Sleeman v Tuloch Pty Ltd t/as Palms on Oxford (No 4)
[2013] NSWDC 111
•19 July 2013
District Court
New South Wales
Medium Neutral Citation: Sleeman v Tuloch Pty Ltd t/as Palms on Oxford (No 4) [2013] NSWDC 111 Hearing dates: 19 July 2013 Decision date: 19 July 2013 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) On the application of the plaintiff, the hearing of the defendants' application for a costs order against Mr Dezarnaulds today is vacated.
(2) Mr Dezarnaulds is to pay the costs thrown away by reason of the vacation of the hearing date on an indemnity basis, the application not having been notified prior to 11.03pm on Thursday 18 July 2013.
(3) The defendants' application for a costs order against Mr Dezarnaulds for the whole proceedings (or part thereof) is stood over part-heard for directions to Friday 16 August at 9.00am.
(4) LawCover, or any solicitor instructed on its behalf (or by Mr Dezarnaulds directly) is to file any Notice of Appearance in the costs application in 14 days.
(5) Order (2) of the judgment handed down on 19 June 2013 is varied to provide that the plaintiff pay the first to third defendants' costs of these proceedings on an indemnity basis.
Catchwords: COSTS - defendants seek costs of the proceedings pursuant to s 40(2)(b) Defamation Act 2005 (NSW) - whether plaintiff unreasonably failed to accept defendants' offer of amends Legislation Cited: Defamation Act 1974 (NSW), s 48A
Defamation Act 2005 (NSW), ss 15(3),17 and 40
Limitation Act 1969 (NSW), s 56A(2)
Liquor Act 2007 (NSW)
Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 26.08(3)
Uniform Civil Procedure Rules 2005 (NSW), Pt 42 Div 3, r 42.15ACases Cited: Bechara v Bonacorso (No 5) [2010] NSWDC 260
Calderbank v Calderbank [1975] 3 All ER 333
Cornes v The Ten Group Pty Ltd (No. 2) [2011] SASC 141
Davis v Nationwide News Pty Ltd [2008] NSWSC 946
Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141
Haddon v Forsyth (No 2) [2011] NSWSC 693
Hocken v Morris (No. 2) [2011] QDC 137
Hyndes v Nationwide News Pty Ltd [2011] NSWSC 1443
Jones v Sutton (No. 2) [2005] NSWCA 203
Manefield v Child Care NSW (No 2) [2011] NSWSC 104
Mizikovsky v Queensland Television Limited & Ors [2013] QCA 68
National Auto Glass Supplies (Aust) Pty Ltd v Nielsen & Moller Auto Glass (NSW) Pty Ltd (No. 9) [2007] FCA 1826
Noonan v MacLennan [2010] QCA 50
Old v McInnes [2011] NSWCA 410
Pingel v Toowoomba Newspapers Pty Ltd [2010] QCA 175
Rayney v State of Western Australia (No 3) [2010] WASC 83
Ryan v Premachandran (New South Wales Supreme Court, Nicholas J, 13 November 2009)
Szanto v Melville (Ruling) [2011] VSC 618
West v Nationwide News Pty Ltd [2003] NSWSC 767Texts Cited: Mr David Barr MLA, Defamation Amendment (Costs) Bill 2003 (Hansard, 16 October 2003, p. 4027)
Mr Debus MLA, Defamation Bill 2005 (Second Reading Speech, 13 September 2005, p. 17637)Category: Costs Parties: Plaintiff: Richard Sleeman
First Defendant: Tuloch Pty Ltd (ACN 086 654 140) t/as Palms on Oxford
Second Defendant: Peter Inwood
Third Defendant: Rodney InnesRepresentation: Plaintiff: Ms L Evans
Defendants: Ms S Chrysanthou / Ms B R Styles
Plaintiff: Camille E Dezarnaulds & Associates
Defendants: Sylvester & Browne Lawyers
File Number(s): 2012/225941 Publication restriction: None
Judgment
The plaintiff commenced proceedings for defamation for statements allegedly made to the plaintiff by a security guard outside the Palms on Oxford nightclub in Darlinghurst on 23 December 2011, namely:
"You are way too drunk. Go and sober up somewhere else. You can't come in"
The defence filed by the first to third defendants did not admit publication, denied vicarious liability or that the matter complained of was defamatory, and relied upon the defences of common law and statutory qualified privilege, triviality, offer to make amends and honest opinion.
There was a five-day hearing between 5 and 12 June 2013. On 19 June 2013, I handed down judgment for the first to third defendants, and ordered the plaintiff to pay the defendants' costs. I gave liberty to restore in relation to costs.
Pursuant to that leave, the defendants now seek the following orders:
(a) An order that the plaintiff pay the first to third defendants' costs of these proceedings on an indemnity basis;
(b) To the extent that the plaintiff is unable to meet that costs order, part or the whole of such unpaid costs be paid by the solicitor who signed the s 347 Legal Profession Act 2004 (NSW) Certificate on each of the three successive statements of claim.
