Maras v Lesses (No 2) - [2016] SADC 57

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MARAS v LESSES (NO 2)
[2016] SADC 57
Reasons for Decision of His Honour Judge Chivell
15 June 2016
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
Plaintiff successful in all aspects of a defamation action brought against the defendant except on the defendant’s claim of qualified privilege, which defence failed as found to be actuated by malice. Application by plaintiff for costs of the action on an indemnity basis pursuant to s 38(2)(a) Defamation Act 2005 (SA). Whether defendant unreasonably failed to agree to a settlement offer made by the plaintiff.
Held: Defendant unreasonably failed to agree to settlement offer. Costs award reduced by 10% for trial time spent on the question of qualified privilege. Defendant to pay 90% of the plaintiff’s costs of the action on an indemnity basis, to be assessed if they cannot be agreed.
Defamation Act 2005 (SA) s 38, referred to.
Cornes v The Ten Group Pty Ltd & Ors (No 2) [2011] SASC 141; De Poi v Advertiser-News Weekend Publishing Company Pty Ltd (No 2) [2016] SASCFC 45; Oshlack v Richmond River Council (1998) 193 CLR 72, considered.

MARAS v LESSES (NO 2)
[2016] SADC 57

Mr Maras applies for an order that Mr Lesses pay the costs of this action on an ‘indemnity’ basis. He successfully sued Mr Lesses for defamation. I awarded him $75 000 damages.[1]
[1] Maras v Lesses [2016] SADC 40.
The only aspect of the action where Mr Maras was not completely successful was his challenge to Mr Lesses’ claim of qualified privilege. I upheld Mr Lesses’ contention that the defamatory statements were made on occasions of qualified privilege. However, the defence of qualified privilege failed because I held that the statements were actuated by malice.
The parties agree that the issue of costs in relation to defamation proceedings is governed by s 38 of the Defamation Act 2005 (SA). Section 38 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.
There are also Rules of Court which touch upon the issue (6DCR 187, 188 and 263), but it is agreed that s 38 ‘covers the field’ where defamation proceedings are concerned.
There were various offers made to settle these proceedings, even before proceedings were issued on 1 June 2012. They are helpfully set out in the materials handed up by Mr Whitington QC, counsel for Mr Maras.
In brief summary:
·an apology was demanded in the ‘concerns notice’[2] sent by letter from Mr Maras’ solicitors to Mr Lesses on 28 November 2011;
[2]    See Defamation Act, s 14.
·Mr Lesses’ solicitors responded by requesting further particulars. These were provided.
From this point on, all correspondence was between solicitors:
·on 25 January 2012, Mr Lesses offered to apologise without admitting liability, and indicated his willingness to contribute to Mr Maras’ costs;
·on 23 February 2012, Mr Maras responded by demanding a more fulsome and unconditional apology, a wide distribution of the apology and full payment of his costs to date;
·on 22 March 2012, Mr Lesses responded by declining to apologise to the full extent demanded by Mr Maras and agreeing to a more limited distribution of the apology and a ‘contribution’ to costs;
·Mr Maras responded on 6 June 2012 rejecting Mr Lesses’ limited response to his previous offer, making a further proposal for an apology, offering to further consider the issue of distribution and demanding costs of $5900. By this time, of course, the proceedings had been issued;
·Mr Lesses replied on 21 June 2012, further quibbling about the terms of the apology. In particular, he was prepared only to acknowledge a ‘perceived’ reference to untrustworthiness arising from the publications. Further, he indicated a willingness to accept a more limited distribution of the apology and to pay $5000 costs, not $5900;
·on 13 August 2012, Mr Maras notified Mr Lesses of his disinclination to negotiate further, notifying him of an intention to proceed with the litigation;
·on 11 July 2013, Mr Lesses requested a meeting with Mr Maras ‘(in the absence of lawyers)’. This was declined;
·on 27 February 2015, Mr Maras filed on Offer of Settlement in the court pursuant to 6DCR 187(3). The offer was to accept:
-     $25 000 in damages plus costs to be taxed or agreed;
-      a retraction and apology in similar terms to that demanded previously.
Mr Lesses did not accept this offer.
