Yunghanns v Colquhoun-Denvers (Costs)
[2019] VSC 853
•20 December 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2016 01170
| PETER NICHOLAS YUNGHANNS | Plaintiff |
| v | |
| NICHOLAS COLQUHOUN-DENVERS | Defendant |
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JUDGE: | T FORREST JA |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Determined on the papers |
DATE OF JUDGMENT: | 20 December 2019 |
CASE MAY BE CITED AS: | Yunghanns v Colquhoun-Denvers (Costs) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 853 |
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PRACTICE AND PROCEDURE – Costs – Claim – Plaintiff unsuccessful – Costs of claim – Counterclaim – Defendant unsuccessful – Costs of counterclaim – Apportionment of costs –Plaintiff pays defendant’s costs of claim on standard basis – Defendant pays plaintiff’s incremental costs of counterclaim on standard basis – Each party bears own costs of costs application – Defamation Act 2005 s 40(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Houghton QC with Mr B Holmes | Strongman & Crouch |
| For the Defendant | Mr B McClintock SC with Dr S Baron Levi and Ms J Alderson | Batten Sacks |
_________________________________________________________________________________
HIS HONOUR:
Introduction
This Court delivered judgment in this matter on 28 June 2019, dismissing the plaintiff’s claim and the defendant’s counterclaim.[1] I directed the parties to file and serve written submissions on costs.
[1]Yunghanns v Colquhoun-Denvers [2019] VSC 433 (‘Reasons’).
The plaintiff’s claim in this matter centred around two emails which were sent by the defendant on 3 November 2015 and 30 December 2015. The plaintiff claimed that the defendant made statements in these emails which were defamatory of him. The defendant admitted that these statements were defamatory and raised the defences of justification,[2] truth and qualified privilege.[3]
[2]Under Defamation Act 2005 (Vic) s 25 (‘Defamation Act’).
[3]Ibid s 30.
The defendant alleged in his counterclaim that he was defamed by the plaintiff in three emails published on 6 November 2015, 22 December 2015 and 30 May 2016. The plaintiff denied that any of the impugned statements carry defamatory imputations and raised the defences of justification,[4] truth and qualified privilege.[5]
[4]Ibid s 25.
[5]Ibid s 30.
Neither the claim nor counterclaim was made out. The circumstances that attached to both the claim and counterclaim are set out at length in the substantive judgment.
Submissions on costs
Plaintiff’s submissions
The plaintiff asserted that he incurred $1.4 million in legal costs,[6] and despite failing in his claim, sought an order that the defendant pay one-third of the costs of the proceeding on a standard basis.[7]
[6]Plaintiff’s Submissions on Costs [2].
[7]Ibid [7], [26].
The plaintiff submitted that the legal costs incurred by him were avoidable, had the defendant responded to the plaintiff’s invitations to negotiate a settlement on three separate occasions.[8] It was submitted that the defendant failed to make any offer or proposal to settle throughout the course of the proceedings,[9] and thus failed to make reasonable attempts to resolve the dispute as he is required to do under s 40 of the Defamation Act 2005 (Vic) (‘Defamation Act’) and s 22 of the Civil Procedure Act 2012 (Vic) (‘CPA’).
[8]Ibid [3], [19]–[22]. The plaintiff submitted that he served a Concerns Notice on the defendant and invited the defendant to make an offer prior to commencing proceedings, made a settlement offer on 6 October 2017 and made a further offer on 23 March 2018.
[9]Ibid [4].
The plaintiff claimed that the defendant’s allegedly blasé attitude was due to the fact that the Federation of International Polo (‘FIP’) bore the defendant’s legal costs,[10] which was a ‘clear example of [the] defendant misusing his superior financial position’ under sub-s 40(1) of the Defamation Act.[11]
[10]Ibid [5], [23].
[11]Ibid [6].
