Stanton v Fell (No 2)

[2014] NSWSC 1052

Supreme Court

New South Wales

Medium Neutral Citation:	Stanton v Fell (No 2) [2014] NSWSC 1052
Hearing dates:	7 November 2013
Decision date:	05 August 2014
Before:	Simpson J
Decision:	The plaintiff pay the defendant's costs on an indemnity basis.
Catchwords:	COSTS - defamation - Defamation Act 2005 (NSW), s 40 - verdict for defendant - plaintiff to pay defendant's costs - order sought that costs be paid on an indemnity basis - whether plaintiff unreasonably failed to accept settlement offer made by the defendant - whether interests of justice require otherwise than an order that costs be paid on an indemnity basis - defendant showed more than the plaintiff merely failing in proceedings - Haddon v Forsyth (No 2) [2011] NSWSC 693 - plaintiff's failure to accept first and second offers was unreasonable - interests of justice require that defendant be fully indemnified - plaintiff to pay defendant's costs on an indemnity basis
Legislation Cited:	Defamation Act 2005 (NSW)
Cases Cited:	Calderbank v Calderbank [1975] 3 All ER 333 Haddon v Forsyth (No 2) [2011] NSWSC 693 Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority [2005] VSCA 298; 13 VR 435 Stanton v Fell [2013] NSWSC 1001
Category:	Costs
Parties:	Arthur Peter Stanton (Plaintiff) Gary Fell (Defendant)
Representation:	Counsel: S T Chrysanthou (Plaintiff) P J Hayes (Defendant) Solicitors: Access Law Group (Plaintiff) Russell Kennedy, Melbourne (Defendant)
File Number(s):	2012/288471

Judgment

1. This claim arises out of defamation proceedings unsuccessfully brought by the plaintiff, Dr Arthur Stanton, against the defendant Mr (or Dr) Gary Fell. The plaintiff's claim in defamation failed, for five independent reasons: Stanton v Fell [2013] NSWSC 1001. I dismissed the plaintiff's claim and ordered the plaintiff to pay the defendant's costs. The defendant now seeks an order that the costs be paid on an indemnity basis. Section 40 of the Defamation Act 2005 (NSW) relevantly provides:

"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) ...

(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."

1. The questions which arise are:

(i) Did the plaintiff unreasonably fail to accept a settlement offer made by the defendant?;

(ii) If so (and only if so) do the interests of justice require otherwise than an order that the costs be paid on an indemnity basis?

1. In Haddon v Forsyth (No 2) [2011] NSWSC 693 I held that, for failure to accept a settlement offer to be unreasonable, more is required than that the plaintiff is unsuccessful in the proceedings. I adhere to that view.

1. It is necessary to set out a short history:

(i)   at material times the plaintiff was a vascular surgeon attached to the Wollongong Hospital. The defendant was the Chair of the Board of Vascular Surgery ("BVS"), an organisation that, inter alia, managed and supervised the training of vascular surgeons. The plaintiff was in significant conflict with the other vascular surgeons at the Hospital. The publication on which the plaintiff sued was an email communication sent by the defendant on 19 September 2011 to a medical colleague of the plaintiff at the Wollongong Hospital. It was given some further, but very limited, republication. The email communicated a decision of the BVS, that, in effect, requested that the plaintiff not be involved in the training of vascular surgeons (although the plaintiff was not named);

(ii) by letter dated 12 July 2012 solicitors acting for the plaintiff sent to the defendant, pursuant to Pt 3 of the Defamation Act, a "concerns notice". In the letter, the solicitors asserted that the email sent by the defendant conveyed two imputations that seriously defamed the plaintiff and were "completely false". They claimed that the publication "deeply distressed" the plaintiff and injured his personal and professional reputations, and resulted in substantial economic loss and legal costs. The letter asserted that the publication resulted in the plaintiff's suspension from his position as vascular surgeon attending on the public list at Wollongong Hospital. It purported to offer the defendant an opportunity to make amends and stated that if the defendant agreed to the offer then set out, the plaintiff would agree not to sue in defamation in relation to the publication of the email. They requested that the defendant undertake:

• not to republish the content of the email or the imputations they alleged were conveyed by it; and

• immediately to provide the plaintiff with a signed and dated apology and retraction in the following terms:

"Apology to Dr Arthur Stanton

On 19 September 2011 I published a letter about Dr Arthur Stanton which was defamatory of him.

I did not have any basis to make such allegations about Dr Stanton and I retract them.

I unreservedly apologise to Dr Stanton for the hurt caused to him by reason of my thoughtless conduct.";

• the solicitors also requested immediate publication of the apology to a number of named or otherwise identified individuals. Finally, they requested the defendant immediately to provide the plaintiff with all documents, including correspondence, emails and file notes which contained information on which the defendant relied in preparing the email. Accompanying the letter was a draft Statement of Claim which, inter alia, set out the imputations alleged to have been conveyed;

(iii)   on 16 July 2012 solicitors acting for the defendant replied, advising that they were obtaining instructions, but stating that they did not believe that the email conveyed the imputations alleged in the draft Statement of Claim, and did not believe that the publication of the email was the reason for the suspension of the plaintiff from his position as vascular surgeon at the Wollongong Hospital;

(iv)   on 17 September 2012 the Statement of Claim was filed, pleading the imputations foreshadowed; the Statement of Claim was amended on 27 May 2013;

(v)   thereafter, various steps in the proceedings were taken by both parties. It is apparent from the evidence on this application that these steps included discovery;

(vi)   on 19 March 2013 the solicitors acting for the defendant wrote to the solicitors acting for the plaintiff. The letter contained a good deal of material that might be called argumentative. For example, the solicitors contended that the imputations pleaded were not conveyed in the email, and sought to explain the reasons for the decision of the BVS that the subject matter of the email. They suggested that, should the claim proceed, it was likely to fail on the basis of defences of qualified privilege and fair comment/honest opinion, and on the basis that the email was published only to one person, a person with whom the plaintiff was already in conflict (suggesting the unlikelihood of damage to the plaintiff's reputation).

