Porter v John Fairfax Publications

[2001] NSWSC 680

CITATION:	Porter v John Fairfax Publications [2001] NSWSC 680
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 11259/00
HEARING DATE(S):	27/11/00;30/11/00;15/2/01;16/2/01;10/8/01
JUDGMENT DATE:	9 August 2001
PARTIES :	Stewart Porter v John Fairfax Publications Pty Ltd
JUDGMENT OF:	O'Keefe J

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	8283/95
LOWER COURT JUDICIAL OFFICER :

COUNSEL :	Mr R Campbell/Mr A A Robins - For plaintiff Mr H Nicholas/Mr K Andronos - For defendant
SOLICITORS:	Colquhoun & Colquhoun Balmain - For plaintiff Freehill Hollingdale & Page sydney - For Defendant
CATCHWORDS:	Indemnity costs - Contingency premium may be included - Limited application of District Court Practice Note 42 - Costs payable as a result of an order by a Court or Tribunal does not include costs payable under a deed - Successful outcome of the matter - Unreasonable amount and unreasonably incurred are questions of fact
LEGISLATION CITED:	Legal Profession Act 1987, ss.186;187;189;208H; District Court Act 1973, s.148B District Court Rules 1973 District Court Practice Note 42
CASES CITED:	EMI Records Limited v Ian Cameron Wallace Limited & Anor (1983) 1 ch 59 Degmam Pty Limited (In Liq) v Wright(No.2) (1983) 2 NSWLR 354 Madden v New South Wales Insurance Ministerial Corporation ((1999) NSWSC 196, unreported at par 15, Master Malpass 15 march 1999)
DECISION:	Judgment for the plaintiff for $223,982. The defendant is to pay the plaintiff's costs for the hearing, including two counsel.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

CORAM: O’KEEFE J

DATE: 9 August 2001

No: 11259/00 - STEWART PORTER v JOHN FAIRFAX PUBLICATIONS PTY LIMITED

JUDGMENT

1    HIS HONOUR: By summons filed on 24 May 2000 and amended on 17 July 2000, Stewart Porter (the plaintiff) sought:

(i) a declaration that John Fairfax Publications Pty Limited (the defendant) is liable to pay the plaintiff’s costs incurred in certain District Court proceedings on an indemnity basis;

(ii) an order that costs of those proceedings be referred for assessment on an indemnity basis pursuant to the Legal Profession Act 1987; and

(iii) judgment for the amount at which the relevant costs were assessed by such assessor.

2    On 17 July 2000 there was a consent declaration made that the defendant was liable to pay the plaintiff’s costs of the proceedings in the District Court of New South Wales No. 8283 of 1995 on an indemnity basis together with an order referring the assessment of the plaintiff’s costs of the District Court proceedings on an indemnity basis to a nominated assessor for inquiry and report pursuant to Part 72 Rule 2(1) of the Rules of the Supreme Court.

3    The history of the matter is that the plaintiff sued the defendant in the District Court claiming damages for the publication of two defamations. The defamations were said to have been published in editions of the Sun Herald of 23 July and 8 October, 1995. The first defamation arose out of a statement in the publication of 23 July 1995 that the plaintiff had been found guilty of attempting to head butt the referee and spitting at him in the course of a professional soccer match. This was not true. In a somewhat grudging correction published on 8 October, 1995 the defendant was said to have defamed the plaintiff once again.

