Deep Cycle Systems Pty Ltd v Fischer (No. 2)

[2025] QDC 61

DISTRICT COURT OF QUEENSLAND

CITATION:

Deep Cycle Systems Pty Ltd v Fischer (No. 2) [2025] QDC 61

PARTIES:

DEEP CYCLE SYSTEMS PTY LTD

(plaintiff)

v

STEFAN FISCHER

(defendant)

FILE NO:

1169 of 2024.

DIVISION:

Civil

PROCEEDING:

Costs application.

ORIGINATING COURT:

Brisbane District Court

DELIVERED ON:

23 May 2025

DELIVERED AT:

Mackay

HEARING DATE:

Heard on the papers.

JUDGE:

Byrne KC, DCJ

ORDER:

1.   The Claim is dismissed.

2.   The plaintiff pay the defendant’s costs of and incidental to the proceeding, on the standard basis, as assessed or agreed.

CATCHWORDS:

DEFAMATION – ACTIONS FOR DEFAMATION – COSTS – INDEMNITY COSTS – where the plaintiff commenced proceedings seeking damages in defamation – where the proceedings were effectively dismissed when the plaintiff was found to not be an excluded corporation under s 9(2) of the Defamation Act 2005 (Qld) – where the defendant provided the plaintiff a proposed order as to costs following the ruling – where the plaintiff did not consent to the proposed order – where the defendant now applies for costs ordered on an indemnity basis either under s. 40 of the Defamation Act 2005 or on common law principles – whether costs should be ordered on an indemnity basis in the circumstances.

LEGISLATION:

Defamation Act 2005 (Qld), ss 9, 40.

CASES:

di Carlo v Dubois [2002] QCA 225.
Deep Cycle Systems Pty Ltd v Fischer [2025] QDC 25.
Fair Work Ombudsman v Priority Matters Pty Ltd & Anor [2016] FCCA 1474.
LPD Holdings (Aust) Pty Ltd v Phillips, Hickey & Toigo [2013] QCA 305.
Oshlack v Richmond River Council (1998) 193 CLR 72.

COUNSEL:

Ms L. Brabazon for the plaintiff.

Mr. J. Castelan for the defendant.

SOLICITORS:

Twomey Dispute Lawyers for the plaintiff.

NetCounsel Lawyers for the defendant.

Introduction

1. The plaintiff commenced proceedings seeking damages in defamation. On 11 March 2025 I found that the plaintiff was not an excluded corporation within the meaning of that term at s 9 of the Defamation Act 2005.[1]  The effect of that ruling was to terminate the proceedings, although I did not make that order as the issue before me was determined on a separate question hearing (“the excluded corporation hearing”). 

   [1]Deep Cycle Systems Pty Ltd v Fischer [2025] QDC 25.

2. The defendant now seeks his costs of the whole of the proceeding on the indemnity basis, justified either pursuant to s 40 of the Defamation Act, or at common law.

3. The plaintiff accepts that the proceeding should be dismissed and accepts that it should be ordered to pay the costs of and incidental to the excluded corporation hearing on the standard basis, but otherwise submits that the parties should bear their own costs of the proceeding.

   Further factual material

4. An amount of inter-parties’ correspondence was filed on this costs application.  It is unnecessary to recite it in detail, but it can be said that there were relevant communications by the defendant, and denials by the plaintiff, about the excluded corporation question, and that the plaintiff indicated an intention to oppose the granting of the excluded corporation hearing.  On the day that application was heard, it did eventually consent to the hearing being conducted.  There were a number of other issues raised in the correspondence which need not be directly considered, but do include the issue of a separate question hearing for the issue of serious harm.

5. Also, on 11 March 2025, but after the judgment was delivered, the defendant’s solicitors wrote to the plaintiff’s solicitors indicating that the defendant would agree to the following orders being made:

   1.   That the proceeding be dismissed.

   2.   That the plaintiff pay the defendant’s costs of and incidental to the proceeding to be taxed on the standard basis in default of agreement.

   Or

   2.   That the plaintiff pay the defendant’s costs of and incidental to the proceeding in the sum of $70,000.

6. It was noted that if the offer was not accepted, the defendant intended to seek indemnity costs.  The proposal was to remain open for three days, which was ultimately extended by a further four days.  It was not accepted.  There is no suggestion that any earlier offer had been made by the defendant.

   The offer under s 40 of the Defamation Act

7. Section 40(2)(b) of the Defamation Act mandates an indemnity costs order in favour of the defendant if the court is satisfied that the plaintiff unreasonably failed to accept the settlement offer of 11 March 2025, unless the interests of justice require otherwise.  To qualify, the settlement offer must be made before the proceedings are determined, and be a reasonable offer at the time it was made.[2]

   [2]Section 40(3) of the Defamation Act.

8. As the proceedings had not been formally dismissed at the time of the primary judgment, the first limb is satisfied. However, as the only dispute remaining between the parties was that of costs, the issue of reasonableness relates to the form and contents of the costs order, not the reasonableness of commencing and continuing with the proceeding overall.

9. Although the plaintiff had not indicated a preparedness for the proceeding to be dismissed prior to filing its written submissions on this costs hearing, there was little opportunity to do so, and it was the inevitable outcome of the primary judgment.  Accordingly, the delay in consenting to the proceeding being dismissed is of no moment.

10. The defendant did not substantiate the calculation of the proposed fixed costs order in the sum of $70,000.  The defendant had, in earlier correspondence, again without substantiation and in the context of raising the possibility of an application for security for costs, estimated his overall costs to be in the range of $150,000 to $200,000.  Despite requests by the plaintiff for better particulars of that estimate, it does not appear any was given.  Certainly, the application for security for costs did not eventuate.

