Lesses v Maras (No 3)
[2017] SASCFC 154
•21 November 2017
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
LESSES v MARAS (NO 3)
[2017] SASCFC 154
Judgment of The Full Court
(The Honourable Justice Blue, The Honourable Justice Parker and The Honourable Justice Hinton)
21 November 2017
DEFAMATION - ACTIONS FOR DEFAMATION - COSTS
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT - COSTS OF WHOLE ACTION - WHERE MONEY PAID INTO COURT OR OFFER OF COMPROMISE MADE
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - PARTIAL SUCCESS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - NATURE OF PROCEEDINGS - DAMAGES RECOVERED SMALL - ACTION WHICH SHOULD HAVE BEEN BROUGHT IN INFERIOR COURT
Appeal against judgment awarding damages for defamation. Issues of costs.
A District Court Judge awarded judgment in favour of the respondent in respect of two pleaded imputations, namely that three documents published by the appellant to members of the Greek Orthodox Community of South Australia (GOCSA) conveyed the imputation that the respondent is untrustworthy and that one of the publications (the flyer) contained the imputation that he does not care about GOCSA churches. The Judge assessed damages at $75,000.
On appeal, this Court allowed the appeal in respect of the untrustworthy imputation, upheld the judgment in respect of the “does not care” imputation, dismissed the respondent’s cross-appeal on costs and assessed damages at $25,000: Lesses v Maras [2017] SASCFC 48 and Lesses v Maras (No. 2) [2017] SASCFC 137.
The appellant seeks an order that the respondent pay his costs of appeal and of the cross-appeal on a party/party basis and that the respondent pay his costs of action or alternatively a proportion thereof on an indemnity basis. The respondent seeks an order that the appellant pay a proportion of his costs of appeal and the cross-appeal or alternatively that there be no order as to those costs and that the trial Judge’s order that the appellant pay 90% of his costs of action on an indemnity basis be preserved.
When the action was instituted in the District Court, the combined operation of s 42 of the District Court Act 1991 and rule 263 of the District Court Civil Rules 2006 was that costs in a defamation action were not generally recoverable unless the plaintiff obtained judgment for damages exceeding $7,500. That amount was later increased to $20,000 and then to $25,000 several weeks before the trial commenced.
Before the action was commenced or served, there were negotiations between the parties concerning potential resolution of the matter on the basis of an agreed apology and payment of costs during which each of the appellant and respondent made offers that they contend were reasonable.
Held by the Court:
1. Subsection 42(2) and rule 263(2)(f) prima facie apply so as to deprive the respondent of an entitlement to an order for the costs of action in his favour if he would otherwise be entitled to such an order (at [35]-[39]). However, given the imminence of the trial when the relevant amount was increased, it is just in the circumstances of the case that the respondent not be precluded from recovering the costs of action if he would otherwise be entitled to such an order (at [41]).
2. Observations concerning the relevance of disproportionality of costs to the value of the dispute the subject of the action (at [42]-[46]).
3. Subsection 38(2) of the Defamation Act 2005 does not operate to require the making of an order for costs of action in favour of either party to be assessed on an indemnity basis (at [65], [70]).
4. Taking into account the mixed success of the parties at first instance and on appeal and the negotiations between the parties, it is appropriate to order that each party bear his own costs of action and of the appeal and cross-appeal (at [101]).
A, DC v Prince Alfred College Inc (No 2) [2016] SASCFC 27; Australian Trade Commission v Disktravel [2000] FCA 62; Cornes v The Ten Group Pty Ltd (No 2) [2012] SASCFC 106; Jones v Sutton (No 2) [2005] NSWCA 203; Ruddock v Vadarlis (No 2) [2001] FCA 1865, discussed.
LESSES v MARAS (NO 3)
[2017] SASCFC 154Full Court: Blue, Parker and Hinton JJ
THE COURT:
This is an appeal against a judgment for the plaintiff in an action for defamation.
The respondent, Theo Maras, sued the appellant, John Lesses, in the District Court for defamation. Mr Maras alleged that three documents published by Mr Lesses in June 2011 to certain members of the Greek Orthodox Community of South Australia (GOCSA) conveyed the defamatory imputation that Mr Maras is untrustworthy (the untrustworthy imputation) and that one document (the Flyer) also conveyed the defamatory imputation that he does not care about GOCSA churches (the does not care imputation). The Judge upheld Mr Maras’ claim in respect of both imputations and awarded damages of $75,000.
This Court partially allowed Mr Lesses’ appeal on liability, finding that the documents did not convey the “untrustworthy” imputation but the Flyer conveyed the “does not care imputation” which was defamatory, and dismissed Mr Maras’ cross appeal on costs.[1] This Court assessed damages in respect of the does not care imputation at $25,000.[2]
[1] Lessesv Maras [2017] SASCFC 48.
[2] Lessesv Maras (No 2) [2017] SASCFC 137.
These reasons address issues of costs. The parties’ submissions raise five partially overlapping issues:
1.Should Mr Maras be deprived of his costs of action (if otherwise to be awarded in his favour) by the operation of section 42 of the District Court Act 1991 (SA) (the District Court Act) and rule 263(2)(g) of the District Court Civil Rules 2006 (SA) (the Rules)?
2.Were the costs incurred disproportionate to the value of the dispute and if so does this bear on the exercise of the costs discretion?
