Marshall v Megna; Megna v Tory; Tory v Megna (No 2)

[2013] NSWCA 456

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Marshall v Megna; Megna v Tory; Tory v Megna (No 2) [2013] NSWCA 456

Hearing dates:

On the papers

Decision date:

18 December 2013

Before:

Beazley P;
Hoeben JA

Decision:

(1) Order 5 made by this Court in this matter on 25 February 2013 be varied by omitting "to be calculated" and inserting "in the sum of $62,949.43";

(2) Order 6 made by this Court in this matter on 25 February 2013 be varied by omitting "to be calculated" and inserting "in the sum of $45,282.32";

(3) Order 7 made by this Court in this matter on 25 February 2013 be varied by inserting, at the end of subparagraph (a), "on an ordinary basis up until 15 August 2006 and on an indemnity basis as and from 16 August 2006";

(4) Each party to bear its own costs of the notice of motion.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

DAMAGES - calculation of interest - date from which interest should be calculated where damage sustained over a period - date at which damage first suffered varied on appeal.

COSTS - application for indemnity costs - Defamation Act 1974, s 48A - whether offer of compromise compliant with Uniform Civil Procedure Rules, r 20.26 - whether offer of compromise should be given effect as a Calderbank offer.

Legislation Cited:

Defamation Act 1974
Supreme Court Act 1970
Uniform Civil Procedure Rules 2005

Cases Cited:

Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160
Calderbank v Calderbank [1975] 3 WLR 586
Megna v Marshall (No 2) [2011] NSWSC 52
Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15
Old v McInnes and Hodgkinson [2011] NSWCA 410
Whitney v Dream Developments Pty Ltd [2013] NSWCA 188

Category:

Costs

Parties:

David John Marshall (First Appellant/Cross-Respondent)
Richard Martin Tory (Second Appellant/ Second Cross-Respondent)
Michael Megna (First Respondent/Second Cross-Appellant)
Russell James Lloyd (Second Respondent/Second Cross-Appellant)

Representation:

Counsel:
In person (First Appellant/Cross-Respondent)
A T S Dawson (Second Appellant/ Second Cross-Respondent)
T Molomby SC; R Rasmussen (Respondents)
Solicitors:
Bricknell Legal (Second Appellant/Second Cross-Respondent)
Etheringtons (Respondents)

File Number(s):

2004/181254; 2012/105217

 Decision under appeal 

Jurisdiction:

9111

Citation:

Megna v Marshall [2010] NSWSC 686

Date of Decision:

2010-06-25 00:00:00

Before:

Simpson J

File Number(s):

SC 2004/181254

Judgment

1. THE COURT: Judgment in this matter was delivered by the Court on 26 February 2013: Marshall v Megna; Megna v Tory; Tory v Megna [2013] NSWCA 30. The outcome of the proceedings was to uphold the defamation claims brought by the plaintiffs, Mr Megna and Mr Lloyd (the cross-appellants in this Court) against the defendants, Mr Marshall and Mr Tory (the appellants in this Court), found to have been made out at first instance and that other claims rejected at first instance had been made out. The Court awarded damages in a different sum from that awarded by the trial judge. By order 5, the Court ordered damages in favour of Mr Megna in the sum of $300,000, together with interest to be calculated. By order 6, the Court ordered damages in favour of Mr Lloyd in the sum of $200,000, together with interest to be calculated.

1. The Court also made the following orders:

"7. Order that the appellants/cross-respondents/defendants (Mr Marshall and Mr Tory) pay the following costs of the respondents/cross-appellants/plaintiffs:

(a) Of the proceedings in the court below including the costs of the s 7A jury trial;

(b) Of the appeal and the cross-appeal;

8. The parties are to recalculate the interest payable on the judgment sums on the same basis specified in the reasons of the trial judge of 18 February 2011: Megna v Marshall (No 2) [2011] NSWSC 52, at the rate of 2 per cent from 1 January 2001 up to and including the date of her Honour's judgment of 25 June 2010."