The defendants rely upon the affidavit of David Sylvester sworn 12 July 2013. As to the second application, Mr Sylvester's affidavit attaches a letter dated 7 May 2013 putting Mr Dezarnaulds on notice that, by reason of a number of issues identified in that letter, the defendants "will be seeking a costs order against you [Mr Dezarnaulds] personally for their costs of the proceedings". Written submissions setting out in detail the basis upon which such costs would be sought were served on Mr Dezarnaulds on 12 July 2013.
I note that the order for indemnity costs is brought by the first to third defendants ("the defendants") only. The fourth and fifth defendants, against whom proceedings were discontinued with an order that the plaintiff pay costs on a party/party basis, seek costs orders against Mr Dezarnaulds personally, but not on an indemnity basis, as they were not parties to the offer of amends.
Unfortunately, Mr Dezarnaulds left it until this morning to take steps to contact Law Cover. He is not in court today, and Ms Evans, who appears for the plaintiff, not only has no instructions to represent him, but considers that she should not do so. She has sought a 28-day adjournment for Mr Dezarnaulds to retain other legal representation, but is ready to proceed with the first application, namely the application for indemnity costs.
I have agreed with Ms Evans that Mr Dezarnaulds may still address in relation to issues of indemnity costs when the question of what, if any, of those costs he should bear is raised. His position is therefore protected.
The defendants are put in a difficult position by the separation of these issues, as some of the matters they raise may relate to Mr Dezarnaulds' conduct. Ms Chrysanthou has stated that her clients do not bring the indemnity costs application on the basis of conduct of the litigation (s 40(1)), but in relation to the plaintiff's failure to accept the offer of amends (s 40(2)(b)). While the matters particularised in the offer of amends require some consideration of issues overlapping with s 40, Ms Evans indicated she is able to deal with these, and I have proceeded on that basis.
The circumstances in which indemnity costs may be ordered in defamation proceedings differ significantly from other causes of action: s 40 Defamation Act 2005 (NSW) ("the Act"). I shall first set out those provisions, together with a short history of this costs provision.
Applications for indemnity costs in defamation proceedings
Section 40 is as follows:
"40 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."
As counsel for the defendants points out (written submissions, paragraph 12), s 40 (and the costs provisions upon which it was modelled, s 48A Defamation Act 1974 (NSW)) represented a radical departure from costs rules generally applicable in Australia. The differences between its operation, and the operation of the Offer of Compromise system (Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), Pt 42 Div 3) and Calderbank offers (Calderbank v Calderbank [1975] 3 All ER 333), include the following:
(a) Indemnity costs may be awarded for the whole of the proceedings, not merely from the date of expiry of an offer;
(b) The settlement offer does not need to be a valid offer of compromise, or better than the result; the question is whether the unsuccessful party "unreasonably failed to accept a settlement offer" (s 40(2));
(c) In determining the entitlement of a party to indemnity costs, the court may have regard to the conduct of the case by the party in question (s 40(1)(a)), or any other matter the court considers relevant (s 40(1)(b)). Section 40(2), which provides the court "must" make orders in specified circumstances where an offer has been made, specifically starts with the words "without limiting subsection (1)"; and
(d) "Settlement offer" includes an offer of amends (s 40(3)). This imports a further concept of "reasonable" offers, as the offer must be "reasonable" (s 18(1)(c)). The statutory checklist set out in s 18(2) includes the extent and prominence of the apology, the period of time between publication and the offer of amends, disagreement about defamatory meaning and "any other matter that the court considers relevant". However, the question of whether an offer is "reasonable" and whether a plaintiff "unreasonably" failed to accept it (s 40(2)(b)) are separate issues.
Section 40 was enacted to discourage the bringing of claims which were trivial or politically motivated (Jones v Sutton (No. 2) [2005] NSWCA 203), or where inequality of resources between the parties (a common problem, due to the rarity of defamation insurance and complexity of the cause of action) needed to be addressed.
Section 40 was modelled on s 48A Defamation Act 1974 (NSW). When introducing the Defamation Amendment (Costs) Bill 2003 (Hansard, 16 October 2003, p. 4027), Mr David Barr MLA gave a lively account of the long history of libel costs legislation, starting as far back as 1886, when Sir George Reid (later to become Australia's fourth Prime Minister) sought to introduce a "very similar" provision. The problem was that, in those harsh times, a successful libel litigant who could not pay his legal costs was liable to be imprisoned for debt. Sir George Reid complained that winning (in 1886) was a Pyrrhic victory where "the costs amount to hundreds of pounds, and a poor defendant... has to endure the term of twelve month's imprisonment."
Mr Barr MLA stated that, while bankruptcy (rather than prison) was now the remedy, the high defamation legal costs problem remained unresolved, and New South Wales was now "the defamation capital of the world" (at 4030). The purpose of the these new costs provisions was to discourage the bringing of trivial actions, and to deal with amendments to the Supreme Court Rules following West v Nationwide News Pty Ltd [2003] NSWSC 767.