3.Does subsection 38(2) of the Defamation Act 2005 (SA) (the Act) require the making of an order in favour of either party for indemnity costs and if not does the conduct of the parties in settlement negotiations otherwise affect the appropriate costs order?
4.Does the mixed success of the parties of the issues bear on the exercise of the costs discretion?
5.How should the costs discretion be exercised in respect of each of the costs of action and costs of appeal?
Background
The Flyer was emailed in mid June 2011 to 78 GOCSA members.
On 28 November 2011 Mr Maras’ solicitors sent to Mr Lesses a concerns notice under the Act. Mr Lesses’ solicitors responded requesting particulars and on 23 December 2011 Mr Maras’ solicitors provided the particulars.
On 25 January 2012 Mr Lesses’ solicitors wrote to Mr Maras’ solicitors offering to resolve the matter on the basis of a draft apology that Mr Lesses was prepared to issue to Mr Maras and payment of a contribution towards Mr Maras’ legal costs. The letter said that the terms of the draft apology were subject to negotiation. The draft apology included a statement:
If anyone has drawn an inference from the newsletters to the effect that Mr Maras does not care about GOCSA churches, I regret this. No such inference was intended, and I apologise for the misunderstanding.
On 23 February 2012 Mr Maras’ solicitors replied offering to resolve the matter on the basis of an apology containing seven amendments to the draft apology proposed by Mr Lesses (without actually drafting the seven amendments required), distribution thereof to every GOCSA member and church, publication in three Greek newspapers and payment of Mr Maras’ legal costs and disbursements in full (said to be approximately $3,000). One amendment related to the does not care imputation and the remaining amendments related to the untrustworthy imputation or other matters. The letter did not expressly say that the seven amendments were not negotiable, but this might be implied from statements in the letter “if your client is agreeable to this proposal, and if agreement can be reached as to the exact form of an amended apology to be drafted according to the points set out above, our client will accept such resolution in full and final settlement of his claim … If resolution cannot be reached on these terms, our client will … issue proceedings”. A subsequent letter from Mr Maras’ solicitors expressly said that the 23 February letter was not intended to be taken as a negotiable position.
On 22 March 2012 Mr Lesses’ solicitors replied offering to resolve the matter on the basis of a revised draft apology, distribution thereof to all persons to whom the newsletter was originally sent and encouragement to those persons to forward it to anyone to whom they forwarded the original newsletter and payment of a reasonable contribution towards Mr Maras’ legal costs to be taxed if not agreed. The draft apology addressed six of the seven points set out in Mr Maras’ solicitors’ letter, the one not addressed being an apology for an untrustworthy imputation. It included a statement amended as requested by Mr Maras’ solicitors:
I also apologise and regret the suggestion that Mr Maras does not care about GOCSA churches.
From this time onwards in the negotiations the wording of the proposed apology insofar as it addressed the does not care imputation was settled and insofar as the negotiations addressed the apology wording they addressed different matters.
On 1 June 2012 Mr Maras instituted the action in the District Court but did not serve the proceeding until May 2013.
On 6 June 2012 Mr Maras’ solicitors replied to the 22 March 2012 letter offering to resolve the matter on the basis of an apology in terms of an apology enclosed with the letter and payment of his legal costs and disbursements in full (said to be approximately $5,900). They said that Mr Maras may agree to distribution of the apology in the manner proposed by the 22 March 2012 letter but first required a list of the original recipients. The enclosed apology varied in some respects from the apology offered by Mr Lesses. It included specific retractions of “the inference that Mr Maras is untrustworthy” and “the claim of breach of fiduciary obligations”. Mr Maras’ solicitors said that the content of the apology required by their previous letter had been not negotiable, that Mr Maras did not resile from his position and his position in respect of his legal costs was not intended to be negotiable either.
On 21 June 2012 Mr Lesses’ solicitors replied offering to resolve the matter on the basis of a revised draft apology. By this point, there were only three remaining differences between the respective versions of the proposed apology. The letter enclosed a list of the 78 recipients of the Newsletter, Flyer and Email. The letter said that Mr Lesses was prepared to pay reasonable costs, offered to pay $5,000 and said that if Mr Maras sought any more a work in progress report was requested so that Mr Lesses could review those costs before agreeing to any payment.
On 13 August 2012 Mr Maras’ solicitors replied rejecting the offer contained in the 21 June 2012 letter.
On 23 May 2013 Mr Maras’ solicitors wrote to Mr Lesses enclosing the proceeding in service upon him.
On 11 July 2013 Mr Maras’ solicitors wrote to Mr Lesses’ solicitors offering to resolve the matter on the basis of the 6 June 2012 version of the proposed apology to be sent to the original recipients together with payment of damages of $20,000 and payment of Mr Lesses’ costs to date.
On 1 October 2013 the action was listed for trial to commence on 23 March 2015.
On 27 February 2015 Mr Maras filed and served a formal offer of settlement under subrule 187(3) of the Rules offering to settle the action for $25,000 plus costs to be taxed or agreed and a retraction and apology in terms set out therein. The apology was in substance the 6 June 2012 version except that it omitted any reference to the does not care imputation.
On 27 February 2015 by consent the trial date was vacated and the matter relisted for the trial to commence on 18 May 2015.
On 14 May 2015 Mr Lesses’ solicitors wrote to Mr Maras’ solicitors offering to resolve the matter on the basis of the 21 June 2012 version of the apology and payment of $20,000 as a contribution by Mr Maras towards Mr Lesses’ costs.
