Sarina v O'Shannassy (No 6)
[2020] FCCA 3422
•17 December 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
Sarina v O’Shannassy (No 6) [2020] FCCA 3422
File number(s): SYG 1339 of 2018 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 17 December 2020 Catchwords: DEFAMATION – COSTS – Whether costs should follow the event in relation to costs that have been reserved – whether costs should follow the event in relation to issues the successful respondent lost – costs not to follow the event in relation to a number of issues. Legislation: Australian Competition and Consumer Act 2010 (Cth), Schedule 2
Federal Circuit Court of Australia Act 1999 (Cth), s.79
Federal Court Rules 2011 (Cth), Part 40
Defamation Act 2005 (NSW), ss.33, 40
Cases cited: Ainsworth v Burden [2005] NSWCA 174
AMC Caterers Pty Ltd v Stavropoulos [2005] NSWCA 79
Commonwealth of Australia v Gretton [2008] NSWCA 117
Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5
Hughes v Western Australia Cricket Association (1986) ATPR 40-748
Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15
Sarina & Anor v O'Shannassy [2019] FCCA 732
Sarina & Anor v O'Shannassy (No.2) [2019] FCCA 2802
Sarina & Anor v O'Shannassy (No.3) [2020] FCCA 974
Sarina & Anor v O'Shannassy (No.4) [2020] FCCA 989
Sarina & Anor v O'Shannassy (No.5) [2020] FCCA 2911
Number of paragraphs: 28 Date of last submission/s: 25 November 2020 Date of hearing: Decided on the papers Place: Sydney Counsel for the Applicants: Mr R Rasmussen Solicitor for the Applicants: Kalantzis Lawyers Counsel for the Respondent: Mr T Crispin Solicitor for the Respondent: Lloyd & Lloyd Solicitors ORDERS
SYG 1339 of 2018 BETWEEN: CLINTON SARINA
First Applicant
MARTIN GREEN
Second Applicant
AND: JOHN O'SHANNASSY
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
17 DECEMBER 2020
THE COURT ORDERS THAT:
1.The order for costs made on 4 October 2019 is confirmed, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules 2011 (Cth) (Federal Court Rules).
2.The respondent pay the applicants’ costs of their obtaining orders 1 and 2 of the orders made on 13 June 2018, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
3.The respondent pay the applicants’ costs of the application in a case that is the subject of the orders made on 7 April 2020, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
4.Each party pay his own costs of the applications in a case that are the subject of the orders made on 29 March 2019.
5.The respondent pay the applicants’ costs of the day on 15 April 2020, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
6.The applicants pay 40% of the respondent’s costs of the proceeding that are not the subject of the costs referred to in orders 1-5, the respondent’s costs to be agreed or, if there be no agreement, to be taxed under Part 40 of the Federal Court Rules.
REASONS FOR JUDGMENT
INTRODUCTION
On 30 October 2020 I ordered that judgment be entered against the applicants on a cause of action for defamation, and directed the parties file and serve submissions on costs.[1] The parties filed submissions, the respondent, Mr O’Shannassy, filed an affidavit made by his solicitor, Mr See, and the parties have consented to my determining the question for costs without any further hearing. In these reasons for judgment, therefore, I consider the question of costs.
[1] Sarina & Anor v O'Shannassy (No.5) [2020] FCCA 2911
Before I consider the parties’ submissions, it will be necessary to identify four sets of interlocutory orders I have made, because in each of the applications that resulted in my making orders I reserved the question of costs. It will also be necessary to set out communications about costs that have passed between the parties.
INTERLOCUTORY ORDERS
There are four interlocutory orders which included an order that costs be reserved.
(a)On 13 June 2018 I ordered that service of the application on Mr O’Shannassy be dispensed with.
(b)On 29 March 2019, in response to an application in a case filed by the applicants for leave to amend the statement of claim, and a separate application in a case filed by Mr O’Shannassy for dismissal of the proceeding, I ordered that part of the statement of claim be struck out, but granted the applicants leave to amend their statement of claim.[2]
(c)On 7 April 2020 I granted Mr O’Shannassy leave to issue a subpoena for production, extended the time for filing evidence, and dismissed Mr O’Shannassy’s application for further discovery.[3]
(d)On 16 April 2020 I dismissed Mr O’Shannassy’s application for an adjournment.[4]
[2] Sarina & Anor v O'Shannassy [2019] FCCA 732
[3] Sarina & Anor v O'Shannassy (No.3) [2020] FCCA 974
[4] Sarina & Anor v O'Shannassy (No.4) [2020] FCCA 989
COMMUNICATIONS ABOUT COSTS
Before the applicants commenced the proceeding their lawyer sent a letter dated 12 April 2018 to Mr O’Shannassy. The letter referred to a number of emails Mr O’Shannassy had sent which the letter alleged constituted misleading or deceptive conduct, contrary to s.18(1) of the “Australian Consumer Legislation”, and that the emails were defamatory. The letter stated:
In order to avoid proceedings being brought against you we request you withdraw the representations and imputations and apologise. You should also pay our clients’ reasonable legal costs and a reasonable amount as compensation.