The offers previously made by Mr Maras were more generous than the offer of 27 February 2015. Each of them could have been considered an offer pursuant to s 38(2)(a). However, up until July 2013, although technically Mr Lesses ‘failed to agree to’ Mr Maras’ settlement offers, he responded with counterproposals.
I see little profit in examining each proposal and counterproposal on its merits to determine who was being more reasonable. If I find that the offer of 27 February 2015 was reasonable, and that Mr Lesses ‘unreasonably failed to agree to’ it, it follows that Mr Lesses’ failure to accept the earlier, more generous, offers was even more unreasonable. In view of the outcome of the trial, I regard Mr Maras’ failure to accept any of Mr Lesses’ proposals as irrelevant. In particular, I reject any suggestion that his ‘superior financial position’ (which has been assumed rather than proved) has been misused to hinder early resolution of the proceedings – s 38(1)(a).
I therefore propose to examine Mr Lesses’ ‘failure to agree to’ the offer made on 27 February 2015 for the purposes of s 38(2)(a).
Mr Lesses knew, when he was considering the offer, what his motivations and beliefs were when he made the publications. I presume without difficulty that he was advised that even if his claim of qualified privilege succeeded, it would be defeated if malice were proved. Malice would almost inevitably be proved if it were shown that Mr Lesses knew that the publications were untrue, or that they were made with reckless disregard for the truth.
These matters were established on the basis of Mr Lesses’ own evidence, along with a consideration of the objective circumstances. Further, it seems to me that it should have been obvious that if malice were established, having regard to the nature of the defamations and the mode of publication, damages would be substantial.
In Cornes v The Ten Group Pty Ltd & Ors (No 2),[3] Peek J eschewed ex post facto reasoning. He nevertheless compared the offer then under consideration with the ultimate award of damages, and noted that the disparity was substantial. His Honour found that the defendant’s failure to agree to the plaintiff’s offer was unreasonable. The disparity in that case was very similar to the disparity between the offer and the outcome in this case.
[3] [2011] SASC 141 at [26].
In all the circumstances, I find that Mr Lesses ‘unreasonably failed to agree to’ Mr Maras’ offer of 27 February 2015. Section 38(2)(a) therefore requires me to order costs of the proceedings (of the entire proceedings) on an indemnity basis ‘unless the interests of justice require otherwise’. That being the test, I do not see that resort to general principles in relation to indemnity costs is useful. For example, Mr Heywood-Smith’s reference to ‘some relevant delinquency’ on the part of the unsuccessful party entitling the successful party to indemnity costs[4] is not apposite here. Section 38(2)(a) covers the field on this issue.
[4] See Oshlack v Richmond River Council (1998) 193 CLR 72 at [44].
As to the test in s 38, in De Poi v Advertiser-News Weekend Publishing Company Pty Ltd (No 2),[5] the Full Supreme Court held that the plaintiff in the proceedings below was entitled to indemnity costs pursuant to s 38(2)(a), because the defendant had unreasonably failed to accept her offers to settle. However, the court found that she should receive 85% of her costs, because the defendant was successful in defending some of the six pleaded imputations.
[5] [2016] SASCFC 45.
Mr Heywood-Smith argued that in this case, Mr Maras wasted the time of the court, to the extent of 50% of the trial, by disputing that the publications were made on occasions of qualified privilege. I reject that submission. It is true that 87 paragraphs of the plaintiff’s written submissions were concerned with that issue. However, almost all of these submissions were addressing questions of law, rather than issues of fact. Very little evidence which went solely to qualified privilege was necessary. Most evidence was relevant to the other issues in the trial as well, particularly the background facts of the case, the question of whether the publications were defamatory, whether they were actuated by malice, the other defences raised by Mr Lesses (fair comment, justification) and damages.
To acknowledge the limited extent to which the trial spent time on the question of qualified privilege alone, I consider that a reduction of 10% of the award for costs is appropriate.
The defendant shall pay 90% of the plaintiff’s costs of the action on an indemnity basis, to be assessed if they cannot be agreed.