Section 40 was one of a series of reforms subsequently included in the uniform legislation enacted in 2005. There are separate provisions in s 40 for applications by plaintiffs and for applications by defendants. As to plaintiffs, the general approach to s 40(2)(a) indemnity costs applications has been explained by McClellan CJ at CL in Davis v Nationwide News Pty Ltd [2008] NSWSC 946. In Davis, the plaintiff made an offer of compromise of $150,000, and ultimately received a sum, inclusive of interest, of $150,736.00. The defendant had only made a "walk away" offer, which the defendant argued was sufficient to amount to compliance with s 40. McClellan CJ at CL did not accept this submission, nor did he accept that the failure of the plaintiff on certain aspects of the claim, such as the finding that a number of the imputations pleaded had not been conveyed, would disentitle the plaintiff to claim indemnity costs.
Davis v Nationwide News Pty Ltd, supra, is one of a number of cases where a successful plaintiff had been able to rely upon s 40(2)(a) (see also Ryan v Premachandran (New South Wales Supreme Court, Nicholas J, 13 November 2009); Cornes v The Ten Group Pty Ltd (No. 2) [2011] SASC 141; Hocken v Morris (No. 2) [2011] QDC 137; Manefield v Child Care NSW (No 2) [2011] NSWSC 104). A defendant may be caught under one of two provisions in s 40(2)(a) where a plaintiff is successful, namely for failure to make any offer at all, or to agree to an offer proposed by the plaintiff.
The provision for defendants' applications, s 40(2)(b), essentially mirrors this provision, but with one principal difference, namely that unsuccessful plaintiffs are not penalised if they have not make any offer at all. Where a defendant has complied with s 40, and the plaintiff has failed to accept the offer (s 40(2)), the court, again, "must" make an order for indemnity costs if the plaintiff unreasonably failed to accept a settlement offer made by the defendant: National Auto Glass Supplies (Aust) Pty Ltd v Nielsen & Moller Auto Glass (NSW) Pty Ltd (No. 9) [2007] FCA 1826 at [2] (in relation to s 48A(2)(b) in the repealed legislation). Curiously, defendants have a much lower success rate than plaintiffs in s 40 applications.
In Bechara v Bonacorso (No 5) [2010] NSWDC 260, the defendant had made an offer of compromise in the sum of $35,000. The plaintiff failed at the trial on all issues, including publication. The application for indemnity costs was made pursuant to UCPR r 42.15A, for costs from the time of the offer of compromise. As is noted at [11]-[17] of the judgment, the defendant specifically did not seek costs of the whole of the trial pursuant to s 40(2)(b) but only from the date of the offer of compromise, and pursuant to the offer of compromise regime. This was a deliberate decision by the defendant's representatives, as is noted in [17] of the judgment. It was a wise decision to make, given the lack of success s 40(2)(b) has enjoyed since that time.
In Haddon v Forsyth (No 2) [2011] NSWSC 693 defences of qualified privilege and justification succeeded. The successful defendants sought an order that the whole of the costs of the proceedings be borne by the plaintiff on an indemnity basis, or alternatively from the date of two specific offers of compromise made pursuant to UCPR r 42.15A. Simpson J noted that the provisions of s 40(2)(b) should prevail over the UCPR offer of compromise positions, and first considered the entitlement of the defendants to indemnity costs under this provision.
The offers were as follows. The plaintiff made a pre-litigation offer involving an apology and no payment of money, but the parties could not agree on the terms. The defendants then made a "walk away" offer of compromise in a letter attaching the draft defence (at [20]). A second offer of compromise, offering $20,000 in costs but no damages, was made three months before the hearing. A third offer, of a "statement" but no damages or costs, was made shortly before the trial. Interwoven with these offers were complaints from both sides about s 40(1) issues, such as the defendants' refusal to agree to the proceedings being transferred to the District Court.
Her Honour found, in relation to the principal issue, namely whether it was unreasonable for the plaintiff to refuse any or all of the offers of settlement, that "the only basis upon which he could be said to have been unreasonable was that the proceedings were unsuccessful", a factor which her Honour considered to be "insufficient". However, the second of the offers of compromise triggered the principles underlying UCPR r 42.15A, and indemnity costs could be granted from the date upon which that offer was made.
Simpson J explained (at [55]) the difference between UCPR r 42.15A and s 40(2)(b) as follows:
"[55] The position is different with respect to UCPR 42.15 A. There a defendant is "entitled" (unless the court otherwise orders) to an order that costs be assessed on an indemnity basis from the beginning of the day after an offer of compromise was made. No considerations of unreasonableness of refusal arise."
In other words, a defendant is worse off under s 40, because under the offer of compromise system, all that has to be established is that an offer of compromise has been made; "no considerations of unreasonableness of refusal arise". This was no doubt the reason for reliance on the offer of compromise provisions (rather than s 40) in Bechara v Bonacorso (No. 5), supra, as is noted in [17] of that judgment.