Further, the plaintiff submitted that he was entitled to the costs order sought because of the way in which the defendant conducted his case, including by:
(a) taking unnecessarily technical points at various interlocutory stages (such as seeking to set aside service of the Writ on grounds held to be fanciful, which caused a 6 month delay);
(b) failing to acknowledge clear deficiencies in his Defence and Counterclaim, and opposing every argument raised by the plaintiff, which led to his pleading being struck out on two separate occasions, causing a further 6 month delay;
(c) failing to comply with Court orders for discovery and engaging in significant and unexplained delay in performing his discovery obligations;
(d) making a counterclaim for strategic purposes which had little if any prospect of success.[12]
[12]Ibid [8].
These allegations are largely repeated in the plaintiff’s reply to the defendant’s written submissions, to which I now turn.
Defendant’s submissions
The defendant refuted the plaintiff’s claim that FIP covered the defendant’s legal costs. In his written submissions, the defendant maintained that FIP paid for all disbursements and around 80 per cent of the costs of the Australian lawyers.[13]
[13]Defendant’s Submissions on Costs [7].
The defendant also rejected the plaintiff’s claims that the defendant failed to act reasonably in attempting to resolve the dispute. Instead, the defendant alleged that it was the plaintiff who refused to settle the matter by, for example, refusing to attend mediation.[14]
[14]Ibid [15]–[40].
Further, the defendant described the plaintiff’s settlement offers as ways in which the plaintiff intimidated[15] the defendant and ‘wielded his wealth as a stick’,[16] and thus misused his superior financial position under sub-s 40(1) of the Defamation Act.[17]
[15]See, eg, ibid [45].
[16]Ibid [49].
[17]Ibid [71].
In relation to legal costs that were not borne by FIP or the insurer, the defendant claimed he incurred AUD $356,000 in fees for senior and junior counsel, and USD $404,000[18] in fees for overseas lawyers.[19]
[18]Approximately AUD $586, 769.60 at the time of these reasons.
[19]Defendant’s Submissions in Response on Costs, Appendix B.
The defendant sought orders that:
(a) the defendant be awarded the costs of the claim on an indemnity basis; and
(b) each party bear his own costs of the counterclaim.[20]
[20]Ibid [81].
Alternatively, the defendant sought an order that:
The defendant is awarded the costs of the claim and counterclaim on an indemnity basis with the EXCEPTION of the costs of drafting or settling the Counterclaim and the Reply to the Counterclaim as to which the parties are to bear their own costs.[21]
[21]Ibid [82].
The defendant also requested a direction under reg 63.34(4) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Supreme Court Rules’) that the Costs Court have authority to allow an increase in the fees claimed.[22] Alternatively, the defendant sought liberty to apply to the court for an order allowing an increase in the fees claimed.[23]
Relevant principles
[22]Ibid [83].
[23]Ibid.
Costs generally
The Supreme Court Act 1986 (Vic) confers a discretion on this Court to award costs.[24] The normal order for an award of costs is that a successful litigant should recover his or her costs. An unsuccessful litigant must demonstrate special circumstances to deprive a successful litigant of his or her costs.[25] In considering whether circumstances exist which justify a departure from the normal rule, the court may take into account the conduct of the parties throughout the litigation:[26]
As Dixon J noted in Smith v Gould (No 2) [2012] VSC 541 at [11]:
The successful party may be deprived of costs in myriad ways relating to the manner of conduct of the proceeding, including by contesting many issues on which it failed, by requiring the losing party to contest issues abandoned during trial, by taking unnecessarily technical points, by inappropriately prolonging the litigation, by pressing a substantially exaggerated claim, by causing the real issues to be obscured or unnecessary evidence to be led, or by facilitating the loss of the opportunity to expeditiously dispose of the case.[27]
[24]Supreme Court Act 1986 (Vic) sub-s 24(1). This discretion is exercised in accordance with Supreme Court Rules ord 63.
[25]Ritter v Godfrey [1920] 2 KB 47, 52.
[26]See CPA ss 2(b), 9(1)(b), 22.