On 18 May 2015 the trial commenced. Mr Maras was represented by very experienced senior counsel and by junior counsel who was also the (principal) instructing solicitor. It is not known whether other solicitors attended at court during the trial. Mr Lesses was represented by very experienced senior counsel and by junior counsel. It is not known whether a solicitor or solicitors attended at court during the trial.
The evidence occupied approximately nine days. Mr Maras’ evidence extended over approximately three days of which approximately 70 per cent comprised evidence in chief and re-examination. Mr Elovaris’ evidence extended over approximately two days of which approximately 70 per cent comprised evidence in chief and re-examination. Mr Abbott QC gave extremely brief character evidence.
Mr Lesses’ evidence extended over approximately three days of which approximately 60 per cent comprised cross-examination. The balance of the witnesses called by Mr Lesses occupied the balance of the time. The evidence concluded (subject to very brief supplementary evidence by Mr Lesses) on 31 July 2015.
The parties prepared lengthy written closing addresses. Oral closing addresses occupied a further two days in September 2015.
The parties’ contentions
Mr Lesses seeks an order that Mr Maras pay his costs of action in the District Court, or alternatively a proportion thereof, on an indemnity basis. Mr Maras seeks the preservation of the trial Judge’s order that Mr Lesses pay 90 per cent of his costs of action on an indemnity basis.
Mr Lesses seeks an order that Mr Maras pay his costs of appeal and of the cross-appeal. Mr Maras seeks an order that Mr Lesses pay a proportion of his costs of the appeal and the cross-appeal or alternatively that there be no order as to those costs. Mr Lesses seeks an order that Mr Maras pay his costs of his application for a stay of execution pending appeal in any event.
Mr Lesses contends that, as Mr Maras did not recover more than $25,000, by operation of section 42 of the District Court Act and rule 263(2)(f) of the Rules Mr Maras should not in any event recover his costs of action in the District Court. Mr Maras contends that the amendment effected by District Court Civil Rules Amendment No 29 (Amendment 29) which came into effect on 1 April 2015 increasing the amount for the purpose of rule 263(2)(g) to $25,000 does not apply to the action because the action had been commenced before 1 April 2015. Alternatively Mr Maras contends that the discretion conferred by rule 263(2) to order to the contrary should be exercised in his favour.
Mr Lesses contends that the costs orders should reflect what he submits is a gross disproportionality between the costs incurred and the damages award of $25,000.
Each party contends that the other party unreasonably failed within the meaning of section 38 of the Act to agree to a settlement offer proposed by the first party.
Each party contends that the vast majority, or at least the substantial majority, of the time spent at trial and on appeal was in respect of issues on which that party was ultimately successful.
Section 42(2) and rule 263(2)
Subsection 42(2) of the District Court Act provides:
If—
(a)an action for the recovery of damages or any other monetary sum is brought in the Court; and
(b)the action might have been brought in the Magistrates Court; and
(c)the plaintiff recovers less than an amount fixed by the rules for the purposes of this paragraph,
no order for costs will be made in favour of the plaintiff unless the Court is of the opinion that it is just in the circumstances of the case that the plaintiff should recover the whole or part of the costs of action.
Rule 263(2)(f) provides:
(2)The general rule is, however, subject to specific rules to the contrary and also to the following exceptions (which apply subject to the Court's order to the contrary)—
(f)in an action founded on a claim for defamation, general costs of action are not to be awarded in favour of the successful plaintiff unless the damages exceed $25,000;
When the action was commenced in June 2012, the amount referred to in rule 263(2)(g) (as rule 263(2)(f) was then numbered) was $7,500. The rule was amended with effect on 1 July 2013 to amend the amount to $20,000. The rule was further amended with effect on 1 April 2015 to amend the amount to $25,000.
Mr Maras contends that the reference in subsection 42(2) to an action being “brought” is a reference to an action being commenced and the reference in paragraph (c) to “the amount fixed by the rules for the purposes of this paragraph” is a reference to the rules in force as at the date of commencement of the action.
We reject this contention. The word “brought” has been used by the legislature in contradistinction to the word “commence” and encompasses both commencement and prosecution of proceedings. In any event there is nothing in the text, context or evident purpose of subsection 42(2) that confines the reference to the rules to the rules as they were when the action was commenced.
Mr Maras contends in the alternative that Amendment 29 should be construed in accordance with the general presumption applicable to legislation that it does not intend to alter retrospectively existing rights and obligations[3] and subordinate legislation should be construed in the same manner as legislation.[4]
[3] Citing Maxwell v Murphy (1957) 96 CLR 261 at 267 per Dixon CJ.
[4] Citing ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18, (2014) 254 CLR 1 at [51] per Gageler J.
Mr Lesses contends that amendments affecting procedure and costs are not the subject of the presumption relied upon by Mr Maras and are generally construed as being intended to have retrospective effect.[5]
[5] Citing Sykes v Queensland Gas Co [2009] QCA 163 at [78]-[82] per Muir and Chesterman JJA and Wilson J; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139 at [73] per Nicholas J.
Even when presumptions apply, ultimately a rule or statutory provision must be construed by reference to its text, context and evident purpose. Amendment 29 was expressed to come into effect on 1 April 2015. It did not contain any transitional provision, such as is sometimes included, that it was not to apply to existing actions. The natural effect of the text is that it applies to existing and future actions alike. Any prejudice that this might otherwise cause can be addressed under the discretion the court has to otherwise order if it is just in the circumstances to do so.