Simpson J has given the test of "unreasonableness" generous parameters. This is in contrast to the test for applications to extend time to commence proceedings require the plaintiff to establish that it was "not reasonable" (s 56A(2) Limitation Act 1969 (NSW) to commence proceedings within the limitation period. In Rayney v State of Western Australia (No 3) [2010] WASC 83 this test was described as setting "a difficult hurdle" which could only be satisfied in "relatively unusual circumstances" (see also Noonan v MacLennan [2010] QCA 50 at [15]; Pingel v Toowoomba Newspapers Pty Ltd [2010] QCA 175). While I have been careful not to conflate the test in limitation provisions with the test for s 40(2)(b), one feature which these tests ought to have in common is that the test is objective, in that the plaintiff cannot simply prove a subjective belief that the offer was not reasonable.
The application in Haddon v Forsyth, supra, appears to have failed because all the defendants could show was rejection of offers better than the result, although there was reliance on s 40(1) factors as well. Ultimately, however, Simpson J did award indemnity costs, albeit under the UCPR offer of compromise rules.
The defendants were even less fortunate in the next three cases as, in addition to their applications for indemnity costs being dismissed, gaps in the offer of compromise system prevented them from relying upon the offer of compromise system in the alternative.
In Hyndes v Nationwide News Pty Ltd [2011] NSWSC 1443 the defendant succeeded on a justification defence before a jury. The defendant had made what were described in [17] as a number of "substantial and reasonable settlement offers". These included an offer of amends, a series of Calderbank offers (the highest of which was $150,000 plus costs, and was made twice), an Offer of Compromise of $75,000 plus costs, three offers inclusive of costs (the highest of which was $150,000 inclusive of costs) and attending a mediation.
Hislop J considered that each of these offers in fact fell below what was, in his Honour's opinion, a reasonable assessment of the plaintiff's prospects at the time the offer was made. His Honour considered that, the defendant's offers "may not have been" settlement offers within the terms of s 40(3). These included an offer of $140,000 inclusive of costs, which costs were estimated at $97,000. Hislop J considered the plaintiff's failure to accept this offer (the plaintiff made a counter-offer of $170,000 inclusive of costs) was not unreasonable. His Honour also rejected an application for costs under the general law in relation to the Calderbank offers, stating that "the considerations referred to in relation to s 40" were relevant to the Calderbank issue, and that it was reasonable for the plaintiff not to accept the defendant's offers.
There is no reference in Hyndes v Nationwide News Pty Ltd, supra, to any finding in relation to the Offer of Compromise. This may be because the offer referred to costs, and such offers at the time were considered to be invalid (Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [16]-[29]; Old v McInnes [2011] NSWCA 410). The offer in Haddon v Forsyth, supra, would arguably also have failed for this reason, as it offered a specific sum in costs, but this point was not raised. The relevant provisions in the UCPR have now been changed.
Hislop J accepted a submission that the offer of amends was insufficient because the plaintiff "wouldn't achieve a verdict" and "wouldn't achieve some real measure of compensation" from the offer to pay reasonable legal costs (at [11(a)]). (The judgment does not disclose whether the offer of amends went to the jury.) However, the effect of an offer of amends, explained in ss 15(3) and 17 of the Act, is just as much an enforceable bargain as any settlement achieved through a Calderbank offer or mediation. As for the contents of the letter to the editor which the defendant offered to publish, it would have been open to the plaintiff to seek appropriate orders under s 15(3)(b) of the Act. The basis upon which the offer of amends (which, by operation of s 40(3), must be regarded as being an offer for the purposes of s 40(2)(b)) was found to be unreasonable is not stated.
In Szanto v Melville (Ruling) [2011] VSC 618, a defendant who was successful at trial (on a qualified privilege defence) was similarly unsuccessful, despite making a Calderbank offer and an offer of compromise. The offer of compromise was for the sum of $5,000, an offer not accepted by the plaintiff.
Kaye J notes (at [9]) that, because the plaintiff did not in fact obtain judgment, r 26.08(3) Supreme Court (General Civil Procedure) Rules 2005 (Vic) did not apply to the offer, "a matter which perhaps might be given some consideration by the Supreme Court Rules Committee". This meant that, unlike the defendant in Bechara v Bonacorso (No. 5), supra, the defendant had no recourse under the offer of compromise principles.
Kaye J held that it was not unreasonable for the plaintiff to have failed to accept either of the offers "at the date at which both of those offers were made, on the information which was then available to the plaintiff" (at [15]). Unlike the offer of amends in these proceedings, which remained open for the whole of the litigation, the offer of compromise was only open for a short period.
The most recent analysis of s 40(2)(b) can be found in Mizikovsky v Queensland Television Limited & Ors [2013] QCA 68. This was an action for defamation for imputations that the plaintiff was an incompetent builder who caused financial loss to his clients. The jury's answers to questions included findings in favour of the defendants on the contextual imputations, and judgment was entered for the defendants. The trial judge awarded indemnity costs to the defendants pursuant to s 40(2)(b). On appeal, the trial judge's finding was set aside.