[27]Summers v Repatriation Commission (No 2) [2015] FCAFC 64, [30] (Kenny, Murphy & Beach JJ).
In relation to costs in a defamation proceeding, s 40 of the Defamation Act provides:
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.
Under sub-s 40(1) of the Defamation Act, the court’s consideration as to costs:
… encompasses the questions which party (if any) should pay the opponent’s costs, whether different costs orders should be made by reference to different aspects of or issues in the proceeding, whether the amount of a party’s costs ordered to be paid by the opponent should be reduced and whether a costs order should be on a party/party, solicitor/client or indemnity basis. In exercising this discretion, the court may have regard, amongst other things, to the event (who has been successful overall), whether there was mixed success on separate issues, and the conduct of the parties in the litigation.[28]
[28]Duffy v Google Inc (No 3) [2016] SASC 1, [8] (citations omitted).
Counterclaim as a separate ‘event’
The principles set out above apply where a proceeding consists of a claim and a counterclaim, including a situation such as the present where both the claim and counterclaim are dismissed. In the circumstances, the claim and counterclaim are treated as separate ‘events’, and costs follow each event.[29] In Smith, Dixon J (as his Honour then was) held:
It often happens that one party is to pay the costs of the action and the opposite party is to pay the costs of the counterclaim. There may be, as in this case, judgment for the plaintiff upon the claim in the action with costs and for the defendant upon the counterclaim with costs … In such cases the rule is that, in the absence of special order, there is no apportionment of costs.[30]
Ordinarily, the costs of the counterclaim are limited to the incremental costs incurred beyond the costs of the claim.[31] Therefore, where a counterclaim is dismissed, a plaintiff is only entitled to the costs of defending the counterclaim which were additional to the costs of the claim.[32]
[29]See, eg, Smith v Madden (1946) 73 CLR 129 (‘Smith’); Dimos v Willetts (2000) 2 VR 170 (‘Dimos’); Victorian WorkCover Authority v Adventure Park Pty Ltd [2019] VSC 270 (‘Victorian WorkCover Authority’).
[30]Smith (1946) 73 CLR 129, 132–133.
[31]Ibid. See also Dimos (2000) 2 VR 170; Victorian WorkCover Authority [2019] VSC 270.
[32]Malabar RSL Sub-Branch Club Pty Ltd v RSL Custodians Pty Ltd (Costs) [2014] NSWSC 1278, [21].
Consideration
The internecine conflict that has characterised the primary litigation has been perpetuated in the arguments over costs.
Allegation has been met with counter allegation. Both parties claimed to have been the victim of financial oppression. Both said that the other party acted unreasonably in the conduct of the litigation and in the conduct of negotiation. Both parties accused the other of insincerity at the negotiation table.
In my reasons in the substantive action, I stated that I considered the plaintiff’s claim had little to do with reputational damage and was brought as part of a larger campaign to discredit FIP at every opportunity. The counterclaim, I stated, was a strategic device without much merit. I have not deviated from either position.
I have considered the sorry history of negotiation, settlement, offers, mediation and similar. I am not satisfied that I ought order the successful defendant to pay any of the plaintiff’s costs on the claim. Every offer made by the plaintiff involved a financial settlement to the plaintiff, apology, costs on a standard basis and mutual releases. The plaintiff claimed a virtue out of the defendant’s failure to respond to any of these offers, and argued that the costs were thus avoidable if the defendant had taken the trouble to respond.
This contention seems to ignore the fact that the plaintiff lost his claim. He now asks that the defendant be liable for costs for fighting and winning the cause. Put shortly, I am not satisfied that this is that ‘most exceptional case’[33] that would justify such an extraordinary course.
[33]Verna Trading Pty Ltd v New India Insurance Co Ltd [1991] 1 VR 129, 155.
