STONE v MOORE (No 2) - [2015] SADC 169

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
STONE v MOORE (No 2)
[2015] SADC 169
Decision of His Honour Auxiliary Judge Clayton
19 November 2015
DEFAMATION - ACTIONS FOR DEFAMATION - COSTS - INDEMNITY COSTS
Unreasonable failure to accept offer. Defamation Act 2005 (SA) s38(2)(a).

DEFAMATION - ACTIONS FOR DEFAMATION - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
The plaintiff claimed damages for defamation in respect of two statements. The first statement was held to have been published on an occasion of qualified privilege and the plaintiff failed to make out a plea of malice. The second statement was held to have been justified. Claim dismissed.
The plaintiff had rejected settlement offers made by the defendant and the defendant applied for costs on an indemnity basis pursuant to s38(2)(a) of the Defamation Act 2005 (SA) on the basis that the plaintiff had unreasonably rejected the offers. Alternatively the defendant sought costs on a solicitor and client basis.
Held:
The plaintiff's failure to accept the settlement offers was not unreasonable because:
(1) It was not unreasonable to seek the court's determination on the question of whether a statement made for the purpose of advising family members about matters of family history could give rise to the defence of qualified privilege.
(2) Notwithstanding evidence of ill will between the parties evidence given by the defendant at the trial established that the defendant was not motivated by malice when he made the relevant statement but was motivated by a desire to inform family members of matters of family history. The plaintiff was unaware of that evidence prior to the trial.
The conduct of the plaintiff did not require a departure from the normal rule that the unsuccessful party pay costs on a party and party basis.
Application for indemnity costs and solicitor and client costs refused.
Order that the plaintiff pay the defendant's costs to be taxed as between party and party.
Defamation Act 2005 s38, referred to.
Gatley on Libel and Slander 12th Ed Para 35.24; State Government Insurance Commission v Lane (1997) 68 SASR 257; Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201; Colgate-Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248; Szanto v Melville [2011] VSC 618; Haddon v Forsyth (No 2) (2011) NSW SC 693; Gatley on Libel and Slander 11th Ed Para 14.38, considered.

STONE v MOORE (No 2)
[2015] SADC 169

The plaintiff sued for damages for defamation in respect of two publications. First an oral statement made on 7 August 2012 and secondly an e‑mail dated 8 August 2012 which was addressed to the plaintiff but published to the plaintiff's daughter-in-law for the purpose of transmission to the plaintiff.
In reasons delivered 22 September 2015 I found that although the oral statement was defamatory it was protected by qualified privilege and that the plaintiff had not proved that the defendant was motivated by malice when he made the statement. I found that to the extent that the e-mail was defamatory the imputations had been justified. Judgment was therefore entered in favour of the defendant.
If the oral statement of 7 August 2012 had not been made on an occasion of qualified privilege I would have assessed damages in respect of that publication at $10,000. If the e-mail had not been justified I would have assessed damages in respect of that publication at $100.
The defendant has applied for costs on an indemnity basis or in the alternative, costs as between solicitor and client.
The plaintiff has opposed the defendant’s application and submitted that the proper order in these proceedings is that there should be no order as to costs. Both parties have provided detailed written submissions.
The defendant relies upon an affidavit of Michelle Louise Hamlyn sworn 30 October 2015. With the exception of paragraphs 21 to 26 of the affidavit that affidavit was read on this application. The affidavit sets out the history of the proceedings including the parties’ attempts to resolve the claim.
Mr Heywood-Smith referred me to Gatley on Libel and Slander 12th Edition paragraph 35.24 where the following passage is set out:
The basic principles. The costs of the proceedings are in the discretion of the court, which has full power to determine by whom, in what amount and when costs are to be paid. If the court decides to make an order about costs the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but this is subject to a qualification expressed in the widest possible terms: "the court may make a different order".
In deciding what order to make the court must have regard to all the circumstances, including the conduct of all the parties, whether a party has succeeded on part of his case, even if not wholly successful and any admissible offer to settle …
The authority for the propositions set out in Gatley is the United Kingdom Civil Procedure Rules. While those rules do not apply in South Australia I have no difficulty in accepting that the principles are applicable in this case.