1. By notice of motion filed 5 March 2013, Mr Megna and Mr Lloyd have sought orders in relation to the amount of interest payable on their respective award of damages. In the case of Mr Megna, the amount of interest claimed is $62,946.43. In Mr Lloyd's case, the claim for interest is in the sum of $45,282.32.

1. Mr Megna and Mr Lloyd also seek that the costs order made by the Court be varied so that costs be ordered to be paid on an indemnity basis, both in respect of the proceedings in the court below and on the appeal and cross-appeal. Alternatively, they seek that the costs in the court below be payable on an indemnity basis from 16 August 2006 in the case of Mr Megna, and from 26 January 2006 in the case of Mr Lloyd.

1. An order is also sought in the notice of motion to correct a wrong reference in order 6 to Mr Lloyd rather than Mr Tory. That order is unnecessary, as the Court's judgment was amended at the time it was delivered. A copy of the corrected judgment was immediately forwarded to each of the parties.

1. With the consent of the parties, this notice of motion has been determined by the President, Beazley P, and Hoeben JA, pursuant to the Supreme Court Act 1970, s 45AA, as the former President of the Court, Justice Allsop, Chief Justice of the Federal Court, is no longer a member of the Court. Also by consent, the matter has been determined on the papers.

Calculation of the payment of interest

1. Before dealing with the determination of the amount that should be awarded by way of interest, two matters are to be noted.

1. First, the Court's order 8, set out above, specified that interest was to be calculated from 1 January 2001, being the date that had been specified by the trial judge in her judgment. The Court has been informed that that date was corrected by consent, so that the relevant dates from which interest was to be calculated was 1 September 1999 in the case of Mr Megna and 1 May 1999 in the case of Mr Lloyd. Those dates reflected the midpoint of the period of time over which the matters complained of, upon which each had succeeded at first instance, had been published.

1. Secondly, the trial judge had assessed damages in respect of each publication that she found to be defamatory. However, so far as the calculation of interest was concerned, her Honour considered that a fair approach was to take a date that was the midpoint between the dates of the first and last publications and to award interest on the total sum awarded at 2 per cent from that date: primary judgment at [25]-[30]. As we have already noted, this Court upheld aspects of the cross-appeal and determined that certain publications, that had not been found to be defamatory by the trial judge, were in fact defamatory of the plaintiffs.

1. The consequence of that outcome, for the purposes of the calculation of interest, is that the date of the first defamatory publication was earlier than the first publication found by her Honour to be defamatory. This necessarily has an impact upon the appropriate date from which to calculate interest. Although this Court adopted a different approach to the award of damages from that taken by her Honour, assessing for each plaintiff a global sum for the totality of the defamatory publications, that will not have an impact on the approach to the calculation of interest, as her Honour also calculated interest on the total sum awarded.

1. The date of the first publication found by this Court to have been defamatory of Mr Megna was April 1998. The last publication found to be defamatory of him was August/September 2003. Mr Megna has calculated the approximate midpoint between those two dates to be about 1 January 2001. He has submitted, however, that it would be inappropriate to calculate interest from that date, as there were 14 publications three years before that date and only one after it. In the case of Mr Lloyd, damages were awarded for publications between April 1998 and February 2000, the midpoint of which is March 1999.

1. Mr Megna and Mr Lloyd submitted, therefore, that the date from which interest should be calculated so as to have regard to the different dates of publication in their respective cases. Mr Megna submitted that in his case, interest should be calculated from 1 August 1999, being the midpoint of the period of the first 14 publications, that is, from April 1998 to October 2000, for nine tenths of his damages, and from 1 September 2003, being the date of the last publication, for the remaining one tenth of his damages. The resultant calculation of interest on that approach is $62,946.43. Mr Lloyd submitted that the appropriate date for the calculation of damages in his case is 1 March 1999, being the midpoint of the dates of publication, giving an interest calculation of $45,282.32.