The Court of Appeal first noted the structure of s 40:
"[46] Section 40(1) of the Act requires a court in awarding costs in defamation proceedings to have regard to the way in which the parties conducted their cases and any other matters that the court considers relevant. Section 40(2)(b) provides that if defamation proceedings are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant, the court must, unless the interests of justice require otherwise, 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."
However, despite noting s 40(1), the terms of which lead into s 40(2), the court went on to construe the trial judge's reasoning as if the costs application had been a Calderbank-style offer with a requirement of "a reasonable decision" (at [47]) superimposed:
"[47] The trial judge rejected the respondents contention that the appellant's failure to accept the respondents' offer was unreasonable for the purposes of s 40(2)(b) of the Act. The trial judge observed that it would have been "a reasonable decision" for the plaintiff to accept the offer, but was not convinced that it was unreasonable not to have accepted the offer. In so finding, the trial judge took into account the following matters. This was an unusually "fact rich" case and the credit and reliability of the evidence of witnesses called by the defence to prove the substantial truth of two of the pleaded imputations and of the contextual imputations were very much an issue. One of the two plaintiff's imputations was found to be substantially true and four of the six contextual imputations were found to be substantially true, reflecting "nuanced findings of fact" based on the evidence of those witnesses. Whilst the factual findings ultimately favoured the respondents more than the appellant, the findings were not wholly in the respondents' favour. There was nothing which would have made the appellant understand that it was more probable than not that the witnesses of truth would present well. The respondents had provided summaries of the evidence which the witnesses of truth would give and the nature of the respondents' case was plain, but much depended upon the jury's assessment of the witnesses under cross-examination. The appellant had available evidence which, if accepted, supported his case. The trial judge found that it could not be concluded that when the offer was made the appellant ought to have realised he had poor prospects.
[48] In nevertheless ordering costs to be assessed on the indemnity basis, the trial judge made the following findings and observations. Appropriately advised, the plaintiff must have realised that there was a real risk that he might not succeed. Although the offer was not expressed to be a Calderbank offer, because it was made pursuant to the rules it could potentially be brought to the attention of the court on the question of costs. It seemed anomalous that under r 361(3) an offer made shortly before the first day of the trial did not entitle a defendant to indemnity costs if not accepted. The defendants were wholly successful. The plaintiff did not accept the substantial sum offered to him before the trial. The plaintiff took a risk in making that decision because the outcome of the case was likely to turn on the jury's determination of factual matters on the basis of the jury's view of lay witnesses, who the plaintiff had no opportunity to assess before the trial. Both sides were well resourced and likely to incur considerable costs in a trial which might run beyond the period of three weeks for which it was set down."
The Court went on (at [49]) to set out the UCPR requirements for offers resulting in indemnity costs, and the application of these rules in proceedings where the cause of action was not a claim for defamation. Once again, the court noted a lacuna in these rules under rule (3), which prevented the defendants from relying upon the offer (made on the first day of the trial) under the UCPR rules for offers (at [50]). This meant that the only basis upon which the defendants could seek indemnity costs was pursuant to s 40(2)(b) of the Act.
The trial judge awarded indemnity costs under s 40(2)(b) but on appeal this was set aside:
"[51] The appellant argued that the trial judge, having found that it was not unreasonable for the appellant to reject the offer, misdirected herself in ordering the assessment of the respondents' costs on an indemnity basis on the ground that it would have been reasonable for the appellant to have accepted the offer. The appellant submitted that Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd established that assessment on an indemnity basis should not be ordered on the ground that the plaintiff did not obtain a judgment as favourable as the defendants' offer in the absence of any element of unreasonableness by the plaintiff in not accepting the offer. The respondents relied upon Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) and Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd for their contrary argument that the making of an offer "is a very relevant circumstance" and, if no countervailing circumstances are raised, "the order for indemnity costs is likely to be made".
[52] Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) concerned a Calderbank offer. White AJA (with whose reasons McMurdo P and Holmes JA agreed) observed in that respect that in the case of a Calderbank offer the Courts are "inclined to the award of indemnity costs as an incentive to parties to consider seriously offers to settle which are reasonably made". The respondents and the appellant agreed in their submissions that the respondents' offer in this case was not expressed to be a Calderbank offer and that it should not be treated as such an offer. Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd, which was approved in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2), also concerned a Calderbank offer. It is distinguishable on the further ground that Chesterman J found that the plaintiffs prosecuted their case when they should have appreciated that it had no worthwhile prospects of success, and that finding informed his Honour's further finding that it was unreasonable for the plaintiffs not to accept the first defendant's Calderbank offer.
[53] Another ground of distinction is that Chesterman J considered that r 361(3) did not apply in that case only because the plaintiffs did not obtain any judgment; his Honour thought that a defendant who was completely successful and had made an offer to settle which was better than the result for the plaintiff should not be in a worse position than a partly unsuccessful defendant who made such an offer. That reasoning is not applicable in this case because the respondents' offer was made before the first day of the trial. The rules leave scope for costs orders adapted to the particular circumstances of the case and r 361 did not apply in this case because the appellant did not obtain any judgment, but the closest analogy here is r 361(2) (which refers to costs on the standard basis) rather than r 361(3) (which refers to costs on the indemnity basis). The trial judge described that contrast between rr 361(2) and 361(3) as "anomalous", but the contrast was apparently deliberate.