Mr Douglas referred to Rule 263 which deals with the court's discretion as to costs. The rule commences with the statement "As a general rule, costs follow the event." (Rule 263 (1)).
Sub rule (2) states that the general rule is subject to specific rules to the contrary and also a number of exceptions which are set out. Those exceptions include the following:
(f) In an action founded on a claim of defamation, the general costs of action are not to be awarded in favour of the successful plaintiff unless the damages exceed $25,000.
Because the plaintiff was not successful that rule has no application in the present case.
Rule 264 provides:
264-Basis for awarding costs
(1) The court may, in the exercise of its discretion as to costs, award costs on any basis the court considers appropriate.
(2) As a general rule, however, costs are awarded as between party and party (that is, on the basis that the party entitled to the costs will be reimbursed for costs reasonably incurred by the party in the conduct of litigation to an extent determined by reference to the scale of costs in force, under these rules or the old rules, when the costs were incurred
…
(4) The court may depart from the scale if there is good reason to do so.
(5) In exercising its general discretion as to costs, the court may-
(a) Award costs as between solicitor and client (that is, on the basis of the party will be fully reimbursed for costs reasonably incurred by the party in the conduct of litigation); or
(b) Award costs on the basis of an indemnity (that is, on the basis of the party be fully reimbursed to costs incurred by the party in the conduct of litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred).
I have considered carefully the oral and written submissions of Mr Heywood-Smith QC. None of the matters to which he referred have persuaded me that there are reasons to depart from the principle that costs should follow the event.
The real issue on this application is whether the costs should be awarded on an indemnity basis, a solicitor and client basis or on the basis of party and party costs.
The defendant's claim for indemnity costs is based upon section 38 of the Defamation Act 2005. Although it is only subsection (2) that refers to indemnity costs it is appropriate to set out the section in its entirety. It provides:
38-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 the 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 agreed 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.
It is to be noted that subsection 38 (1) provides a discretion whereas subsection 38 (2) (b) is mandatory unless the interests of justice require otherwise. The criterion for an award of indemnity costs pursuant to subsection 38 (2) (b) is that the court must be satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.
The grounds relied upon by the defendant in this case for seeking costs on some basis other than party and party costs are:
1 . The claim brought by the plaintiff, even if made out, would never have resulted in an award of damages exceeding the jurisdictional minimum, and was pursued primarily seeking a remedy which the court could not grant (namely, an unequivocal retraction and disavowal);
2.    The plaintiff made no genuine attempt to resolve the dispute prior to commencing proceedings;
3.    The defendant made offers to resolve the dispute, including as early as 11 January 2013, and the plaintiff’s failure to accept each of those offers was unreasonable at the time when each of the offers was made; and
4.    The plaintiff conducted a case in a manner which showed wilful disregard of known facts, noting, in particular, Mrs Stone's refusal to admit that she was estranged from her mother despite acknowledging that she had not spoken to her for 30 years.
Mr Douglas submitted that the court has a broad discretion to depart from the normal award of costs on a party-party basis where the justice of the case requires. State Government Insurance Commission v Lane (1997) 68 SASR 257, 265. He also submitted that the discretion is "absolute and unfettered" other than the requirement that it be exercised judicially. Trade Practices Commission v Nicholas Enterprises (1979) 28 ALR 201 at 207). He cited the well-known passage referring to the exercise of a discretion as to costs in Colgate-Palmolive Co and Another v Cussons Pty Ltd (1993) 118 ALR 248, 254-257. The passage which he relied upon concludes with the statement:
The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
I accept that the court has a wide discretion to award costs on a solicitor and client basis or an indemnity basis. The question is whether the particular facts and circumstances of the case warrant that.
Mr Douglas referred to a list of factors described in the Colgate-Palmolive case which he submitted are pertinent to this action. I do not accept that these proceedings were instituted or continued other than for the bona fide purpose of protecting and enforcing a legal right, to achieve an extraneous purpose or in wilful disregard of known facts or established law. I do not accept that this action is one in which allegations which ought never to have been made were issued, or that the case was unduly prolonged or made more complicated by groundless contentions. Although the plaintiff was unsuccessful, I do not accept that the plaintiff properly advised should have known that she had no prospect of success and I do not accept that in this case there was an imprudent refusal of an offer to compromise.