1. Mr Marshall and Mr Tory oppose the methodology suggested by Mr Megna and Mr Lloyd. Mr Marshall made separate submissions which were adopted by Mr Tory. Mr Marshall submitted that the methodology proposed by Mr Megna and Mr Lloyd "does not give justice" to the respondents, as it increases the final amount for which they are liable. He submitted that, having regard to the approach taken by the Court of Appeal to the assessment of damages, that is, by awarding a global sum, the only "fair" method for the assessment of interest was to notionally allocate an equal award of damages to each publication found to be defamatory.

1. Mr Marshall also opposed the allocation of a midpoint in respect of nine tenths of the judgment and the date of the last publication for the remaining one tenth for the purposes of the calculation. He complains, in particular, that no reason has been advanced as to why that would be a fair method of calculating interest. The result of Mr Marshall's approach is that the amount of interest payable on the judgment sum would be $59,827.30 in the case of Mr Megna and $40,688.34 in the case of Mr Lloyd.

1. In our opinion, the approach suggested by Mr Marshall for the calculation of interest should not be accepted. It does not reflect the manner in which the Court assessed damages which, as we have ready noted, was by way of the award of a global sum for the harm and damage caused by the totality of the defamatory publications. Subject to the division as to nine tenths and one tenth, the approach suggested by Mr Megna and Mr Lloyd is the usual approach taken for the calculation of interest where damage has been sustained over a period. It should also be noted that neither Mr Marshall nor Mr Tory had objected, on the appeal, to the manner in which her Honour had calculated interest on the damages she had awarded by taking a midpoint between the dates of the first and last calculation.

1. We have come to the conclusion that the approach suggested by Mr Megna and Mr Lloyd as to the division of the assessed judgment sum for the purposes of the calculation of interest is appropriate. The award of damages is an evaluative task. Interest on such an award involves the exercise of a discretion. The law does not, given those matters, require a precise arithmetical calculation.

1. In the circumstances, therefore, the Court is of the opinion that interest should be calculated in the manner suggested by Mr Megna and Mr Tory. Accordingly, the amounts so calculated will be added to their respective awards of damages.

Application for indemnity costs

1. Mr Megna and Mr Lloyd seek indemnity costs for the whole of the proceedings, both in the Court below and on appeal. They rely upon three matters in support of this application: first, the terms of the Defamation Act 1974, s 48A; secondly, as against Mr Marshall on the basis that he failed, unreasonably, to make a settlement offer, and as against Mr Tory on the basis that he failed to agree to settlement offers made by Mr Megna and Mr Lloyd.

1. The Defamation Act, s 48A provided as follows:

"48A Costs in proceedings for defamation

(1) In awarding costs in respect of proceedings for defamation, the court may have regard to the following matters:

(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),

(b) whether the costs in the proceedings may exceed the quantum of damages to be awarded in the proceedings,

(c) such other matters as the court considers relevant.

(2) Without limiting subsection (1), a court must (unless the interests of justice require otherwise):

(a) if proceedings for defamation 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 proceedings for defamation 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 genuine 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)."

1. No offer of settlement was made by Mr Marshall. Mr Megna and Mr Lloyd contend that such failure was unreasonable.

1. On 18 January 2006, the solicitors for Mr Tory made an offer of settlement of $100,000 to each of Mr Megna and Mr Lloyd. The offer in each case was divided as between damages, in the sum of $50,000, and a contribution towards legal costs in the sum of $50,000. The offer was not accepted by either Mr Megna or Mr Lloyd.

1. On 25 January 2006, Etheringtons, the solicitors for Mr Megna and Mr Lloyd, wrote to Mr Marshall and to the solicitors for Mr Tory offering to compromise the proceedings on behalf of Mr Megna in the sum of $375,000 "plus costs as agreed or assessed". The letter pointed out that Mr Marshall and Mr Tory would be jointly and severally liable for any damages awarded and stated that Mr Megna was not concerned as to how the amount for which he was willing to settle was apportioned between the defendants. The offer was said to be made pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), r 20.26. The offer was open until 27 February 2006. The letter was stated to be "without prejudice as to costs".

