Davis v Nationwide News Pty Ltd

[2008] NSWSC 946

CITATION:	Davis v Nationwide News Pty Ltd [2008] NSWSC 946
HEARING DATE(S):	28 August 2008
JUDGMENT DATE :	12 September 2008
JURISDICTION:	Civil
JUDGMENT OF:	McClellan CJatCL
DECISION:	1. Verdict and judgment for the plaintiff in the sum of $150,736 2. I order the defendant to pay the plaintiff's costs assessed on an indemnity basis 3. Exhibits may be returned.
CATCHWORDS:	COSTS - plaintiff defamed in two publications - interest on damages - assessment of appropriate rate of interest - offer of compromise - application of rule 42.14 Uniform Civil Procedure Rules - costs regime under s 40 Defamation Act 2005 - whether defendant unreasonably failed to make settlement offer - whether plaintiff entitled to indemnity costs order
LEGISLATION CITED:	Defamation Act 2005 Defamation Act 1974 Defamation Amendment Act 2002
CASES CITED:	Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 Hillier v Sheather (1995) 36 NSWLR 414 John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 McGaw v Channel Seven Sydney Pty Ltd [2006] NSWSC 1270 Windsurfing International Inc v Petit (1987) AIPC 90-441
PARTIES:	Judy Davis (Pltf) Nationwide News (Def)
FILE NUMBER(S):	SC 20149/06
COUNSEL:	R Glasson (Pltf) T D Blackburn SC/J O Hmelnitsky (Def)
SOLICITORS:	Brophy Bridge & Mirow Solicitors (Pltf) Blake Dawson (Def)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
DEFAMATION LIST

McCLELLAN CJ at CL

FRIDAY 12 SEPTEMBER 2008

20149/06 DAVIS v NATIONWIDE NEWS PTY LIMITED

JUDGMENT

1 HIS HONOUR: Ms Davis sued the defendant claiming damages for defamation. The proceedings were brought pursuant to the Defamation Act 2005 (“the Act”). On 11 July 2008 I determined that Ms Davis should be awarded damages in the sum of $140,000.

2 Ms Davis is also entitled to an award of interest. However, the parties have been unable to agree the appropriate rate. She is also entitled to an order for costs and seeks an order on an indemnity basis. The defendant submitted that the order for costs should be confined to an order for 50% of her costs on a party/party basis.

History of the proceedings

3 Ms Davis originally complained that she was defamed in three articles published by the Daily Telegraph on 22 February 2006 and 23 February 2006. She also complained of articles similar to two of the articles published in the Daily Telegraph. One was published in both the Courier Mail in Queensland and the Sunday Times in Perth, and the other was published in the Sunday Mail in Queensland.

4 On 20 March 2006 Ms Davis’ solicitors sent a “concerns notice” to the defendant as contemplated by s 14 of the Act. Section 14(2)(b) provides that a “concerns notice” is a notice which informs the publisher of the alleged defamatory imputations that an aggrieved person considers to be carried in the relevant publication. In that notice Ms Davis complained of 11 imputations.

5 The defendant responded to the notice by letter dated 21 March 2006. However, that response was limited to an indication that an investigation would take place into the matters raised in the notice. The defendant did not respond further.

6 In late March 2008 Ms Davis’ solicitors made an oral offer to settle her claim for $200,000 plus costs and also sought an apology. On 3 April 2008 the defendant responded with a counter-offer which provided that each party would “walk away” from the dispute and pay their own costs. The defendant did not concede that any defamatory imputation had been published and made no offer of an apology.

7 On 11 April 2008 Ms Davis made a formal offer of compromise in the following terms:

“1. The Plaintiff hereby offers to compromise her claim against the Defendant in these proceedings upon the terms that the Defendant pay to the Plaintiff the sum of $150,000.00 within 28 days after acceptance of this offer, plus costs as agreed or assessed.
2. This Offer of Compromise is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005.
3. This Offer of Compromise is open for acceptance for 28 days from the date on which it was made.”