4    The trial of the action did not proceed to a full hearing. The defendant settled it after some days on the basis that it agreed to publish an apology in a form approved by the plaintiff and to pay the plaintiff $80,000 together with indemnity costs. The settlement was not effected by way of verdict or other order of the District Court. The defendant, no doubt wanting to keep secret the fact that it had paid a substantial sum to the plaintiff as compensation for the defamatory publications, settled the action on the basis of a deed of release dated 30 March 1999 (the deed). Its terms included a secrecy clause (Cl.5) and a provision that the plaintiff would release the defendant on the payment of the sum of $80,000. It was further agreed that the plaintiff would “file in the District Court within 7 days of the date of payment (of $80,000) a notice of discontinuance of the proceedings with no order as to costs” and that the defendant would consent to this being done (Cl.4(a)). By Clause 2(a) of the deed the defendant also agreed :

“to pay to the Releasor (the plaintiff) his costs on an indemnity basis, certified for two Counsel, within 14 days of agreement or(failing agreement) assessment and issue of a Costs Certificate pursuant to Part 11 of the Legal Profession Act, whichever is the earlier”. (parenthesis added)

5    With the consent of the defendant the plaintiff filed a Notice of Discontinuance in respect of the District Court proceedings and following unsuccessful negotiations as to the costs payable to the plaintiff, the quantification of the costs was referred to a Cost Assessor. In his Bill of Costs the Assessor certified the plaintiff’s costs at $202,655.24, an amount in excess of the amount which the defendant had offered in satisfaction of the plaintiff’s costs.

6    The plaintiff had been represented in the District Court action by two counsel, both of whom had entered into contingency costs agreements with the plaintiff. Each rendered a memorandum of fees which included a 25% contingency premium (or loading) as permitted by s,.187(3) of the Legal Profession Act, 1987.

7    The costs certified by the Assessor included fees for Senior Counsel of $32,125; for Junior Counsel, $127,564. These figures were arrived at after an amount of $2,500 had been taxed off the amount included in the memorandum of fees submitted by Senior Counsel, and an amount of $27,281 had been taxed off the amount included in the memorandum of fees submitted by Junior Counsel.

8    The fees claimed by Senior Counsel included a contingency premium of $6,925. This was reduced by $500 because the Assessor disallowed one refresher of $2,000, which he determined to be unreasonable.

9    The fees of Junior Counsel were charged at the agreed rate of “$225 per hour (including 25% contingency loading)” and “$1,500 per day (including 25% contingency loading)”. Without contingency premium the fees of Junior Counsel totalled $122,876. This was reduced by the Assessor to $102,051. The contingency premium originally claimed by Junior Counsel was $30,719, however, the amount allowed by the Assessor in respect of the contingency premium for Junior Counsel was $25,513, i.e. 25% on $102,051. It was noted by the Assessor that the extra amount was “allowed as fees claimed plus 25% would have been reasonable without loading.”

10    In a letter dated 28 August, 2000 accompanying his Bill of Costs the Assessor stated :

“I considered that indemnity costs are to be determined on the basis of the definition thereof in Part 39A Rule 13. I am still required to consider whether the costs are reasonable, though those doubts may be resolved in favour of the Applicant.
The contingency fee claimed by the plaintiff’s solicitors over his fees and disbursements other than those of Robins and Campbell was not allowed. The District Court Practice Note 42 specifically deals with it not being recoverable as a party/party cost. However I did allow in the case of Mr Robin’s because I considered that his fees were low and that had he claimed a fee on the basis of 125% without any contingency fee, this would have been reasonable on an indemnity basis. I took the same view of the fees of Mr Campbell …”

11    The effect of the Bill of Costs was to allow as reasonable additional fees of $31,938 which had been charged to the plaintiff by his counsel as a consequence of the action having been undertaken by them on a contingency basis. It is this sum of $31,938 that is in dispute.

12    The defendant declined to pay any part of the amount of $31,938 included in the certified Bill of Costs produced by the Assessor, contending that the Assessor had erred in law in allowing the contingency premium for counsel.

13    When the matter first came on for hearing the court questioned the non- payment of those costs that were not in dispute. When the hearing resumed, the Court was informed that the amount had been paid, leaving in dispute the balance stated in paragraph 11.

14    It was submitted on behalf of the defendant that the referee wrongly allowed the premium of 25% to be included in the fees claimed by senior and junior counsel on the basis of the costs agreements each had in place at the time of carrying out the work the subject of their memoranda of fees.