[54] In Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd, the relevant principle was stated as being that "...a party who unreasonably refuses to accept a Calderbank offer, on terms more favourable than the court's subsequent order, may be ordered to pay indemnity costs". The principle should not be more generous in the case of a defendant who makes an offer which, as the respondents accepted was the case here, is not a Calderbank offer. That offer afforded the respondents a significant protection against the adverse costs order which would probably be made if the appellant obtained even a relatively small judgment in his favour. In such a case, the appellant's failure to accept the offer would displace the usual presumption of costs following the event of the litigation, provided that the judgment in favour of the appellant was not more favourable to him than the respondents' offer. As the litigation fell out, it was the respondents who were entitled to the benefit of that usual approach to costs, but it does not follow that the appellant's mere failure to accept the offer afforded a ground for the costs awarded in favour of the respondents to be assessed on an indemnity basis.
[55] The circumstances identified by the trial judge provided an insufficient basis for departing from the usual basis of assessment of a successful party's costs. In the kind of defamation litigation described by the trial judge - which is presumably not atypical of serious defamation litigation - it would be reasonable for a plaintiff to accept any one of a very broad range of offers. To adopt that as a sufficient ground for ordering indemnity costs where the plaintiff has not acted unreasonably in any respect would unduly erode the basic principle that indemnity costs orders are the exception rather than the norm."
The court has dealt with the terms of the offer as if it were another form of offer of compromise or Calderbank offer. This approach raises many questions. Should s 40(2)(b) be construed in the light of the whole of s 40, having regard to the opening words to ss 40(1) and 40(2)? If so, the trial judge is given a broad discretion to consider "any other matters", which would include such matters as the circumstances in which the claim for defamation was brought (Jones v Sutton (No 2), supra), the conduct of the case by a party, and matters which may be adverted to in any list appended to the offer of amends of factors making the offer reasonable (a step the defendants took in these proceedings). Is s 40 only the equivalent, in terms of defamation proceedings, of an offer of compromise system, with an additional (and generously interpreted) factor of unreasonableness? Given the list of factors in s 40(1), this seems unlikely. Is the offer of amends defence intended to operate as statutory equivalent of an offer of compromise? In fact, the contrary was stated by Mr Debus MLA when the Defamation Bill was put before the Parliament (Second Reading Speech, 13 September 2005, p. 17637).
It is not necessary for me to resolve these issues, for two reasons. First of all, the offer of amends sets out the factual matters relied upon by the defendants in relation to "reasonableness" and is the subject of findings of fact in the judgment. This is not conclusive in any way, but it is a helpful guide. Secondly, the offer of amends made in these proceedings has unique features, by reason of the facts of this case, which enable me to determine issues of "unreasonableness" on the facts of this case, and it is to the determination of that issue that I now turn.
The defendant's offer to make amends
The defendants made an offer to make amends on 30 August 2012, which was shortly after being served with a statement of claim stated as follows:
"This is an Offer to Make Amends pursuant to Part 3, Division 1 of the Defamation Act 2005 (NSW).
This Offer to Make Amends is in relation to the publication of the entire matter complained of.
Our clients make the following Offer to Make Amends:
1. Publish to Mr Sleeman the following apology:
On 23 December 2011 Richard Sleeman attempted to enter the Palms on Oxford nightclub in Darlinghurst. He was refused entry by a security guard who believed him to be intoxicated.
Mr Sleeman has since informed the owners of the Palms that he was not in fact intoxicated and indeed, that he opposes excessive drinking.
The Palms on Oxford apologises to Mr Sleeman for any offence caused to him on that occasion.
2. Pay to Mr Sleeman the expenses reasonably incurred by him in relation to this matter before this offer and in considering this offer.
This Offer to Make Amends is open for acceptance by Mr Sleeman at any time until it is withdrawn. Our client is, unless the Offer to Make Amends is withdrawn, ready, willing and able to complete the terms of the offer.
If your client declines to accept the Offer to Make Amends and continues the proceedings, our clients will rely on this Offer to Make Amends as a defence to the claim and, in the alternative, by way of mitigation. We draw your attention to s.18 of the Defamation Act 2005 in that regard.
It is our clients' view that this Offer to Make Amends is reasonable in the circumstances including for the following reasons:
1. The publication to your client of the apology;
2. The compensation offered is reasonable in all of the circumstances;
3. The security guard published the matter complained of honestly, and absent of any malicious intent;
4. Our clients had a duty to publish the matter complained of pursuant to the Liquor Act 2007 (NSW);
5. The extent of publication of the matter complained of was very limited;
6. Allegations of drunkenness are unlikely to be found to be defamatory;
7. Our clients are not vicariously liable for the conduct of the security guard;
8. Our clients are likely to succeed in defending the claim as it was published on an occasion of qualified privilege.
We will rely on this correspondence to the extent that our clients are entitled to do so.
