974 (NSW) introduced in 2002. There are no reported decisions on whether section 38 of the Act or its equivalents apply to appellate proceedings.
There are three preconditions which must be met before section 38(2)(a) is engaged:
·defamation proceedings must be successfully brought by a plaintiff;
·the court must have determined that costs in the proceedings are to be awarded to the plaintiff; and
·the court must be satisfied that the defendant unreasonably failed to make or agree to an offer to settle the proceedings made before the proceedings are determined.
The issue turns on the meaning of “defamation proceedings” and “proceedings” in section 38(2). Section 38(2) applies naturally to proceedings at first instance in which a plaintiff is successful and receives an award of costs in his or her favour. The wording and structure of the section do not apply naturally to circumstances in which a plaintiff is successful at first instance and obtains an award of costs on an indemnity basis pursuant to the section and then the defendant is unsuccessful on an appeal.
The references in the section to “proceedings” in each of the preconditions are not capable of being read as referring to “appellate proceedings” as such. That is because it cannot be said that appellate proceedings by a defendant have been “successfully brought by the plaintiff”: the appellate proceedings are brought by the defendant and not by the plaintiff at all.
In recognition of this, Mrs Cornes contends that, in circumstances in which a plaintiff is successful at first instance and the defendant is unsuccessful on appeal, the “proceedings” identified in the section refer to the entire, undivided proceedings encompassing both the proceedings at first instance and on appeal.
However, section 38 is drafted in a manner which assumes the exercise of the jurisdiction to make a costs order once only in the “proceedings”. The section could not be read as empowering a trial Judge to award the costs of the entire proceedings (including any subsequent appeal by the defendant) to be paid by the defendant on an indemnity basis. Not only would this be nonsensical, but the second precondition could not be met at that stage in that a trial Judge could not know that the costs on appeal were to be awarded to the plaintiff. Nor could a trial Judge know whether the entire proceedings (including any appeal) would ultimately be successful: this would deprive a trial Judge of jurisdiction to make any order for costs to be assessed on an indemnity basis. It is manifestly not the intention of the section that costs orders for the entire proceedings, at first instance and on appeal, would only ever be made by the final court of appeal.
Moreover, the third precondition is that the court must be satisfied that the defendant unreasonably failed to settle “the proceedings” before “the proceedings” were determined. The reference to “the proceedings” is to the same “proceedings” referred to in the first and second preconditions. The definition of “settlement offer” referring to an offer “before the proceedings are determined” suggests that the offer must be made before final judgment at first instance. Otherwise, it would still be open to a defendant to make a settlement offer after final judgment and argue that it ought be taken into account by the trial Judge under section 38(2)(a).
Aside from the wording and structure of the section, its evident purpose is to encourage the early settlement of defamation proceedings[8] (as opposed merely to settlement after judgment at first instance and prior to final determination on appeal). The costs incurred in the proceedings at first instance are likely to be several times the costs incurred on appeal, and the total gap between party/party and indemnity costs is likely to be much greater in respect of proceedings at first instance.
[8] See, for example, Haddon v Forsyth (No 2) [2011] NSWSC 693 at [5] per Simpson J.
Section 38 was enacted against the background of rules of court which provide for indemnity costs in favour of a plaintiff who betters a settlement offer. It is the evident purpose of section 38(2)(a) to broaden the situations in which indemnity costs are awarded to plaintiffs to encompass situations in which a plaintiff falls short of bettering a plaintiff’s offer as well as a situation in which a plaintiff achieves substantially more than a defendant’s offer.[9] This rationale does not apply to an appeal on liability, in which the appellant is either successful or not and no comparison arises between the quantum achieved by the plaintiff and the quantum of earlier offers.
[9] See, for example, Davis v Nationwide News Pty Ltd [2008] NSWSC 946 at [25]-[27] per McLellan CJ at CL; Channel Seven Sydney Pty Ltd v Mahommed (No 2) [2011] NSWCA 6 at [41] per McColl JA (Spigelman CJ, Beazley JA, McLellan CJ at CL and Bergin CJ in EQ agreeing).
In addition, section 38(2)(b) makes a counterpart provision for indemnity costs in respect of defamation proceedings which are unsuccessfully brought by a plaintiff and costs therein are to be awarded to the defendant. On the plaintiff’s construction, a plaintiff unsuccessful both at first instance and on appeal would be obliged to pay costs on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant before judgment at first instance (unless the interests of justice required otherwise). This is an unlikely intention to attribute to Parliament.
The inherent difficulties in applying section 38(2) to encompass appellate as well as original proceedings are exemplified by the situation in the present case. The trial Judge concluded, and we upheld his conclusion on appeal, that Channel Ten and Mr Molloy had unreasonably failed to agree to a settlement offer proposed by the plaintiff. On Mrs Cornes’ argument, that determination is conclusive in relation to the costs on appeal, regardless of the merits or circumstances of the appeal itself.
While the use of the term depends on its context, generally appellate proceedings are regarded as separate from first instance proceedings. A defamation action might be heard and determined in the Magistrates Court or District Court, and the unsuccessful party might institute an appeal to this Court. The entirety of the proceedings in the Magistrates Court or District Court and the appeal in this Court would not normally be regarded as one set of proceedings.
Given the inherent differences between costs issues arising at first instance and on appeal and the wording of the section, if Parliament had intended to create a regime for mandatory indemnity costs in appellate proceedings, it can be expected to have addressed it explicitly and separately from proceedings at first instance.
We conclude that section 38 of the Act is confined to proceedings at first instance, leaving the Court with its general discretion as to costs in appellate proceedings.
On the assumption that the section does apply to appellate proceedings, the question arises whether the exception to section 38(2) applies, namely whether “the interests of justice require otherwise” than an order that Channel Ten and Mr Molloy pay Mrs Cornes’ costs of appeal on an indemnity basis.
The appeal was on liability and costs only. There was no challenge to the quantum of damages awarded by the trial Judge. While unsuccessful, it cannot be said that, properly advised, the appellants ought to have realised that the appeal was bound to fail. The appeal raised arguable points, both as to liability and as to costs at first instance.
In addition, Channel Ten and Mr Molloy made an offer, after judgment on liability and quantum but before the costs order was made at first instance, to pay the full amount of the judgment sum of $93,000 together with $100,000 for costs. In response, Mrs Cornes identified the quantum of her costs at $300,000 and offered to accept $275,000 for costs. However, Mrs Cornes declined to provide any details of her calculation of costs.
In these circumstances, we consider that in any event the interests of justice require that an order not be made that Channel Ten and Mr Molloy pay costs on an indemnity basis. Costs should be awarded on party/party basis.
We order that the appellants pay the respondent’s costs of appeal on a party/party basis.