Accordingly, subsection 42(2) and rule 263(2)(f) prima facie apply such that Mr Maras is not entitled to an order for the costs of action in his favour if he would otherwise be entitled to an order in his favour.
Mr Maras contends that this Court should exercise the discretion under subsection 42(2) to relieve him of the consequences of the operation of the subsection and rule 263(2)(f) because the increase in the amount effected by Amendment 29 was only made on 1 April 2015, which was after the original trial date set of 23 March 2015 and only shortly before the actual commencement of the trial on 18 May 2015. He contends that “it is just in the circumstances of the case” within the meaning of subsection 42(2) that he should not be precluded from recovering the costs of action because he recovered less than the amount fixed by rule 263(2)(f).
We accept Mr Maras’ submission. Given that the original trial date had already passed and the relisted trial date was imminent, it is unreasonable to have expected Mr Maras to apply for transfer of the action to the Magistrates Court. This does not entail that Mr Maras should recover his costs of action or should do so in accordance with the District Court (as opposed to the Magistrate Court) scale because the Court has a general discretion as to costs regardless of the operation of subsection 42(2) of the District Court Act and rule 263(2) of the Rules. However, we are of the opinion that it is just in the circumstances of the case that subsection 42(2) not operate so as to preclude Mr Maras from recovering his costs of action.
Proportionality
A party who succeeds in litigation does not have a right to recover his or her costs. Costs are always in the discretion of the court. The question whether the amount of the costs that would be recovered by a successful party if the usual rule that costs follow the event were applied would be disproportionate to the value of the subject matter of the litigation is a relevant factor to take into account in the exercise of the court’s discretion.
The importance of efficiency and cost minimisation is reflected in the objects of the Rules expressed in rule 3 which include:
(d)to promote efficiency in dispute resolution so far as that object is consistent with the paramount claims of justice; and
(e)to minimise the cost of civil litigation to the litigants and to the State.
In Jones v Sutton (No 2),[6] the New South Wales Court of Appeal considered the relevance of proportionality in the exercise of the cost discretion. Beazley and Santow JA and Stein AJA said:
There has been considerable emphasis in the courts in recent years on litigation being conducted justly, quickly and cheaply. …
In this case, there is no charge that the appellant failed to comply with the rules in a timely manner. However, the objective of the justice system to resolve disputes in a “just, quick and cheap” manner is not confined to ensuring there has been compliance with the Rules of Court. …
The High Court has expressed concern about the cost of litigation in the context of the immunity of barristers from claims in negligence. This concern has also found expression in judgments in this Court and in the Divisions of the Supreme Court in respect of a variety of issues. …
In England, the Right Honourable Lord Woolf was appointed by the Lord Chancellor to review the rules and procedures of the Courts in England and Wales with the aim, inter alia, of improving access to justice and reducing the cost of litigation. Lord Woolf’s Access to Justice Report was delivered in July 1996. The unacceptability of costs being disproportionally high to the quantum of a claim was emphasised throughout the Report.
Even though the trial judge found that this was a serious defamation, the reality of this matter is that the appellant was awarded $5,000.00 after 17 days in court (including on the application for leave to appeal and the appeal). ...
… Likewise the costs of the proceedings as a whole, given the length of the trial and the engagement of senior and junior counsel, will have been disproportionate to the claim. Massively so. In our opinion, the Court should not facilitate such disproportion by making an order for costs that simply follows the event.[7]
[6] [2005] NSWCA 203.
[7] At [48]-[53]. (Citations omitted)
In that case the plaintiff succeeded in establishing liability on appeal and hence succeeded both at first instance (as a result of the appeal) and on appeal. Nevertheless, taking into account disproportionality as well as other matters, the Court of Appeal ordered that the plaintiff recover costs for only four days of trial on the basis of junior counsel only together with reasonable costs for preparation for trial and that otherwise each party bear his own costs of action. The Court of Appeal also ordered that each party bear his own costs of the appeal. In that case there were factors in addition to disproportionality that led to this outcome and every case needs to be considered by reference to its own facts and circumstances. Nevertheless, this is an illustration of the relevance of disproportionality when exercising the discretion to make an appropriate costs order.
Although the damages awarded of $25,000 in the present case are somewhat higher than the damages awarded in that case, nevertheless the costs of action of each party on an ordinary party/party basis would be at least an order of magnitude greater than the value of the subject matter of the litigation. This needs to be weighed together with the other relevant factors in determining an appropriate costs order in this matter.
Negotiations to settle the matter
In exercising the costs discretion, leaving aside special rules about settlement offers addressed below, a court is entitled generally to consider the causes of the costs of the litigation being incurred. Costs may be seen as being caused by the pursuit by the unsuccessful party of a claim or defence measured by reference to the result of the action. This is the rationale when and to the extent that it applies for costs following the event. Costs may be seen as being caused by the conduct of one party before the commencement or during the litigation by reference to the litigation (as opposed to that party’s anterior conduct that is the subject of the litigation). Costs may be seen as being caused by one party being unwilling to resolve the matter on terms measured by reference to the result of the action. There may be multiple causes of the costs of the litigation being incurred and this may result in a multi-dimensional assessment by the court of the causes of the costs of litigation.
In addition to the general costs discretion, there are two specific provisions that operate by reference to negotiations to resolve the matter.