Our clients otherwise reserve their rights."
I note the following features of this offer of amends:
(a) No offer to make amends was made prior to proceedings being commenced. However, no notice of concerns was ever served by the plaintiff, so the first notice the defendants had of defamation proceedings was the service of the statement of claim. The plaintiff had previously commenced proceedings against the defendants in the Anti-Discrimination Board, but the service of the statement of claim for defamation came without any prior warning. In those circumstances, the plaintiff cannot complain that an offer to make amends was not made prior to commencement of the litigation.
(b) The offer of amends was served ten days after the statement of claim was served, and no response or counter offer was ever made.
(c) The offer to make amends was open for a lengthy period. It was effectively open to be accepted for the entire time that these proceedings were ongoing, up to the date of the trial. This is a significant period (compare Haddon v Forsyth, supra at [54], Hyndes v Nationwide News Pty Ltd, supra, at [26] and Szanto v Melville, supra, at [8]).
(d) The offer to make amends included an apology, the text of which was set out in full (compare Mizikovsky v Queensland Television Limited & Ors, supra, and Haddon v Forsyth, supra), and an offer to pay costs. No restrictions in time were placed on those costs. This meant that, as the proceedings moved towards the hearing, the sum involved would have been substantial, as those costs would have related to all the work performed up to that date.
(e) The offer responds to the case as pleaded in the statement of claim. The objections raised by the plaintiff in relation to the offer to make amends are firstly that the offer does not include any reference to the matters the subject of the anti-discrimination claim (namely the assertion that the true reason for the plaintiff's exclusion was his age), or promise not to take such action again, and secondly that no damages are offered. This misconceives the nature of the offer to make amends. An offer to make amends can only be made in the context of an alleged defamatory publication. An offer to apologise for unrelated conduct, such as age discrimination, falls outside the ambit of the provisions. Secondly, it is not a pre-requisite that an offer of amends must offer damages. Any damages that the plaintiff received for a publication for such a limited nature would have been extremely small, for the reasons explained by Simpson J in Haddon v Forsyth, supra.
Was the offer of amends a reasonable offer at the time it was made?
Ms Chrysanthou drew to my attention a number of matters which she submitted made the conduct of the plaintiff, in failing to accept the offer of amends, unreasonable. These included:
(a) This offer of amends provided the text of the apology the defendants were prepared to publish. (That was not the case in the decisions referred to above.) It was unreasonable of the plaintiff to refuse an offer which contained a proposed draft apology, particularly since there is a procedure under s 15 to seek appropriate orders to effect the settlement if the offer of amends is accepted.
(b) The compensation that was offered, namely the payment of legal costs, was reasonable in the circumstances, particularly since the offer of amends remained open from ten days after the statement of claim was served until the end of closing submissions in the trial. Given the very limited publication to persons who knew who he was (namely three very good friends), the damages would be very small. The offer made in these proceedings thus also differs from the offers made in the cases discussed above where indemnity costs were refused, by reason of the fact that this offer was open for the whole of the litigation.
(c) Unlike the plaintiffs in the cases discussed above, who chose to "roll the dice" (as Ms Chrysanthou puts it) and see how the tribunal of fact viewed the evidence, Mr Sleeman had the opportunity to discover who Mr Unwin was, and to see him give evidence (and indeed hear all the evidence, including the witnesses) in the Administrative Decisions Tribunal in February 2013. This is a substantially different situation to that of the plaintiff in Szanto v Melville, supra, or Hynde v Nationwide News Pty Ltd, supra, where the fact that this evidence was unknown or untested was given great weight.
(d) The security guard had a duty to publish the matter complained of under the Liquor Act 2007 (NSW). It was his job to tell persons seeking to enter the licensed premises whether they could or could not do so, and why. Only if there was evidence of malice could his statements, defamatory though they may be, be actionable. It was unreasonable of the plaintiff not to accept the offer of amends in these specific circumstances.
(e) The limited extent of the publication (in terms of persons knowing the plaintiff's identity and/or extrinsic facts) meant that the terms of the offer of amends complied with s 18(2), and it was made as soon as practicable, namely 10 days after the first notice of the claim (s 18(1)(a)). The defendants were at all times willing and able to carry out the terms of the offer (s 18(1)(b)) and it would have been unreasonable for the plaintiff to refuse to accept the offer for any asserted claim of delay. This includes his continued refusal to accept the offer up to and during the trial.
(f) While the defendant contended that allegations of drunkenness were unlikely to be defamatory, disputes about the defamatory meaning of a publication are permissible in the offer of amends process (s 18(2)(b)(i)). It was unreasonable of the plaintiff to refuse the offer of amends for such a reason.
(g) This was an unusual case, in that the defendant did not bring proceedings against the person he alleges spoke the words, although it was open to him to seek preliminary discovery to ascertain the identity of that person and the identity of his employer. It was unreasonable of him to insist upon admissions of wrongdoing from third parties in those circumstances.