Mr O’Shannassy did not respond to the letter within the time the letter requested Mr O’Shannassy respond; and the applicants commenced the proceeding on 14 May 2018.
By letter dated 29 June 2018 to the applicants’ lawyer, Mr O’Shannassy’s lawyer said Mr O’Shannassy would pay his own legal costs if the applicants were to discontinue the proceeding. Although the applicants’ lawyer responded to Mr O’Shannassy’s lawyer’s letter, he did not refer to Mr O’Shannassy’s offer.
By letter dated 4 June 2019 Mr O’Shannassy’s lawyer conveyed an offer by Mr O’Shannassy to settle the proceeding on terms that the applicants agree to the proceeding being dismissed and the applicants pay Mr O’Shannassy’s costs “on the party-party basis”. The letter contended the proposed amended application had no prospects of success, and it relied on assertions that imputations conveyed by the emails the subject of the proceeding were true. The letter also referred to the emails Mr George sent to Mr O’Shannassy between 20 December 2017 and 24 December 2017, and asserted that “on no proper known basis will the plaintiffs [sic] establish any likelihood of harm or reputational damage”.
The applicants’ lawyers did not respond within the 14 day period the letter dated 4 June 2019 stated the offer contained in that letter remained open. Instead, by letter dated 23 July 2019 the lawyer for the applicants conveyed an offer that the proceeding be settled on the basis that there be a verdict for the applicants, Mr O’Shannassy pay the applicants $20,000, and that Mr O’Shannassy pay the applicants’ legal costs as agreed or assessed. Mr O’Shannassy did not respond to that offer.
Finally, by letter dated 20 April 2020 Mr O’Shannassy’s lawyer conveyed an offer that Mr O’Shannassy would be prepared to settle the proceeding on the basis that each party pay his own costs.
PARTIES’ SUBMISSIONS
Mr O’Shannassy submits the applicants should pay Mr O’Shannassy’s costs on an indemnity basis or, in the alternative, on a party and party basis. He submits as follows:
(a)the mere fact that a defendant strenuously defends a claim (and fails in some of those defences) does not entitle a plaintiff to the costs of a trial where the plaintiff does not succeed, or where the plaintiff does not succeed to any material extent;[5]
(b)as a matter of basic fairness Mr O’Shannassy, as the successful party, should be compensated for expenses he has incurred because the applicants obliged him to litigate;
(c)in giving judgment for Mr O’Shannassy I made adverse credibility findings against the applicants;
(d)it is reasonable to infer that at all times throughout the conduct of the proceeding, costs were likely to be disproportionate to any damages that might have been awarded;
(e)the applicants acted unreasonably in not accepting the offers of settlement Mr O’Shannassy made; and
(f)for the purposes of s.40 of the Defamation Act 2005 (NSW) (Defamation Act), the applicants have refused to reasonably negotiate or accept the offers of settlement Mr O’Shannassy had made.
[5] Relying on AMC Caterers Pty Ltd v Stavropoulos [2005] NSWCA 79, at [6]
The applicants, on the other hand, submit that the following orders should be made in relation to the costs I have reserved:
(a)Mr O’Shannassy should pay the applicants’ costs of their application for dispensing personal service of the application;
(b)Each party should pay his own costs in relation to the applications that were the subject of the orders I made on 29 March 2019;
(c)Mr O’Shannassy should pay the applicants’ costs of Mr O’Shannassy’s application for further discovery, leave to issue a subpoena, and further time to file evidence; and
(d)Mr O’Shannassy should pay the applicants’ costs incurred in relation to Mr O’Shannassy’s unsuccessful application on 15 April 2020 to adjourn the hearing.
As for the balance of the costs of the proceeding (Balance Costs) the applicants submit that each of the parties should bear his own costs. The applicants rely on the following matters:
(a)Mr O’Shannassy attempted to evade service of the application and statement of claim.
(b)Mr O’Shannassy relied on five defences and lost all but one of them.