8 On 22 April 2008 the defendant rejected the offer. No further settlement negotiations occurred.

9 The hearing of the proceedings commenced on 5 May 2008 and concluded on 13 June 2008. Nine distinct imputations were ultimately pleaded. On 16 May 2008 the jury found that two defamatory imputations were carried by the publication in the Daily Telegraph on 23 February 2006 and one defamatory imputation was carried by the publication in the Sunday Mail on 26 February 2006. The jury rejected each of the other pleaded imputations. On 2 June 2008 the jury rejected the defences pleaded by the defendant. The jury also returned a finding of malice against the defendant.

Interest

10 The parties are unable to agree the appropriate rate of interest in respect of the award of damages. It is of particular significance in this case. If an award is made at a rate of 2.5% per annum the total sum of interest to the date of judgment, which will be 12 September 2008, is agreed to be $8,947.00. However, if the rate is 3% it will be an amount of $10,736.00. If interest is awarded at a higher rate obviously the sum will be further increased. The parties are agreed that interest will form part of the judgment and that the total sum must be considered when determining whether the plaintiff has obtained a verdict in excess of $150,000.00.

11 Ms Davis seeks interest at a rate of 4% from the date of publication to the date of judgment or in the alternative 3% for the same period. The defendant submitted that the appropriate rate is 2% or 2½%.

12 It is generally accepted that the appropriate rate of interest for cases of non-economic loss is 4% per annum: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; McGaw v Channel Seven Sydney Pty Ltd [2006] NSWSC 1270 at [2]. However, the defendant submitted that I should be guided in the present case by the remarks of McHugh JA in John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131. In that case in which the plaintiff recovered damages for defamation, his Honour determined that it was appropriate to assess the damage as having occurred over the entire period from the date of publication to the date of judgment which vindicated the plaintiff’s reputation. Accordingly, his Honour concluded that it was reasonable to discount the ordinary rate by 50%. In that case his Honour applied the discount to the prevailing commercial rate of 15% and awarded interest at the rate of 7.5% per annum. The approach of McHugh JA has not been followed in some cases: Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 at [1551].

13 The reasoning of McHugh JA is revealed in the following passage from his Honour’s judgment at 143:

“The correct approach in theory would seem to be that, since the plaintiff was entitled to damages immediately upon publication, the proper inquiry is first to determine to what extent the award was increased by reason of continuing injury. In strict theory the interest, in respect of this additional sum, would need to take account of the fact that the injury was spread over a period after publication. That is, leaving aside any question of future loss, the matter should be approached on the basis that the plaintiff is prima facie entitled to interest on the whole amount of the award from the date of publication. However, that amount has to be reduced for any sum additional to "vindication damages" awarded in consequence of injury suffered between publication and verdict. This approach gives rise to obvious difficulties of assessment. But if, as I think is the case, the plaintiff is entitled to at least part of his damages from the date of publication, the choice is between awarding no interest at all or attempting to calculate interest on a basis which, although not mathematically perfect, achieves a measure of justice. Since it is unfair to plaintiffs to deprive them of interest for the period in which they have been deprived of their money, interest ought to be awarded to the extent that it is fair and proper.”

14 In Marsden the Court of Appeal acknowledged the remarks of McHugh JA but confirmed that the purpose of an award of interest is to properly compensate the plaintiff for “having been kept out of money which was due to the plaintiff at the date the plaintiff was wronged, in order to put the plaintiff in the position in which the plaintiff would have been had the damages for the wrong immediately been paid” [1540]. Rather than applying a purely arithmetical approach to the calculation of interest it is necessary to consider what is “fair and proper” in the circumstances of the particular case. Relevant to this question will be the extent to which injury was sustained immediately upon publication rather than inflicted over an extended period of time (Kelly at 143; Marsden at [1555]). In the present case the defendant submitted that because the plaintiff was “publicly known” the injury to her reputation occasioned by the defamatory imputations would have been spread, effectively evenly, over the entire period since publication and accordingly interest should be discounted in the same manner as occurred in Kelly.

15 I do not believe this is the appropriate manner in which to approach the present matter. Ms Davis gave evidence of the significant hurt to her feelings occasioned by the publications. I accepted her evidence and found that she was distressed by the publications which were a “source of profound and significant hurt” to her ([13] and [15]). Although the hurt would have continued its major impact would have been felt immediately upon publication and for a confined period thereafter.