The decision of the Queensland Court of Appeal in Mizikovsky v Queensland Television Limited & Ors, supra, may be distinguished, having regard to these facts, on the basis that this case is the exception rather than the norm. This is by reason of the circumstances relevant to publication (including the legal obligations placed upon the security guard and the limited publication), the prompt use of the offer of amends, the clear wording of the apology and the extraordinarily long time that the offer of amends remained open for acceptance, as well as offering to pay what would have been substantially increasing legal costs.
Ms Evans submits that the offer to make amends did not include any payment of damages, and that it would not be reasonable to accept an offer of amends without such a payment. However, the damages awarded for such a publication would be sufficiently small so that, as Ms Chrystanthou pointed out, they would be swallowed up in unrecoverable legal costs. In addition, as Mr Debus MLA pointed out in his second reading speech, an offer of amends is not intended to function as an offer of compromise.
Ms Evans also relied upon the "grapevine effect", but the plaintiff's decision to discuss the matter with work colleagues and friends as a form of "pre-emptive strike" appears to have been the principal cause of such knowledge. He could, I find, have shown the apology to such persons, or published it in the Oxford Street newspaper he contacted a few days after the events in question. Passers-by in the street who were Oxford Street regulars would also have had the opportunity to read it. It was unreasonable not to have accepted the apology, particularly in the unusual circumstances of this case. In addition, no plea of "grapevine effect" was made in the statement of claim, or particularised; it was a last-minute addition at the end of the hearing, so it would be unreasonable of the plaintiff to have refused the offer of amends on such a basis.
Taking all of the above into account, I am satisfied that it was unreasonable for the plaintiff not to have accepted the offer to make amends at any time over the 10-month period between the date of offer and the hearing. Accordingly I propose to make an order that the plaintiff pay the defendants' costs of these proceedings on an indemnity basis.
Additional matters
I have made an order that Mr Dezarnaulds pay the costs of the hearing today on an indemnity basis. I shall set out briefly my reasons for so doing.
The defendants stated, in their letter of 7 May 2013, that they intended to seek costs orders personally from Mr Dezarnaulds. This was expressed to follow from their complaints of his incompetent conduct of these proceedings (some details of which are set out at [2013] NSWDC 43), the hopelessness of the case, and an asserted admission from Mr Dezarnaulds that the plaintiff was impecunious. This costs application was given a special fixture on 19 June 2013 for hearing today (19 July 2013), and the defendants accordingly served written submissions on 12 July setting out the basis upon which a costs order would be sought against him. On 15 and 18 July my associate wrote to Mr Dezarnaulds inquiring if he would be able to serve evidence and any submissions in reply prior to 19 July 2013. There was no reply until 11.03 pm last night, when Ms Evans sent my associate and Ms Chrysanthou an email saying she would ask for an adjournment today, which email was not seen by Ms Chrysanthou until this morning. In addition, although not stated in Ms Evans' email, she does not have instructions to appear for Mr Dezarnaulds, who was, she has now told the court, consulting Law Cover today.
If some action had been taken on 12 or 15 July, today's hearing date could have been vacated, and Mr Dezarnauld's legal representatives could have either appeared today or provided information as to when the application in relation to Mr Dezarnaulds will be ready to proceed.
Ms Chrysanthou submitted this was yet another delay in proceedings with a history of delay and oversight, and I am inclined to agree. I would have had no hesitation in adjourning today's hearing if requested to do so when my associate forwarded an inquiry to the parties on Monday 15 June 2013. The defendants have come today prepared for an application for costs against Mr Dezarnaulds, which has had to be adjourned in unsatisfactory circumstances.
I have told Ms Evans that, if there is a compelling explanation for the delay and the failure to respond to correspondence, Mr Dezarnaulds' representatives may raise it on the next occasion in relation to the costs order I propose to make. However, the delay is egregious, and warrants an order for indemnity costs.
In addition although it is a trifling matter, the statement of claim in these proceedings misspelled the first defendant's name as "Tuloch" when it is in fact "Tulloch". This error was not picked up until the file was sent to me for hearing, and now cannot be corrected on JusticeLink without great difficulty. The names of all parties to litigation, including ABN and ACN numbers where applicable, should be set out by the parties accurately on all court documents that they file.
Orders
(1) On the application of the plaintiff, the hearing of the defendants' application for a costs order against Mr Dezarnaulds today is vacated.
(2) Mr Dezarnaulds is to pay the costs thrown away by reason of the vacation of the hearing date on an indemnity basis, the application not having been notified prior to 11.03pm on Thursday 18 July 2013.
(3) The defendants' application for a costs order against Mr Dezarnaulds for the whole proceedings (or part thereof) is stood over part-heard for directions to Friday 16 August at 9.00am.
(4) LawCover, or any solicitor instructed on its behalf (or by Mr Dezarnaulds directly) is to file any Notice of Appearance in the costs application in 14 days.
(5) Order (2) of the judgment handed down on 19 June 2013 is varied to provide that the plaintiff pay the first to third defendants' costs of these proceedings on an indemnity basis.
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Decision last updated: 22 July 2013
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