11. Substantiation of a proposed fixed sum of costs will not always be required, particularly where the proposed amount is obviously for a fair sum.  That is not this case.  While the suggested amount is not obviously exorbitant, I consider it was not unreasonable to refuse that alternative part of the defendant’s offer in the absence of justification for its calculation.

12. For reasons to be explained when considering the application for costs based on common law principles, I consider that the appropriate outcome in this case is that an order be made for the costs of the proceeding in favour of the defendant on the standard basis.  The defendant argues that it was unreasonable to reject the offer where the plaintiff is not in a better position than the offer, and in fact is worse off because of costs attributable to this costs application.

13. While there is some merit in that submission it is not a point that I need to decide.  Even had I found it meritorious, an indemnity costs order should not be ordered as, in my view, the offer was not made before the proceedings were determined. 

14. It will be recalled that the offer to settle was not made until after the excluded corporation hearing had been determined. Although I did not formally dismiss the Claim, that was inevitable. There was no basis to continue any part of the Claim in the face of the primary judgment. It could be appealed, but it remained binding unless overturned. In my view, the proceedings had been determined, even though not in the terms of the order made, and accordingly the offer made on 11 March 2025 does not amount to a settlement offer for the purposes of s. 40 of the Defamation Act.

    Costs on the common law approach

15. The defendant’s other basis for the granting of indemnity costs requires consideration of common law principles.  The discretion as to ordering costs is unfettered, but must be exercised judicially.  The object of a costs order, whether on the standard or indemnity basis, is not to punish the unsuccessful party, but rather to compensate the successful party for the expense to which they were put, and to the extent which is justified in all of the circumstances.  There may be many bases for justifying an indemnity costs order, but underlying them must be some “relevant delinquency” on the part of the unsuccessful party.[3]  It has also been said that to justify an award of indemnity costs there must be some special or unusual feature of the particular case.[4]  Importantly, the overall justice of the case must accommodate such an order.  I am also conscious of the warning by White J (as her Honour then was) that “it is important that applications for the award of costs on the indemnity basis not be seen as too readily available …”.[5] 

    [3]Oshlack v Richmond River Council (1998) 193 CLR 72, per Gaudron and Gummow JJ at [44].

    [4]LPD Holdings (Aust) Pty Ltd v Phillips, Hickey & Toigo [2013] QCA 305, [21]-[22].

    [5]di Carlo v Dubois [2002] QCA 225, [40].

16. In essence, the defendant emphasises that the plaintiff comprehensibly failed in proving a fundamental pre-requisite as to the jurisdiction to commence proceedings and, it is said, unreasonably proceeded with the action after the issue was identified.  It is said that unreasonableness includes its opposition to the listing of the excluded corporation hearing as a separate question, at least until that application was heard.

17. The law on the issue of excluded corporations is not plentiful, with the only helpful authority being one of an inferior court[6] and even then, only on an analogous provision.  Apparently, the primary decision is the only published decision on the point in this State. There was then some novelty to the litigated issue.

    [6]Fair Work Ombudsman v Priority Matters Pty Ltd & Anor [2016] FCCA 1474.

18. The primary decision turned on findings of fact in the context of the application of the onus of proof and issues of credibility. Notwithstanding the defendant’s submissions to the contrary, it was not a case where the facts were demonstrably all one way. While the plaintiff should have been, and no doubt was, alert to the Court’s need to assess the credibility and reliability of its sole director given the state of the pleadings,[7] his credibility and reliability was not necessarily so damaged as to preclude the legitimate commencement of proceedings. Put another way, the assessment of his credibility and reliability was an issue properly left to the court, in my view.

    [7]Primary decision at [8]-[11].

19. Ultimately, I am not persuaded that an order for indemnity costs is warranted, in all of the circumstances of this matter.  I am particularly persuaded by the novelty of the excluded corporation issue, meaning that the issue was fairly arguable, and that the extent of the credibility issues was not fully apparent until the hearing itself. It was not unreasonable to commence, and pursue, the proceedings. It is puzzling that the plaintiff resisted a separate question hearing, but I am not satisfied that, either in isolation or in combination with all other features, rises to the necessary level to warrant indemnity costs.

20. On the other hand the plaintiff contends that it should not be liable for all costs of the proceeding where only one of a number of issues in the proceeding was litigated, where the defendant, it submits, unnecessarily applied to determine the issue of serious harm as a separate question and where there were inefficiencies obvious in the manner in which the defendant conducted his case (including twice amending his defence).

21. It is not generally necessary or desirable to delve into the reasons steps were taken in determining what costs order is appropriate, although it may sometimes be appropriate to apportion costs where the losing party has partially succeeded on the litigated issues.  That is not the case here.  The defendant has been wholly successful and has been put to the expense of defending litigation. The fact it has been determined at a separate question hearing means that further, as it eventuates, unnecessary expense has been avoided by both parties.  Any issues as to the reasonableness of the costs sought can be decided through the taxation process, if those objections are maintained. 

22. It follows that it is not appropriate to make a partial order for costs in favour of the defendant.  There is no reason why the costs of the whole proceeding should not follow the event, and they should be ordered on the standard basis. 

    Orders

23. The orders are as follows:

    1.   The Claim is dismissed.

    2.   The plaintiff pay the defendant’s costs of and incidental to the proceeding, on the standard basis, as assessed or agreed.