The defendant submitted that there was unreasonable failure by the plaintiff to accept offers pursuant to section 38 (2) of the Defamation Act.
Three separate offers were made. They are set out in a summary of offers which is annexed to the defendant' s written submission. Only one of the offers, the third, was an offer to pay a sum of money. That was an offer to pay $3000. Nevertheless, all the offers were within the definition of a "settlement offer" in sub-section 38 (2) of the Defamation Act.
I accept that all three offers represented genuine offers of compromise. There is no dispute that the plaintiff rejected each of the three offers. The defendant has submitted that at the time when each of the offers was made it was unreasonable for the plaintiff to have rejected those offers.
The offer to pay $3000 fell short of the sum of $10,100 that I would have awarded if the plaintiff had been successful.
There is a fundamental reason why this case has been incapable of settlement. The plaintiff gave evidence, which I accept, that her primary concern was not an award of damages but to obtain an apology in respect of a statement which she found hurtful. The court cannot direct a defendant to make an apology. The defendant gave evidence, which I also accept, that he is unable to give an unconditional apology because that would involve an acknowledgement that his late mother had told him something which was untrue.
So far as the claim for indemnity costs is concerned the question for the court is whether, at the time when each of the offers was rejected, it was unreasonable for the plaintiff to have rejected the defendant's offers.
I have found that the oral statement made on 7 August was defamatory. The real issues in respect of that alleged defamation were whether the statement was made on an occasion of qualified privilege and whether the defendant was motivated by malice when he made the statement. I found that the statement was made on an occasion of qualified privilege and that while the defendant was not well disposed towards the plaintiff he was not motivated by malice when he made the statement.
Whether the existence of a close family relationship could establish the requisite duty or interest for the purpose of qualified privilege was a question which the court had to decide. There is a passage in Gatley which suggests that it can. Gatley on Libel and Slander 11th Edition paragraph 14.38. In finding for the defendant I relied upon that passage and the argument of the defendant' s counsel which was based upon general principle and logic. I was not referred to any direct authority on the question. In those circumstances it was reasonable for the plaintiff to litigate the issue.
Similarly, the plaintiff claimed that the statement was made with malice so that the defence of qualified privilege was defeated. In my reasons I found that the plaintiff and defendant were not on good terms at the time the defendant made the statement in question. The defendant did not want the plaintiff to attend their mother's funeral and the defendant had told the plaintiff that if she did attend he would treat her as if she was not there. The plaintiff was not invited to the activities which followed the burial and the defendant's e-mail of 8 August, which is the subject of the second alleged defamation, was critical of the plaintiff. On the basis of those matters the plaintiff did have an argument that the defendant had demonstrated malice towards the plaintiff. However, having heard the evidence I found that, notwithstanding the defendant’s animosity towards the plaintiff, the plaintiff had not proved that the sole or dominant motive for the defendant publishing the statement on 7 August was malice. I found that the defendant was motivated by a desire to inform the plaintiff’s son and daughter-in-law of matters of family history. That finding was the result of evidence given at the trial.
At the time the plaintiff rejected the defendant's offers she could not have been certain as to whether the oral statement of 7 August was made on an occasion of qualified privilege or whether the defence of qualified privilege would be defeated on the ground of malice.
I find that in rejecting the defendant's offers the plaintiff did not act unreasonably. Accordingly, section 38 (2) (b) does not apply and an order for indemnity costs is not mandatory.
The conclusion which I have reached is supported by Szanto v Melville [2011] VSC 618 to which I was referred by Mr Heywood-Smith. The circumstances in that case were remarkably similar to those presently before the court. Kaye J observed that the critical question in respect of the equivalent Victorian provision in the Defamation Act "and certainly a central question in relation to the application of the Calderbank principle is, in this case, is whether it was not unreasonable for the plaintiff to have rejected the offers made to him …" (Para.14). His Honour concluded that it was not unreasonable for the plaintiff not to have accepted the offers which were made because "at the date at which both of those offers were made, on the information which was then available to the plaintiff, I consider that the plaintiff had a proper basis to expect that he had reasonable prospects of success in the claim of defamation brought by him.”