First subrule 188(6) as in force up to 30 November 2015[8] provided that, if a formal offer of settlement insofar as it relates to principal relief is not accepted and the court determines the claim on terms (as to principal relief) no more favourable to the offeree than the terms of the offer, subject to the Court’s order to the contrary the offeror if the plaintiff is entitled to costs of action on a solicitor/client basis. Neither party invokes subrule 188(6).[9]
[8] The formal offer regime in force up to 30 November 2015 was changed with effect on 1 December 2015 by the introduction of new rules 187-188I.
[9] Mr Lesses did not file a formal offer. Mr Maras relies on his formal offer filed on 27 February 2015 as a “settlement offer” under section 38 of the Act but does not rely on subrule 188(6).
Secondly section 38 of the Act provides:
38—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.
Several features of section 38 should be noted. First paragraphs 38(2)(a) and 38(2)(b) create two discrete rules that are mandatory subject only to the interests of justice otherwise requiring. However, these discrete rules do not otherwise limit the generality of the very broad discretion conferred by subsection 38(1) addressed further below.
Secondly the discrete rules only apply to costs recovery by successful parties. They do not apply to unsuccessful parties who for example make reasonable offers to settle: this is left to be addressed under subsection 38(1) and the general costs discretion.
Thirdly the discrete rules only apply when the court has already determined that costs are to be awarded in favour of the successful party. This is a precondition to their operation.
Fourthly the discrete rules have a very specific operation: they prescribe the scale of costs as indemnity costs when they operate.
Fifthly the discrete rules operate when the unsuccessful party failed to agree to/accept a settlement offer proposed/made by the successful party that was reasonable when it was made. The rule in respect of a successful plaintiff also operates when the unsuccessful defendant failed to make a reasonable settlement offer.
Sixthly the court may take into account under subsection 38(1) the parties’ conduct in relation to settlement in circumstances not covered by subsection 38(2) such as a reasonable offer by a defendant not accepted by a successful plaintiff.
Seventhly section 38 must be understood in the context of the other provisions of the Act. Part 3 Division 1 creates a regime enabling defendants to make offers to make amends. Section 18 creates a defence to a defamation action if the defendant made a reasonable offer to make amends as soon as practicable after becoming aware that the matter may be defamatory and was ready and willing to carry out the terms of the offer. Section 18 changes the common law in a fundamental way by making an offer to make a retraction and apology a complete defence and thereby precluding the plaintiff from obtaining judgment or recovering damages for the defamation. It follows that a defendant is not obliged to offer to pay damages as part of an offer to make amends.
Finally the policy evident in section 38 is to broaden the relevance to the award of costs of the reasonableness of the parties’ positions in and in respect of settlement negotiations. In a passage referred to with approval by this Court in Cornes v The Ten Group Pty Ltd (No 2),[10] McLellan CJ at CL in Davis v Nationwide News Pty Ltd[11] said:
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)…
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.[12]
[10] [2012] SASCFC 106 at [14] per Kourakis CJ, Gray and Blue JJ
[11] [2008] NSWSC 946.
[12] At [36]-[37].
Offers by plaintiff
Mr Maras contends that each of his offers made in February and June 2012, July 2013 and February 2015 was reasonable and gives rise to an entitlement to indemnity costs under section 38(2)(a).
However, each offer contained as an essential term a requirement that Mr Lesses admit making the untrustworthy imputation. The February 2012 letter required the apology to “refer to, and express regret for, the inference that our client is untrustworthy”. The June 2012 letter required the apology to include the following paragraph:
I also retract the inference that Mr Maras is untrustworthy.
The July 2013 letter required the same apology. The February 2015 formal offer required the apology to include the following paragraph:
I also apologise and regret the suggestion that Mr Maras is untrustworthy.
It is clear that the component relating to the untrustworthy imputation was not negotiable from Mr Maras’ perspective. This was so notwithstanding that Mr Lesses in his June 2012 response was prepared to go as far as retracting any perceived inference that Mr Maras is untrustworthy.
Mr Maras failed on appeal in respect of the untrustworthy imputation. His offers requiring Mr Lesses to acknowledge such an imputation and apologise for it were plainly not reasonable. His offers were not reasonable within the meaning of section 38.
Mr Maras advances the bald contention that both limbs of section 38(2)(a) are applicable, thereby implicitly contending that Mr Lesses unreasonably failed to make a settlement offer. However Mr Maras does not articulate the terms of the settlement offer that Mr Lesses unreasonably failed to make. Given that Mr Maras would not settle in the absence of a full apology acknowledging the untrustworthy imputation, there is no basis on which it could be found that Mr Lesses unreasonably failed to make a reasonable settlement offer.
It follows that Mr Maras is not entitled to rely on section 38(2)(a) for an order for indemnity costs. It is doubtful given the considerations addressed at [68] below that Mr Maras should be regarded as having successfully brought defamation proceedings in circumstances in which he failed on the major of the two imputations alleged, but it is unnecessary to decide this question.
Offers by defendant
Mr Lesses contends that each of his offers made in January, February and June 2012 was reasonable and gives rise to an entitlement to indemnity costs under section 38(2)(b).
As noted above, section 38(2)(b) only applies when two preconditions are satisfied (aside from reasonableness of the defendant’s offer): first that defamation proceedings are unsuccessfully brought by a plaintiff and secondly that costs in the proceedings are to be awarded to the defendant.