15    Counsel for the defendant first argued that the amount allowed in respect of contingency premium was not recoverable under the District Court Act 1973 or Rules. Section 148B of the District Court Act 1973 empowers the Court to make orders for costs on an indemnity basis. Part 39A Rule 13 of the District Court Rules 1973 states the costs to be allowed where the assessment of costs is on an indemnity basis. That rule provides:

“On an assessment on the indemnity basis, all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the assessor may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party.”

16 It was contended that these provisions do not admit of the contingency premium being allowed on an assessment of indemnity costs ordered by the Court because of s.208H of the Legal Profession Act 1987 and District Court Practice Note 42.

17 Section 208H is in Subdivision 3 of Division 6 of Part 11 of the Legal Profession Act, 1987 (the Act). Subdivision 3 is concerned with the assessment of costs ordered by a court or tribunal.

18 The argument on behalf of the defendant was that s.208H of the Act, prevents an assessor from taking into account any costs agreements in assessing the costs payable by the defendant. Section 208H of the Act provides that:

(1) A cost assessor may obtain a copy of and may have regard to a costs agreement;
(2) A costs assessor must not apply the terms of a cost agreement for the purposes of determining appropriate, fair and reasonable costs when assessing costs payable as a result of an order by a court or tribunal .” (bold added)

19 In the present case no order for costs has been made by any court or tribunal. The costs payable to the plaintiff in respect of the District Court action were not payable as a result of any order of that court. Those costs are payable to the plaintiff pursuant to the terms of the deed. The defendants argued that the Assessor was assessing costs payable as a result of an order made by a court, namely Order 2 in the Short Minutes of Order made by consent by this Court on 17 July 2000. The Supreme Court made no order for the payment of such costs. It merely made a declaration and referred the costs payable to the plaintiff in respect of the District Court proceedings for assessment and report. The declaration concerned the effect of a deed and the reference was for the assessment of the costs that the defendant had agreed to pay under the deed. It was not an order of the kind referred to in s 208H(2).

20    The defendant also relies on Practice Note 42 to resist payment of the contingency premium. Practice Note No.42 came into force on 1 January, 1998. It includes a statement that :

“the indemnity costs incentive to a plaintiff to make a reasonable offer of compromise has lost much of its efficacy since the 1994 reformation of the costs regimen. The rule amendments substitute solicitor/client costs for indemnity costs, following the practice in most other States of Australia. Where the offer is made 28 days or more before the hearing the sanction is solicitor/client costs for the whole of the proceedings, not merely from the date of the offer. The surcharge payable by the plaintiff to his solicitor under a conditional costs agreement is not part of the sanction and not recoverable from the defendant.”

21    According to the argument advanced on behalf of the defendant this Practice Note negates any contingency premium being recoverable by the plaintiff. For a number of reasons I do not think that this argument is correct. First, the Practice Note is concerned with and directed at “the system of offers of compromise under Part 19A of the District Court Rules”. It is so headed. That is the tenor of the whole Practice Note. It arose out of “an investigation of the system” which was undertaken with the Court’s approval and is expressed to have been issued “… as a result of the Court’s consideration of that investigation.” It was brought into being at the same time as the making of amendments to the Rules which are referred to in the quotation set out in paragraph 20 above. Second, the Practice Note is concerned with costs consequent upon a “judgment or award” made by or under the authority of the court. It contemplates that “the Court will entertain argument” in relation to the factors to be taken into account in determining the actual order for costs to be made. The Practice Note does not deal with costs that are not the subject of an order of the District Court.

22    Even if the costs payable to the plaintiff were payable pursuant to an order of the District Court for the payment of indemnity costs, Practice Note 42 would at highest operate to restrict the meaning of the phrase “indemnity costs” as used in Part 39A Rule 13 of the District Court Rules only in those types of matters to which it is directed. The present case is not a matter of such a type.