1. On the same date, Etheringtons wrote to Mr Marshall and the solicitors for Mr Tory, offering to compromise the proceedings on behalf of Mr Lloyd in the sum of $200,000 on the same basis as set out in the letter written on behalf of Mr Megna.

1. On 16 August 2006, Etheringtons wrote to Mr Marshall and to the solicitors for Mr Tory in the same terms as the letter of 25 January 2006, offering to compromise the proceedings on behalf of Mr Megna, save that the amount of the offer upon which Mr Megna was prepared to compromise the proceedings was $187,500 "plus costs as agreed or assessed".

1. A letter in similar terms was sent on the same date, on behalf of Mr Lloyd, to the solicitors for Mr Tory and directly to Mr Marshall. The amount offered by way of compromise was, on this occasion, identical to that sought by Mr Megna.

1. The trial judge dealt with costs in a separate judgment dated 18 February 2011: Megna v Marshall (No 2) [2011] NSWSC 52.

1. Before the trial judge, Mr Megna and Mr Lloyd had claimed costs, assessed on the usual basis from the commencement of proceedings until 25 January 2006, and on an indemnity basis from 26 January 2006. The basis of that claim was that the awards of damages made by her Honour were greater than the respective offers of settlement made in the letters of 25 January 2006. Mr Marshall's and Mr Tory's response to that costs claim included, in part, that Mr Megna and Mr Lloyd be responsible for portion of their costs. That submission was dismissed by the trial judge, at [38], as being based on "a flagrantly false assumption".

1. The trial judge concluded, at [42], that Mr Megna and Mr Lloyd were entitled to the whole of their costs of and including the s 7A jury trial. Her Honour noted, however, that the s 7A trial preceded the offers of compromise. It followed on her Honour's view that those costs were to be assessed on the ordinary basis. Her Honour then held that Mr Megna and Mr Lloyd should have an order for 90 per cent of their costs of the proceedings following the s 7A trial, assessed on an indemnity basis as and from 26 January 2006.

1. In the further amended notice of cross-appeal, Mr Megna and Mr Lloyd sought an order that:

"The Cross Respondents pay the First and Second Cross Appellant's costs of this appeal and of the trial, the trial costs to be on an indemnity basis from 26 January 2006."

1. The offers of settlement made on 25 January 2006 are no longer relevant. This Court's awards of damages were less than the offers made on that occasion. The offers contained in the letters of 16 August 2006 were lower than the damages this Court has awarded. However, the offers contained in the letters of 16 August 2006 did not comply with the rules relating to an offer of compromise.

1. At the time the offers of compromise were made, UCPR r 20.26(2) provided that an offer made under the rules "must be exclusive of costs". The offers made in the letters of 16 August 2006 contained an offer of compromise, "plus costs as agreed or assessed". The proper construction of UCPR, r 20.26 was determined by this Court in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188, where it was held that to be compliant with that rule, an offer of compromise was not to make any reference to costs at all: see Bathurst CJ at [24] and Barrett JA at [52]. Accordingly, the offers contained in the letters of 16 August 2006 were not offers made under the rules.

1. In Whitney v Dream Developments, it was also been argued that the non-compliant rules offer should, nonetheless, be taken into account in the exercise of the Court's discretion as to costs. The Court, at [42] per Bathurst CJ and [55] per Barrett JA, did not deny that, in a given case, such an approach might be warranted: see Calderbank v Calderbank [1975] 3 WLR 586. The Court considered, however, at [42], that Dream Developments had not, in making its offer, intended that it was to have an operation beyond that permitted by the rules. The Court noted that Mr Whitney and his advisers were entitled to assume that the offers were not intended to have any other significance.