The first precondition is not satisfied. In circumstances in which Mr Maras succeeded in the action insofar as he recovered damages of $25,000 for the does not care imputation, it cannot be said that the defamation proceeding was unsuccessfully brought by him as plaintiff. It may be accepted that Mr Maras’ claim in respect of the untrustworthy imputation in three publications was more substantial on any measure than the does not care imputation in one publication. It is unnecessary to decide whether, if a plaintiff were to succeed in respect of an insignificant or subsidiary imputation but failed in respect of the predominant asserted imputation, the plaintiff would be regarded as having unsuccessfully brought the proceedings because this case does not fall into that relatively extreme category.
The second precondition requires the court to consider whether, in the absence of the relevant settlement offer or offers, the court would otherwise have ordered the plaintiff to pay all or a proportion of the defendant’s costs of action. This precondition is also not satisfied for reasons which appear below.
It follows that Mr Lesses is not entitled to rely on section 38(2)(b) for an order for indemnity costs.
Willingness to settle by reference to result
Although the rules in subsection 38(2) do not apply, it remains appropriate under subsection 38(1) and the general costs discretion to consider whether the cost of the litigation should be seen as being caused by one or other of the parties being unwilling to resolve the matter on terms measured by reference to the result of the action. The result of the action was that Mr Maras was defamed by the does not care imputation but not by the alleged untrustworthy imputation.
Mr Lesses’ offers of March and June 2012 both offered to apologise in terms acceptable to Mr Maras, and in terms objectively reasonable, insofar as the proposed apology addressed the does not care imputation, namely the words set out at [9] above.
As to the balance of the proposed apology, the difference between the parties as at June 2012 is illustrated by the agreed text set out below together with additional words in Mr Maras’ version in parenthesis and additional words in Mr Lesses’ version in italics (the paragraphs being numbered solely for ease of identification):
Apology to Theo Maras
1.Theo Maras has expressed concern about damage to his reputation arising from newsletters circulated last year with which I had an involvement in publishing. These included certain allegations [in particular] concerning his role, as a GOCSA appointee to the FGOCA and regarding the ecclesiastical issue.
2.Specifically, I wish to retract the claim of breach of fiduciary obligations, on his part. I acknowledge that this claim should not have been made. I apologise and regret any distress caused to Mr Maras.
3.I also apologise and regret the suggestion that Mr Maras does not care about GOCSA churches.
4.I also retract [the] any perceived inference that Mr Maras is untrustworthy.
5.Further, I acknowledge that the original photograph of Mr Maras with Bishop Nikandros had included the former Premier, Mr Rann who was cut out of the photograph which was published. I apologise and regret this exclusion. The photograph was taken at an event held by the Premier’s office and is unrelated to the issues I raised in the newsletters. By excluding Mr Rann from the photograph I was intending not to implicate him in an unrelated issue. I acknowledge that its use [was] might therefore be considered to have been misleading.
John Lesses
In respect of the fourth paragraph, as noted above the inclusion of the words “any perceived” in lieu of “the” in relation to the asserted untrustworthy inference was a deal breaker from Mr Maras’ perspective. However, as the published works did not give rise to the untrustworthy imputation, Mr Lesses was offering more in this respect than he was obliged to offer.
In respect of the fifth paragraph, Mr Lesses did not in the first proposed apology refer to the photograph showing Mr Maras and Bishop Nikandros (the photograph). In his solicitors’ response, Mr Maras required the apology to refer to and express regret for the misleading photograph, explaining that Mr Rann was cut out of the photograph and that the photograph was taken at an event held by the Premier’s office. In response Mr Lesses proffered in the next version of the proposed apology the first two sentences contained in the fifth paragraph above. In response Mr Maras included the third sentence contained in the fifth paragraph above together with a final sentence “Its use was therefore misleading”. Mr Lesses accepted the third sentence and added the additional words shown above in italics. The only imputation in respect of which Mr Maras ultimately succeeded was the does not care imputation. Mr Maras did not plead that the photograph was defamatory or otherwise refer to it in his pleading of asserted defamatory matters. To amount to a reasonable apology, Mr Lesses was only required to apologise in respect of the does not care defamatory imputation. The residual difference between the parties in relation to the fifth paragraph does not prevent Mr Lesses’ offers being reasonable.
The function of the first paragraph is purely introductory. It does not refer to any defamatory imputation. The original January 2012 version of the first paragraph was largely the same as the subsequent versions proffered by Mr Lesses, except that it included “and the independence of GOCSA” at the end. The only change requested by Mr Maras in his initial response was to remove those last five words. Mr Lesses did so in the next two versions and in addition he substituted for the original reference to Mr Maras’ role “representing the interests” of GOCSA a reference to his role “as an appointee” of GOCSA to the Federation. In his June 2012 response, Mr Maras requested deletion of the reference to his role as an appointee but left in the reference to the ecclesiastical issue. Given the limited role of the first paragraph, the difference between the parties was not significant and could easily have been accommodated by deleting the second sentence which was not necessary for the purpose of an apology by Mr Lesses for making the does not care imputation.
The negotiations between the parties addressed two elements: the wording of the proposed apology and Mr Maras’ legal costs. In his January 2012 offer, Mr Lesses offered to “pay a contribution towards your client’s legal costs”. This was too vague and non-specific to amount to a reasonable offer. In his March 2012 offer, Mr Lesses offered to pay a reasonable contribution towards Mr Maras’ legal costs and said that if there was any dispute concerning the costs Mr Lesses reserved the right to have those costs taxed. On balance, given the reference to taxation of the costs, this offer should be construed as being an offer to pay Mr Maras’ costs to be taxed if not agreed. In his June 2012 offer, Mr Lesses was responding to a statement by Mr Maras’ solicitors that his costs were in the order of $5,900. Mr Lesses offered to pay $5,000 towards Mr Maras’ costs and added:
If your client is seeking more than this then we would require a WIP from you so that our client may review those costs before agreeing to any payment.