23    The dispute between the parties arises out of and depends upon the effect of the agreement embodied in the deed. For present purposes the relevant provision of the deed is Clause 2(a). It is an agreement that the defendant will pay to the plaintiff “his costs on an indemnity basis” which, in the circumstances of the present case, were to be assessed and included in a Cost Certificate pursuant to Part 11 of the Act. No mention is made in the agreement of the District Court Act 1973 or Rules, nor is any express limitation imposed on the indemnity costs by reference to such Act or Rules.

24    The matters for determination are the meaning of the phrase “pay to the releasor his costs on an indemnity basis” as appearing in clause 2(a) of the deed, and any restrictions that may be imposed on such costs by the Act.

25    The nature of indemnity costs is well known. In EMI Records Limited v Ian Cameron Wallace Limited & Anor (1983) 1 Ch 59, Vice-Chancellor Megarry considered the meaning of an order for “costs on the basis of an indemnity”. He rejected as a possible meaning of this phrase that the successful party is to have every penny of his costs reimbursed to him, however absurd, extravagant or unreasonable they may be (supra at 71). He said that an order for indemnity costs :

“seems to me to give the litigant a complete indemnity, shorn only of anything that is seen to be unreasonable. The litigant does not have to establish that the costs were necessary or proper or that the costs were of a reasonable amount and reasonably incurred. Provided they are costs of and incidental to the proceedings, he is entitled to recover them, subject only to the qualification that they are liable to be reduced in respect of anything that … fall(s) within the headings unreasonable amount or unreasonably incurred.” ( supra at 71)

26    He further said of the indemnity basis of costs that:

“Everything is included unless it is driven out by the words of exclusion, namely except insofar as they are of an unreasonable amount or have been unreasonably incurred.” (supra at 72)

And:

“The loser must indemnify the winner against the whole of his costs except those that are beyond reason or words to that effect.” (supra at 73)

And:

“The effect of an order on an indemnity basis is … that all the costs incurred will be allowed except any which have been unreasonably incurred or are of an unreasonable amount; and in applying these exceptions the receiving party will be given the benefit of the doubt.” (supra at 74)

27    In Degmam Pty Limited (In Liq) v Wright (No 2) (1983) 2 NSWLR 354 Holland J adopted the passage from EMI Records Limited v Ian Cameron Wallace Limited (supra) referred to in paragraphs 25 and 26 above.

28    In Walton v McBride (1995) 36 NSWLR 440 the decision of Vice-Chancellor Megarry was referred to with approval by Kirby P (at 446)and by Powell JA (at 461) and Cole JA (at 474).

29    Determining whether costs are in an unreasonable amount or have been unreasonably incurred is a question of fact to be decided by the cost assessor in each case in the light of the facts of such case, Madden v New South Wales Insurance Ministerial Corporation ((1999) NSWSC 196 unreported, at para 15, Master Malpass 15 March, 1999).

30 The Assessor allowed the costs of counsel in the amounts referred to above, having reduced the total of the costs originally claimed on the basis that some of such costs were unreasonable. Of the remainder he said the amounts were “reasonable on an indemnity basis”. Such a determination is in accordance with the general law relating to indemnity costs, which is embodied in Part 39A Rule 13 of the District Court Rules.

31 The amount assessed is therefore in accordance with law, even though the Assessor arrived at the amount after an incorrect reference to Part 39A Rule 13 and Practice Note 42. The end result did not involve an error of law such as to vitiate such result. The findings made are adequate in law to support the result, subject to one other argument which was advanced on behalf of the defendant, namely that the costs agreements in place as between the plaintiff and junior counsel are invalid and thus no regard can be had to them in determining the costs payable by the defendant to the plaintiff under Clause 2(a) of the deed.

32    The defendant founds this argument on s 187(1) of the Act. It provides :

“A conditional costs agreement may provide for the payment of a premium on those costs otherwise payable under the agreement only on the successful outcome of the matter.”