1. In the present case, the offers of compromise were contained in letters that were headed "Without prejudice save as to costs". That is a usual heading found in what are traditionally labelled Calderbank offers. It is not a necessary heading in relation to an offer of compromise under UCPR, r 20.26. In Old v McInnes and Hodgkinson [2011] NSWCA 410 Beazley JA (as her Honour then was) was of the view that the offer in that case, which was also non-compliant with the rules, ought to be taken into account, in the exercise of the Court's costs discretion. Justice Beazley formed that view on the basis that it had been apparent in the course of the litigation that the respondents had clearly indicated a wish to settle. Whilst Beazley JA was in dissent in that case, the availability of such a view in a particular case was not rejected by the Court in Whitney v Dream Developments.

1. Thus, the question arises as to whether this Court should award indemnity costs for the proceedings at first instance as and from 16 August 2006. The consideration in favour of doing so is that Mr Megna and Mr Lloyd made at least two offers of settlement, purportedly under the rules, but also in a form that also had the appearance of a Calderbank offer and clearly indicated an intention to settle. In those circumstances and, further, having regard to the provisions of s 48A, we have come to the conclusion that indemnity costs for the trial ought to be awarded as and from 16 August 2006.

1. That leaves the application for indemnity costs of the appeal. This Court has consistently stated that if a party intends to seek an order for indemnity costs of appeal proceedings, a fresh offer of compromise ought to be made in relation to the appeal proceedings: see, for example, Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15 at [4], [71]; Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 at [21].

1. There are a number of reasons for this, including that the issues on the appeal are often more confined than they were at first instance. In addition, the parties on the appeal have the benefit of the reasons of the primary judge in which factual findings have been made and legal principles have been discussed. Another factor why a Court will be disinclined from making an order for costs of an appeal is if the offer "was not still open for acceptance when the appeal was instituted or before significant costs had been incurred on the appeal": see Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [71]. Nothing has been advanced in the affidavit evidence filed in support of the notice of motion, nor in the submissions, for departing from the Court's conventional approach to indemnity costs orders where no fresh offer was made on the appeal.

1. The Court thus makes the following orders.

(1) Order 5 made by this Court in this matter on 25 February 2013 be varied by omitting "to be calculated" and inserting "in the sum of $62,949.43";

(2) Order 6 made by this Court in this matter on 25 February 2013 be varied by omitting "to be calculated" and inserting "in the sum of $45,282.32";

(3) Order 7 made by this Court in this matter on 25 February 2013 be varied by inserting, at the end of subparagraph (a), "on an ordinary basis up until 15 August 2006 and on an indemnity basis as and from 16 August 2006";

(4) Each party to bear its own costs of the notice of motion.

1. For the assistance of the parties, the orders of the Court made on 25 February 2013, incorporating these amendments, are now as follows:

(1) Appeal dismissed in part;

(2) Cross-appeal allowed;

(3) Set aside the orders of the trial judge made on 25 June 2010;

(4) Set aside the orders of the trial judge made 18 February 2011;

(5) Judgment for the plaintiff/cross-appellant (Mr Megna) against the defendants/cross-respondents (Mr Marshall and Mr Tory) in the sum of $300,000 together with interest in the sum of $62,949.43;

(6) Judgment for the plaintiff/cross-appellant (Mr Lloyd) against the defendants/cross-respondents (Mr Marshall and Mr Tory) in the sum of $200,000 together with interest in the sum of $45,282.32;

(7) Order that the appellants/cross-respondents/defendants (Mr Marshall and Mr Tory) pay the following costs of the respondents/cross-appellants/plaintiffs:

(a) Of the proceedings in the court below including the costs of the s 7A jury trial on an ordinary basis up until 15 August 2006 and on an indemnity basis as and from 16 August 2006;

(b) Of the appeal and the cross-appeal.

**********

Decision last updated: 18 December 2013