In the context of the previous offer and of the negotiations between the parties, this offer should be construed as being an offer to pay Mr Maras’ costs in full subject to Mr Lesses verifying from the WIP printout that costs in the amount claimed had been incurred and were not unreasonably incurred. It is apparent that it was not the issue of costs that prevented a resolution of the matter. Rather it was the issue of the untrustworthy imputation in respect of which Mr Maras insisted on an unqualified acknowledgement and apology from Mr Lesses. Mr Maras adopted a largely non-negotiable position. By contrast, Mr Lesses was prepared to make concessions in respect of matters not successfully pursued by Mr Maras (including the untrustworthy imputation in respect of which Mr Maras was ultimately unsuccessful and the breach of fiduciary duty imputation which Mr Maras did not pursue in the action).
Mr Lesses’ offers did not include payment of damages to Mr Maras. However, in context this does not prevent the offers being reasonable. This is because Mr Maras did not over the negotiation period January to June 2012 seek payment of damages. This appears to be for a combination of two reasons although it is not essential to determine why Mr Maras adopted this position. First section 18 of the Act provides that, if a timely reasonable offer to make amends is made, a plaintiff does not recover damages. Secondly Mr Maras gave evidence at trial that he brought the action to clear his name and he did not care about the money.
Considered holistically, a material cause of the costs of the litigation being incurred was the insistence by Mr Maras on an unqualified apology in respect of the alleged untrustworthy imputation which we have concluded did not arise. Our assessment is that but for that insistence the matter would have resolved in 2012 and the costs of the litigation would not have been incurred.
Conclusion on section 38
Subsection 38(2) does not operate to entitle either party to costs of action on an indemnity basis. However, the conduct and attitudes of the parties in settlement negotiations is a matter that can be taken into account more generally and is addressed further below.
Mixed success
When there has been mixed success at first instance or on appeal, a court may in appropriate circumstances reduce the costs ordered in favour of the overall successful party, and further may order that party to pay the opponent’s costs, in respect of such issues.[13] When the court considers that the discretion should be so exercised, it will usually make an order for payment of a proportion of one party’s costs by the other party reflecting a broad axe assessment, even when it considers that the successful party should pay the opponent’s costs in respect of such issues.
[13] Robinson v Australian Association of Social Workers Ltd [2000] SASC 239, (2000) 210 LSJS 73 at 81-82 per Martin J (with whom Prior and Williams JJ agreed); Ruddock v Vadarlis (No 2) [2001] FCA 1865, (2001) 115 FCR 229 at [11] per Black CJ and French J; A, DC v Prince Alfred College Inc (No 2) [2016] SASCFC 27 at [5] per Kourakis CJ, Gray and Peek JJ.
In Ruddock v Vadarlis (No 2),[14] Black CJ and French J said:
Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that:
· Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.
· Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.
· A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.[15]
[14] (2001) 115 FCR 229.
[15] At [11].
Without limiting the factors relevant to exercise of the discretion, it is more likely to be exercised to make a costs order reflecting mixed success:
· the more separate and distinct the issue on which the successful party failed (a separateness assessment);
· the greater the relative value and importance of the issue on which the successful party failed (a value assessment);
· the greater the proportion of costs of the issue on which the successful party failed (a relativity assessment);
· the greater the amount of costs of the issue on which the successful party failed (an absolute assessment);
· the less the merit of the successful party’s case on the unsuccessful issue (a merit assessment).[16]
[16] See Australian Trade Commission v Disktravel [2000] FCA 62 at [3] per French, Kiefel and Mansfield JJ; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[6] per Finkelstein and Gordon JJ.
In general terms, appellate courts tend to exercise the discretion to make a costs order reflecting mixed success on appeal less frequently than the discretion is exercised (either at first instance or on appeal) in respect of the costs of action in the court below. This reflects the fact that appeal costs are usually much smaller than first instance costs and the issues are usually fewer and more refined. Nevertheless, appellate courts do exercise discretion to make cost orders reflecting mixed success on appeal when appropriate.
Dealing first with the costs of action, this is a strong case for exercise of the discretion to reflect the mixed success of the parties in an appropriate cost order. Although Mr Maras succeeded in establishing defamation by way of the does not care imputation, it was the lesser of the two imputations for which he sued by the application of almost any criterion. It was inherently of less gravity than the untrustworthy imputation. It appeared in only one of the three publications the subject of the action. It raised issues in a much narrower compass.
The parties make diametrically opposed submissions about the time spent in relation to the does not care and untrustworthy imputations. At one extreme, Mr Maras contends that the addition of the untrustworthy imputation had no appreciable effect on the length of trial or costs incurred in the action. At the other extreme, Mr Lesses contends that almost all of the time spent at trial and costs incurred in the action are attributable to the untrustworthy imputation.
It is necessary to make a broad axe assessment based on the Court’s knowledge acquired as a result of hearing the appeal, an examination of the transcript of the trial and consideration of the other materials available to the Court. For the purpose of making that assessment, it is necessary to determine how to define the issues on which the parties succeeded and failed.