16 Notwithstanding that the damage to Ms Davis’ reputation would have continued over time I am satisfied that the major impact of the publications would have occurred when they were published. The jury returned a finding of malice. I made findings that the allegations were false. Furthermore, the defendant failed to apologise. The major impact of each of these matters was occasioned at or around the time of publication.

17 During the trial counsel for the defendant raised with Ms Davis whether her husband had taken out an apprehended violence order against her. In my principal judgment I made a finding that the “implication in the question was very hurtful to Ms Davis and justifie[d] an award of aggravated damages” [33].

18 The defendant submitted that this matter was “the predominant focus of the plaintiff’s case on aggravation.” It was accordingly argued to the extent that the award of damages includes a sum for aggravated damages, the rate of interest should be discounted by reason of the fact that the major source of aggravation occurred during the trial.

19 Although a component of the aggravation which I determined relates to the defendant’s conduct at the trial it was not the dominant consideration. However, because this component by way of aggravation was only occasioned during the trial, some discount of the interest rate is appropriate.

20 The proceedings in this case were not unduly delayed. Because I am satisfied that the majority of the damage was occasioned at or about the time of publication, adequate allowance can be made for continuing damage and for the component of aggravation occasioned by the defendant’s conduct at trial by adjusting the conventional rate by a modest amount. Although a rate of 3.5% would not be inappropriate I have determined that interest should be awarded at 3% per annum.

21 Accordingly, Ms Davis is entitled to judgment in the sum of $150,736.00 including interest.

The offer of compromise

22 As I have indicated Ms Davis made an offer of compromise on 11 April 2008 in which she sought an award in the sum of $150,000 plus costs. Because I have determined the appropriate rate of interest to be 3% she is entitled to a judgment no less favourable than this amount. Accordingly rule 42.14 of the Uniform Civil Procedure Rules applies. That rule provides:

“Where offer not accepted and judgment no less favourable to plaintiff
(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25)

(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and
(b) assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.”

23 A court should only “otherwise order” as contemplated by rule 42.14(2) where the circumstances of the case are exceptional: Hillier v Sheather (1995) 36 NSWLR 414 per Kirby P at 422. There is nothing in the present case which would make it exceptional and I see no justification for departing from the general rule. Accordingly, but for considerations arising from the particular provision in relation to costs in the Act it would be appropriate to make an order that the defendant pay the plaintiff’s costs on an ordinary basis up until 11 April 2008 and on an indemnity basis from 12 April 2008.

The costs regime in the Act

24 The Act makes special provision for costs in defamation proceedings. Section 40 of the Act provides:

“(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.”

25 Section 40 is based on s 48A of the Defamation Act 1974 which was introduced by the Defamation Amendment Act 2002. Although the provision commenced on 17 February 2003 it has not been utilised to any significant extent.

26 The special costs provisions were introduced following a concern that the costs of defamation proceedings may prohibit persons who have a legitimate claim from pursuing relief. Unless in appropriate cases costs were awarded on an indemnity basis a plaintiff may be out of pocket to such an extent that the risks in bringing proceedings were unacceptable. Furthermore, the intention of the legislation was to promote a “speedy and non litigious method of resolving disputes and to avoid protracted litigation wherever possible” (Second Reading Speech, Legislative Assembly, 12 November 2002). When the Amendment Act was introduced, Mr Stewart the Parliamentary Secretary on behalf of Mr Debus the Attorney-General said:

“The normal costs rule is that the successful party recovers costs on a party-party basis. Typically, this amounts to about 60 per cent to 80 per cent of their actual legal costs. Both the Supreme Court and the District Court have a general discretion as to the amount of costs to be paid by parties, including the award of indemnity costs. Indemnity costs are usually awarded where there has been a flagrant breach of procedural rules by the unsuccessful party and can amount to 80 per cent to 90 per cent of actual costs. In practice, indemnity costs are seldom awarded. The bill adds section 48A to the Defamation Act which requires the court to consider an order for costs on an indemnity basis where it forms the view that there has been an unreasonable failure on the part of either the plaintiff or the defendant to resolve the matter.
For example, a plaintiff would be at risk of an indemnity costs order if he or she were not to accept an offer of correction or apology where the offer was reasonable. A defendant would be at risk of an indemnity costs order were it not to make a settlement offer when it would have been appropriate to do so.”