I reject the proposition that the plaintiff was the victim of a bully defendant in a superior financial position. Even on this proposition, the parties bickered. On 27 November 2017, the defendant, through his solicitors, stated
‘… neither FIP nor our client faces any exposure in relation to liability or to costs …’ as a result of coverage under an insurance policy. In relying on this as an example of financial bullying, the plaintiff overlooked the fact that only a few weeks earlier, on 6 October 2017, the plaintiff himself wrote to the defendant’s solicitors, ‘[i]f I have to spend big money to prove my point, so be it. Fortunately, I am in a position where the legal costs will not trouble me … my writ won’t go away.’
It is correct that the defendant suffered various reversals in interlocutory applications.[34] These had a costs consequence to the defendant at the time and, whilst they may be cited in aid of illustrating the defendant’s approach to certain aspects of the claim, in themselves, I am not persuaded that they contribute much to overcome the presumption that costs ought follow the event.
[34]See, eg, costs ordered against the defendant on 10 April 2017, 21 August 2017, 6 December 2017 and 12 April 2018.
I am unimpressed by the plaintiff’s argument that the defendant’s conduct of the claim generally ought disentitle the defendant to an award of costs on the claim and ought result in the defendant being liable to pay one third of the plaintiff’s costs. The litigation was instigated by the plaintiff and was acrimonious from start to finish, with neither side ‘taking a backward step’. The defendant was a reluctant litigant brought into court by the plaintiff and he ought not be penalised for defending the claim. I have considered all matters raised in the plaintiff’s written submissions, including those that relate to s 40 of the Defamation Act, and ss 22 and 9(1)(b) of the CPA. I am not persuaded that I ought deviate from the generally accepted position that the successful party ought recover costs from the unsuccessful party.
Given the history of acrimony between the parties, and the defendant’s contribution to it, together with his chequered history of compliance with interlocutory obligations and his strategic counterclaim, I propose to award the costs of the action on a standard basis only.
Counterclaim
The successful party to the counterclaim is usually entitled to the costs of that counterclaim. Where a claim and a counterclaim have been dismissed, the actions will be considered ‘separate events’ and the successful party to the counterclaim will be entitled to an award of costs that are uncommon to the claim. No costs incurred by reason of the claim can be costs of the counterclaim.[35]
[35]Smith (1946) 73 CLR 129, 133–134; Dimos (2000) 2 VR 170, 179 [27].
Thus, the plaintiff, in the normal course, would be entitled to his uncommon or incremental costs to the counterclaim. Predictably, the defendant countered that the normal rule ought not apply and that each party ought bear their own costs of the counterclaim. Alternatively, the defendant claimed that he should be awarded both the costs of the claim and the counterclaim with the exception of drafting costs. These latter costs, it was argued, ought be borne by each party as their own. Again, in my view, there is no persuasive reason to depart from the normal rule. As I have said, the counterclaim had little merit and was brought for strategic purposes. I have set out my reasons for awarding standard costs only on the claim in paragraph 29 of these reasons. For similar reasons, I will order that the costs of the counterclaim be borne by the defendant on a standard basis only. The history of acrimony and the plaintiff’s contribution to it influence me in this discretionary exercise.
I will order that the incremental costs of the counterclaim be paid by the defendant to the plaintiff on a standard basis.
I will direct, pursuant to reg 63.34(4) of the Supreme Court Rules, that the Costs Court have authority to allow an increase in the fees set forth in the scale of costs in Appendix A to the Supreme Court Rules. I should add that the acrimony between the parties did not extend to counsel, all of whom discharged their duties with conspicuous competence and courtesy.
Conclusion
I will order as follows:
(a) On the claim, the plaintiff pay the defendant’s costs of that proceeding on a standard basis.
(b) On the counterclaim, the defendant pay the plaintiff’s incremental costs of that proceeding on standard basis.
(c) Each party bear its own costs of this costs application.
(d) The Costs Court, under reg 63.34(4) of the Supreme Court Rules, have authority to allow, should it think fit, an increase in the fees set out in Appendix A to the Supreme Court Rules.
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