33 There is no definition in the Act of what constitutes “the successful outcome of (a) matter.” This is left to agreement between the legal practitioner and the client. However, s 186(4) requires that a conditional costs agreement must set out the circumstances constituting the successful outcome of the matter. In the present case the costs agreements entered into between the plaintiff and junior counsel defined an outcome as successful in the event that:

“1. the plaintiff elects to discontinue the action for any reason, or
2. the matter is settled on any basis, or
3. any verdict for the plaintiff, irrespective of any costs orders or
4. withdrawal of my instructions.”

34    Those were varied on 18 March 1999 by adding:

“A verdict for the Plaintiff or settlement wherein moneys are to be paid to the plaintiff.”

35    The defendant submits that there is no rational basis on which all of the situations contemplated within the contractual definition of successful outcome could be characterised success and that as a consequence the agreements are void. I do not agree. Even if one or more of the above bases were not able to be comprehended by the phrase “successful outcome” as used in s.187(1) of the Act, that would not render the costs agreements void. Section 189(1) of the Act provides that:

“Any provision of a costs agreement or other agreement that is inconsistent with this division is void to the extent of the inconsistency.”

36 Such pro tanto avoidance applies to each of the sections in Division 3 of Part 11(ss 184-189). Moreover, the limited avoidance effected by s 189(1) is to be contrasted with the more draconian avoidance effected by s 189(2) in respect of purported waiver of rights to an assessment of costs or the right to receive a bill of costs in proper form.

37    It flies in the fact of common sense to suggest that the plaintiff did not have a successful outcome of his action. He forced the defendant to publish an apology in a form dictated by him in its own newspaper. In addition, he was paid $80,000 by the defendant and the defendant agreed to pay his costs on an indemnity basis. The settlement of the action was effected by a discontinuance and entry into a deed to meet the apparent desire of the defendant to keep the terms of settlement secret. The settlement falls squarely within category 2 and within the addition of 18 March, 1999 to the contractual definition of successful outcome.

38    The submission that an election by a plaintiff to discontinue an action for any reason cannot constitute a successful outcome ignores experience. The institution of proceedings for defamation may have the effect of preventing further publication of the particular defamatory matter. That in itself may be of real value to a plaintiff who has been defamed. Having achieved such an outcome a plaintiff may be content to discontinue. A number of other examples of the valuable effects of an action could be given. An apology in a particular form and published in a particular newspaper is but one. Having achieved such an outcome, discontinuance of the proceedings may well be a natural sequel, if the defamed person is really looking for an apology rather than money.

39    Settlement of a matter requires a meeting of the minds of the opposing parties in an action. Settlement is unlikely to be effected unless it involves some benefit to a plaintiff, even if that benefit is not in monetary form.

40    A verdict for the plaintiff in a trial is usually an indicium of success. Where, however, the costs agreement is entered into by counsel for a defendant, the fact that the plaintiff succeeds in obtaining a verdict against the defendant may not mean that the outcome has been unsuccessful for the defendant. The amount of the verdict may be much less than the defendant may otherwise have had to pay to a plaintiff. The field of workers compensation was, and to an extent still is, an example of where this can occur.

41    For these reasons I am of opinion that the argument raised by the defendant which seeks to avoid the costs agreement entered into between junior counsel and the plaintiff fails.

42    From the foregoing it can be seen that none of the arguments raised by the defendant operates as a bar to the success of the plaintiff in the present matter. In my opinion appropriate orders for the payment by the defendant to the plaintiff of the amount outstanding under the assessment of costs of 28 August 2000 should be made and the defendant should pay the costs of the proceedings in this court.

43    I direct the parties to bring in short minutes of order at 9.30 am tomorrow which give effect to this judgment. Consideration should be given to the question of interest in the Short Minutes of Order.

10 August 2001

44    Judgment for the plaintiff for $223,982. The defendant is to pay the plaintiff’s costs for the hearing, including two counsel.

**********

Last Modified: 08/14/2001