27 Section 40(2) obliges parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party’s conduct. The section contemplates that an order for costs on an indemnity basis may be made even if a party making an offer does not do better in the proceedings than the offer which he or she has made.

28 Ms Davis submitted that the behaviour of the defendant in relation to the settlement offers justified an order for indemnity costs irrespective of the offer which she herself made. It was submitted that by merely offering that each party should walk away the defendant failed to make a reasonable offer. The defendant gave no explanation for its failure to offer a monetary sum in settlement or even perhaps judgment for the plaintiff with an apology. Her counsel emphasised that the defendant merely adopted the attitude that it had a good defence and showed no preparedness to compromise or enter genuine negotiations.

29 The defendant submitted that a distinction should be drawn between the circumstance of a party “unreasonably failing to make a settlement offer” and “failing to make a settlement offer that the court considers is reasonable.” It was submitted that in this case an offer was made and accordingly it could not be concluded that it had unreasonably failed to make a settlement offer. Furthermore, it was submitted that the reasonableness of the particular offer must be judged at the time at which it was made and that the judgment could not be informed by hindsight gained from consideration of the ultimate resolution of the proceedings. It was submitted that at the time it made the offer that each party walk away it was reasonable for it to hold the view that it could successfully defend the proceedings.

30 The resolution of this issue depends upon the application of s 40(3) of the Act which defines “settlement offer” to include an offer to make amends “that was a reasonable offer at the time it was made.” In my opinion it should have been apparent to the defendant at the time of the publications that Ms Davis had been defamed. At the very least a reasonable offer at that time would have included an offer of an apology. It should also have been obvious to the defendant that not only had the published imputations damaged Ms Davis’ reputation but they had also caused her significant anguish. The defendant should have appreciated that Ms Davis would recover a sum for her damage.

31 The defendant further submitted that because Ms Davis succeeded in relation to only three imputations in two of the publications she should not be awarded all of her costs. It was submitted that an order for half her costs was appropriate: (see Windsurfing International Inc v Petit (1987) AIPC 90-441). In other circumstances the submission would have force. If an offer had been made which provided for an award of compensatory damages, the reasonableness of that offer may have to be considered by having regard to the prospects of success in the entire proceedings. Those prospects would have to be assessed at the time the offer was made. A settlement offer is referred to in s 40(3) as an “offer to settle the proceedings.” Because the Act contemplates a single cause of action, even if there is more than one defamatory imputation in a publication (s 8) and the assessment of damages in a single sum (s 39) where there is more than one cause of action, the approach in Windsurfing may have limited application. The special costs rules in the Act are directed towards early settlement of the proceedings. If the failure by the defendant to make a reasonable offer means the proceedings continue to trial and the plaintiff obtains a judgment, the fact that he or she fails in relation to some of the pleaded imputations will be of limited relevance.

32 I am satisfied that although the jury only found for Ms Davis in relation to three imputations it was reasonable to believe before trial that she would have achieved a greater degree of success. This should have been appreciated by the defendant and a reasonable offer to settle the proceedings would, on my view, have provided for an apology and a sum for compensatory damages. Section 40(2) of the Act provides that a court must order costs on an indemnity basis “if the court is satisfied that the defendant unreasonably failed to make a settlement offer” … “unless the interests of justice require otherwise.” The fact that Ms Davis ultimately failed in respect of some of the pleaded imputations is not in my opinion reason in the interests of justice to deprive her of an award of indemnity costs for the entire proceedings. Being left with only the alternative of walking away or pursuing her claim in my opinion she was justified in pursuing that claim including each of the alleged defamatory imputations which were pleaded.

33 In these circumstances I am satisfied that the defendant unreasonably failed to make a settlement offer within the meaning of s 40 and accordingly Ms Davis is for that reason entitled to an order for costs on an indemnity basis.

34 Accordingly I make the following orders:

1. Verdict and judgment for the plaintiff in the sum of $150,736.
2. I order the defendant to pay the plaintiff’s costs assessed on an indemnity basis.
3. Exhibits may be returned.

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