In relation to the does not care imputation, Mr Maras ultimately succeeded (after appeal) on the issues of construction (does the imputation arise), defamation (is the imputation defamatory), malice and justification. Mr Lesses failed on the issues whether the Flyer was published on an occasion of qualified privilege and the defamatory words were sufficiently connected with the privileged occasion.
In relation to the untrustworthy imputation, Mr Lesses ultimately succeeded (after appeal) on the issue of construction (does the imputation arise). This rendered the subsequent issues moot. This Court’s reasoning for finding that malice was established in respect of the does not care imputation does not apply to the untrustworthy imputation. It should not be assumed that this Court would have upheld the trial Judge’s conclusions that the defences of qualified privilege and fair comment failed. Wielding a broad axe, it is appropriate to proceed on the basis that Mr Maras failed on the issues involving the untrustworthy imputation and succeeded on the issues involving the does not care imputation.
It is appropriate to make an assessment of the length of trial and proportion of total costs of action that would have been reasonably incurred if Mr Maras had sued only in respect of the does not care imputation. Our assessment is that the trial would have occupied significantly less than half the time actually taken and the costs of action would have been significantly less than half the costs of action actually incurred. Our assessment is that the evidence in chief led from Mr Maras and Mr Elovaris would have been much shorter and less controversial and the cross-examination of those two witnesses would also have been much shorter. While there would still have been substantial cross-examination of Mr Lesses, it would have been substantially shorter. The evidence of the remaining defence witnesses would have been much shorter. The written and oral closing addresses would also have been much shorter. While a significant proportion of the evidence adduced from witnesses and documentary evidence tendered formed background or context or was otherwise common to the issues in respect of both imputations, there would have been a need for much less of this type of evidence if Mr Maras had only pursued the does not care imputation.
We have arrived at this assessment without reference to the question of proportionality of costs to the value of the matter in dispute. It would have been grossly disproportionate for the time devoted to the trial and costs incurred in the action to have been spent in an action relating only to the does not care imputation. In making a hypothetical assessment, we are entitled to assume that the parties would have conducted themselves in a manner that avoided a complete disproportionality between the costs incurred and the value of the matter in dispute.
In relation to the appeal, our assessment is that, fairly allocating time spent on common issues to the untrustworthy and does not care imputations, a majority of time spent on appeal was devoted to the untrustworthy imputation.
This is a matter in which the orders to be made in respect of the costs of action and the costs of appeal should reflect the very mixed success of the parties.
Overall exercise of the discretion
The starting point in respect of costs is that costs follow the event. On a simplistic approach, it might be thought that the starting point in respect of costs of action is that Mr Lesses be ordered to pay all or part of Mr Maras’ costs because Mr Maras succeeded (ultimately) in obtaining judgment for $25,000 damages and in respect of the costs of appeal is that Mr Maras be ordered to pay all or part of Mr Lesses’ costs of appeal because Mr Lesses succeeded in overturning the finding of liability in respect of the untrustworthy imputation and a reduction in the damages awarded by $50,000 and pay Mr Lesses’ costs of the stay application because both the application and appeal were successful.
However, this analysis is too simplistic. In many ways there were two events: Mr Maras succeeding in respect of one event and failing in respect of the other event. In any event it is necessary to reflect fairly the mixed success of the parties in an appropriate cost order.
In addition, it is necessary to take account of our finding that, by reference to the ultimate result and the manner in which the parties negotiated in 2012, a cause of the matter proceeding to litigation and the costs of action and appeal being incurred is that Mr Maras insisted on an unqualified apology in respect of the untrustworthy imputation to which he was not entitled and otherwise the matter would have resolved.
If we were to assess the costs of action independently of the costs of appeal, we would have been disposed to order that Mr Maras recover a very small proportion of his costs of action (if any) from Mr Lesses. This would take into account the fact that on the one hand Mr Maras ultimately succeeded in obtaining judgment for damages of $25,000 for the does not care imputation but on the other hand most of the costs incurred in the action were attributable to the more substantial untrustworthy imputation.
If we were to assess the costs of appeal independently of the costs of action, we would be disposed to order that Mr Lesses recover 50 per cent of his costs of appeal from Mr Maras. This would take into account the fact that on the one hand Mr Lesses ultimately succeeded on appeal in respect of the major untrustworthy imputation and a reduction by two thirds of the damages awarded and succeeded on the stay application but on the other hand a significant proportion of the costs incurred on appeal were attributable to the does not care imputation.
However in the particular circumstances of this matter we do not consider that it would be appropriate to make one costs order in favour of Mr Maras in respect of the costs of action and another costs order in favour of Mr Lesses in respect of the costs of appeal costs orders with the amount of the costs awarded likely to offset each other. We consider that a fair and more appropriate outcome overall is that each party bear his own costs of action and appeal.
Considered holistically, given his success on the more important untrustworthy imputation, his success on appeal and his willingness to negotiate a sensible resolution measured by reference to the ultimate result, we do not consider that it is appropriate to order that Mr Lesses pay Mr Maras’ costs. Equally, given his success on the does not care imputation and the fact that ultimately he has obtained judgment for damages of $25,000, we do not consider that it is appropriate to order that Mr Maras pay Mr Lesses’ costs.
Conclusion
An issue has arisen as to the form of orders previously made and orders to be made to reflect the substantive result of the appeal. We will hear the parties as to the form of the orders still to be made in that respect. The orders to be made will include orders that each party is to bear his own costs of action and his own costs of appeal.
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