Notwithstanding those arguments, the solicitors said that the defendant wished to bring the proceeding to an end and therefore offered to settle the proceeding by the payment of $26,000 plus the plaintiff's costs. The terms of the settlement offer included entry by the parties into a deed of settlement which would release the defendant and all members of the BVS from any further action by the plaintiff with respect to any of the matters complained of, required confidentiality, required mutual non-disparagement, and required the parties to enter into consent orders for the withdrawal of the proceedings with no order as to costs. The offer was stated to remain open for 28 days. The letter further stated that the offer was made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333; Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority [2005] VSCA 298; 13 VR 435. They advised that, should the matter proceed to a hearing and the plaintiff fail to obtain a result in the proceedings better than the offer, the letter would used in support of an application that the plaintiff pay the defendant's costs on a solicitor/client basis from the date of the letter.

The proceedings were set down for hearing on 20 May 2013.

(vii)   on 7 May 2013 the defendant increased his settlement offer to $51,000 plus the plaintiff's costs, and otherwise on terms as contained in the letter of 19 March. This offer was expressed to remain to open until 4.00pm on 17 May 2013 - the Friday before the date fixed for commencement of the hearing.

There is no evidence of any written response to this offer. The offer was not accepted and the plaintiff's claim proceeded to trial, with the result indicated above.

1. I return then to the two relevant questions:

Question (i): Was the plaintiff's failure to accept either the offer of 19 March or 7 May unreasonable?

1. As mentioned above, I maintain the view expressed in Haddon that, to establish unreasonable failure to accept a settlement offer, a defendant must show more than merely that the plaintiff has failed in the proceeding.

1. Here, in my opinion, the defendant has shown more. The bases on which the plaintiff's claim failed are significant. First, the imputations pleaded were not conveyed: Stanton v Fell at [112], [116]. The plaintiff's claim therefore failed at the threshold.

1. Second, had the imputations been conveyed, they were defensible on four independent bases: qualified privilege at common law (at [129], [138]); statutory qualified privilege (Defamation Act, s 30) (at [133], [138]); triviality (Defamation Act, s 33) (at [141]); substantial truth (Defamation Act, s 25) (at [150], [154]). Moreover, I held that, by reason of the extremely limited extent of publication, and the circumstance that such publication as there was was to individuals who were already well aware of the issues between the plaintiff and others at the Wollongong Hospital, any damages that might have been awarded would have been nominal.

1. Further, I concluded that the plaintiff's real complaint, and the underlying reason for his bringing the proceedings, did not concern the communication in the email, but concerned the administrative decision made by the BVS and communicated on its behalf by the defendant in the email. The plaintiff's request for documentation relevant to the preparation of the email contained in the "concerns notice" lends support to the suggestion that it was the decision to exclude the plaintiff from training of vascular surgery trainees was the focus of his complaint. Defamation proceedings were, at best, entirely inappropriate.

1. A very significant consideration in this question is the quantum of the two offers, particularly seen in the light of the extremely limited publication of the email. As I held, even if the plaintiff had succeeded in his claim, he could have recovered no more than nominal damages. In my opinion the first offer of $26,000 was generous, and the second offer of $51,000 even more so. Counsel who appeared for the plaintiff on this application argued that the offers were not limited to financial compensation, but included other conditions that were unacceptable to the plaintiff. (She did not go so far as to argue that they were unreasonable conditions, although she pointed out that there may have been some difficulties of interpretation.)

1. I accept that, for present purposes, the offer of 19 March, and the offer of 7 May, have to be looked at in their terms - that is, the whole of their terms. It is not sufficient to suggest that the plaintiff could have sought to negotiate the terms other than the monetary offer. However, I am unable to conclude that the other terms and conditions proposed were unreasonable, or such as to justify the plaintiff's failure to accept what was otherwise a reasonable and generous offer of settlement.

1. My conclusion therefore is that the plaintiff's failure to accept the first offer was unreasonable, his failure to accept the second offer was even more so.

1. Accordingly, unless I was satisfied that the interests of justice require otherwise, s 40(2)(b) of the Defamation Act obliges me to make an order that costs be assessed on an indemnity basis. That brings me to the second question.

Question (ii): do the interests of justice require otherwise than an order that the costs be paid on an indemnity basis?

1. The plaintiff's argument with respect to the defendant's application was directed entirely to the unreasonableness (or otherwise) of his failure to accept the settlement offer. No additional argument was directed to any interest of justice considerations. I am unable to perceive any. The interests of justice, in fact, require that the defendant be fully indemnified in respect of his costs of defending these proceedings.

1. Accordingly, I order that the plaintiff pay the defendant's costs on an indemnity basis.

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Decision last updated: 05 August 2014