(c)Although the applicants failed, it was reasonable for the applicants to seek to “nail the matter[s] complained of as a lie”,[6] and “to set the record straight”; and it was unreasonable for Mr O’Shannassy not to have apologised for the falsity of the matters complained of early in the proceeding.
(d)Mr O’Shannassy conducted the case in an unreasonable manner.
(e)The question of costs cannot be determined on the assumption the Court found there was false evidence, because the Court made no such finding.
[6] Ainsworth v Burden [2005] NSWCA 174, at [89]
The applicants further submit that s.40 of the Defamation Act does not apply because the applicants made reasonable offers to settle their claims.
PRINCIPLES
Before I consider the competing submissions it will be necessary to set out some basic principles.
I begin with s.79 of the Federal Circuit Court of Australia Act 1999 (Cth), which provides:
(1) This section does not apply to family law or child support proceedings or proceedings in relation to a matter arising under the Fair Work Act 2009 or section 14, 15 or 16 of the Public Interest Disclosure Act 2013.
(2) The Federal Circuit Court of Australia or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit Court of Australia or Judge.
This section is similar to provisions contained in other Acts that confer jurisdiction on courts to order costs; and the discretion conferred by s.79(3) is to be exercised according to principles that have been applied to those provisions. A useful statement of those principles is that given by Edmonds J in Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd:[7]
[7] Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5, at [59]-[61]
In Hughes v Western Australia Cricket Association (1986) ATPR 40-748 at 48,136, Toohey J suggests that three principles as to the exercise of the discretion are evident from the cases:
(1)Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.
(2)Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which it has failed.
(3)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 party’s 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.
To these considerations, the Court in Dodds added the following observations (at 271 – 272):
The propositions enunciated in that case are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case…
…
Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.
In Oshlack v Richmond River Council (1998) 193 CLR 72, McHugh J, at 97, expanded on the justification for the general principle that costs follow the event:
[S]ubject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy … The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.
These comments were cited with approval by Hayne J in Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited [2009] HCA 43 at [55].
The principles stated by Toohey J in Hughes v Western Australia Cricket Association recognise that ordinarily a court will order costs in favour of the party who succeeds without the court attempting to differentiate between the particular issues on which the successful party did not succeed;[8] but in certain circumstances that approach may not be appropriate. This will be so where the issue on which the successful party has not succeeded is “clearly dominant or separable”.[9] It is useful, however, to bear in mind what Hodgson JA stated in Commonwealth of Australia v Gretton:[10]
In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.
[8] Hughes v Western Australia Cricket Association (1986) ATPR 40-748, at 48,136
[9] Monie v Commonwealth of Australia (No.2) [2008] NSWCA 15, at [64]
[10] Commonwealth of Australia v Gretton [2008] NSWCA 117, at [121]
It is also necessary to refer to s.40 of the Defamation Act which provides:
(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.
DETERMINATION
Logically, the first question I must consider is whether s.40(2)(b) of the Defamation Act applies; and that is because Mr O’Shannassy, through his lawyers, made a number of offers in relation to the termination of the proceeding. I do not consider the offers Mr O’Shannassy made before 20 April 2020 to be offers of settlement because they did not involve any tangible offer of compromise. The offer made on 20 April 2020 was an offer of settlement because Mr O’Shannassy offered to pay his own costs. I am not satisfied, however, that it was unreasonable for the applicants not to accept the offer. Mr O’Shannassy’s offer in substance offered the applicants capitulate, but it was made in circumstances where the applicants had filed their evidence, and there was no certainty I would not accept the evidence on which the applicants intended to rely.
Next there is the application of the principle that costs should follow the event. Are there any reasons why this principle ought not apply? In my opinion, there are three potential reasons why costs ought not follow the event. The first relates to the order for costs I made on 4 October 2019 in relation to my dismissal of Mr O’Shannassy’s application in a case to dismiss the proceeding, and in relation to the costs thrown away because of the adjournment of the hearing of 30 August 2019.[11] Mr O’Shannassy has not applied to discharge that order for costs.
[11] Sarina & Anor v O'Shannassy (No.2) [2019] FCCA 2802
Second, there is the question of costs I reserved in each of the four interlocutory applications to which I have referred earlier in these reasons. Each set of costs relates to a separable question – the first relates to dispensation of personal service of the application, the second to an application to amend the application, the third to an unsuccessful application for further discovery, and the fourth to an unsuccessful application to adjourn the hearing.
(a)I am satisfied the applicants incurred costs in relation to their application for dispensation of service because of Mr O’Shannassy’s conduct as disclosed by the affidavit of Mr Simon Maxwell made on 12 June 2018. For that reason, Mr O’Shannassy should be ordered to pay those costs.