In that case the defendant had pleaded qualified privilege which could only be overcome if the plaintiff established malice. His Honour observed:
In this context, the establishment of malice required the plaintiff to prove that the defendant was actuated by an ulterior motive, that is a matter which is essentially a factor which the defendant alone would be privy.
19. The defendant alone knew what had actuated him in writing such a serious matter about a fellow practitioner. However at that time, in my view, the plaintiff had appropriate grounds to consider that he might be able to establish the existence of an improper ulterior motive, of the type which was in fact relied on at the trial.
In the present case, on the basis of the defendants conduct and the e-mail of 8 August, the plaintiff may, at the time she rejected the offers, have had appropriate grounds to believe that she could have established malice. At that time she was unaware of the evidence to be given at the trial.
In considering the reasonableness of the plaintiffs conduct Kaye J had regard to another consideration. His Honour said that if the plaintiff had succeeded he would have awarded damages in the sum of $35,000. (Para. 3) The offer which had been made by the defendant was for the sum of $1000 damages. His Honour took the view "that offer could properly be characterised as derisory" and he noted that if the plaintiff succeeded it was clear that he would be entitled to an award of damages substantially in excess of $1000. (Para. 28). For that reason he concluded it was clearly not unreasonable for the plaintiff to have rejected or not accepted the offer.
Kaye J declined to award indemnity costs pursuant to the Defamation Act.
His Honour also declined to award the indemnity costs pursuant to the principle stated in Calderbank. His Honour said:
As I have stated, in my view, whilst the discretion is broader pursuant to the Calderbank principles, nevertheless, as the Court of Appeal has stated in Hazeldene Chicken Farm, the important test is whether the plaintiff, at the particular time at which he received the offer, acted unreasonably in not accepting it. For the reasons, I have stated, I do not consider the plaintiff acted so unreasonably. In my view, to the contrary, I would be positively persuaded that his non-acceptance at that time was quite reasonable. The fact that the plaintiff ultimately, was successful in the case is not the point. The critical viewpoint is at the time at which the offers were made. (Para.31)

His Honour ordered costs on the usual party/party basis.
In Haddon v Forsyth (No.2) (2011) NSW SC 693 Simpson J held that for failure to accept a settlement offer to be unreasonable more is required than that the plaintiff is unsuccessful in the proceedings.
The defendant's claim for solicitor and client costs is not based solely on the plaintiff’s failure to accept the settlement offer but raises the plaintiff's general conduct in the action.
Without descending to the detail of counsel' s careful argument, I do not accept the submission in paragraph 31.1 of the written submission under the heading "Unreasonable Failure by the Plaintiff to Accept Offers Pursuant to Section 38 (2) of the Defamation Act." Prior to hearing the evidence there was a proper basis for the plaintiff to expect that she had reasonable prospects of success with respect to the oral statement.
In paragraph 31 an argument is set out under the heading "The Plaintiff Made No Genuine Attempt to Resolve the Dispute." That submission is contentious. Having regard to the view which I have formed it is unnecessary for me to resolve the dispute. In any event this complaint would not be determinative of the application for solicitor and client costs.
Paragraph 31.3 sets out further argument under the heading "Wilful Disregard of Known Facts and Pressing Groundless Contentions". While there is merit in some of the points which have been made, they are not all relevant to the claim for solicitor and client costs and this complaint does not persuade me to exercise my discretion to order solicitor and client costs.
Paragraph 31.4 sets out an argument under the heading "Ought to Have Known No Prospects of Success". I have already dealt with this question. The issues of qualified privilege and malice were quite properly taken to trial.
Taking all of the matters raised by the defendant into account I am not persuaded that the court should exercise its common law discretion in respect of costs by departing from the usual party-party basis.
I should mention that my reasoning is based on the first cause of action, the oral defamation of 7 August 2012. That reasoning does not apply to the e-mail of 8 August. Counsel never distinguished between the separate causes of action. If the e-mail was the only cause of action I would not have hesitated to award indemnity costs, but that was not the case. The question is whether the plaintiff acted unreasonably in not accepting the offer. There was one offer relating to both causes of action. There was no offer in respect of the e-mail alone which the plaintiff could have accepted.
There will be an order that the plaintiff pay the defendant's costs on a party-party basis.