(b)I am satisfied Mr O’Shannassy should pay the applicants’ costs of the application in a case that was determined by the orders I made on 7 April 2020. Mr O’Shannassy was unsuccessful in obtaining an order for discovery; and to the extent he succeeded in the application in a case, his success related to his obtaining an indulgence to file evidence after the time he was required to do so had passed, and to his applying without opposition from the applicants for leave to issue a subpoena against a third party.
(c)The unsuccessful application for the adjournment of the hearing led to the loss of one day; and given the application for an adjournment was unsuccessful, Mr O’Shannassy should be ordered to pay the applicants’ costs of the day that was lost as a consequence of my hearing and determining Mr O’Shannassy’s application for an adjournment.
The question of the costs of the applications in a case that are the subject of my orders on 29 March 2019 is less straightforward. Each party partly failed and partly succeeded; and Mr O’Shannassy’s success related to a matter – this Court not having jurisdiction to entertain the claim under Schedule 2 to the Australian Competition and Consumer Act 2010 (Cth) – I had identified. In those circumstances I am satisfied that the costs of the applications in a case should be borne by the parties.
That, then, leaves the Balance Costs; and here there are a number of matters to address. First, there is the applicants’ submission that they instituted the proceeding to “nail the matter complained of as a lie”, and to “set the record straight”. This submission assumes that an applicant who is defeated by, and only by, a defence based on s.33 of the Defamation Act, nevertheless would not, or at least ought not, be liable to pay the respondent’s costs. That, however, ignores the effect of s.33. If established, a defence under s.33 of the Defamation Act constitutes a complete defence.
Second, there is the applicants’ submission that Mr O’Shannassy conducted the litigation unreasonably. The only example given in the applicants’ written submissions is Mr O’Shannassy’s not accepting the offer contained in the applicants’ lawyer’s letter dated 23 July 2019. Given that Mr O’Shannassy succeeded in the proceeding, his not accepting the offer was not unreasonable.
Finally, there is the question whether the usual rule that costs follow the event should not apply in relation to the issues on which Mr O’Shannassy did not succeed. That turns on whether those issues are clearly dominant or separable. In my opinion, they are clearly separable. Most of the applicants’ evidence, including evidence given under cross-examination, related to the effect the publication had on the states of mind of the persons who were exposed to the publication of the matter complained of. My not accepting that evidence was an essential element in my concluding that Mr O’Shannassy succeeded in his defence based on s.33 of the Defamation Act. On the other hand, most of the evidence, including evidence given under cross-examination, on which Mr O’Shannassy relied, related to his affirmative defences, and in particular, to his defence of qualified privilege, which I did not accept. In those circumstances, I am satisfied that the usual rule that costs follow the event should not apply in relation to the issues on which Mr O’Shannassy did not succeed.
The next question is how I should give effect to this conclusion. It is my impression that approximately 70% of the hearing and evidence related to the applicants’ evidence which I did not accept; and 30% related to the defences on which Mr O’Shannassy relied and which I found did not succeed. That would translate into an order that the applicants pay 70% of Mr O’Shannassy’s costs, and that Mr O’Shannassy pay 30% of the applicants’ costs which, if set off against each other, would translate into an order that the applicants pay 40% of Mr O’Shannassy’s costs. An order that the applicants pay 40% of Mr O’Shannassy’s Balance Costs, therefore, is a fair reflection of the responsibility of the applicants on the one hand, and Mr O’Shannassy on the other, for the incurring of the Balance Costs.
There is one final matter to note. In his written submissions Mr O’Shannassy implies I made findings that the applicants and Mr George gave false evidence. I made no such findings.
DISPOSITION
I propose to make orders to the following effect:
(a)The order for costs made on 4 October 2019 is confirmed, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules 2011 (Cth) (Federal Court Rules).
(b)Mr O’Shannassy pay the applicants’ costs of their obtaining orders 1 and 2 of the orders made on 13 June 2018, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
(c)Mr O’Shannassy pay the applicants’ costs of the application in a case that is the subject of the orders made on 7 April 2020, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
(d)Each party pay his own costs of the applications in a case that are the subject of the orders made on 29 March 2019.
(e)Mr O’Shannassy pay the applicants’ costs of the day on 15 April 2020, such costs to be agreed or, if there be no agreement, such costs to be taxed under Part 40 of the Federal Court Rules.
(f)The applicants pay 40% of Mr O’Shannassy’s costs that are not the subject of the costs referred to in (a)-(e), the respondent’s costs to be agreed or, if there be no agreement, to be taxed under Part 40 of the Federal Court Rules.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 17 December 2020
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