Nicol v Douglas
[2024] NZHC 3846
•16 December 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-230
[2024] NZHC 3846
BETWEEN ANDREW MICHAEL NICOL
Plaintiff
AND
CRAIG DOUGLAS
First Defendant
JIMMIE KEVIN McNICHOLL
Second Defendant
Hearing: On the papers Appearances:
S D Campbell for Plaintiff
G E Slevin for First Defendant
Judgment:
16 December 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
(Costs)
This judgment was delivered by me on 16 December 2024 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
NICOL v DOUGLAS [2024] NZHC 3846 [16 December 2024]
[1] The plaintiff (Mr Nicol) sued the first defendant (Mr Douglas) and second defendant (Mr McNicholl) alleging they had defamed him and sought only declarations and indemnity costs.1 Mr Nicol and Mr Douglas settled and Mr Nicol was granted a declaration that Mr Douglas had defamed him in a text message Mr Douglas sent to Rowan Robinson, asserting Mr Nicol was a serial rapist being prosecuted in a high-profile trial then before the Christchurch District Court and was almost certain to be imprisoned. Mr Douglas also provided an apology to Mr Nicol in an agreed form.2 Costs of this proceeding as between Mr Nicol and Mr Douglas are to be determined under s 24 of the Defamation Act 1992 (the Act). Mr Nicol’s claim against Mr McNicholl was discontinued.
[2] This judgment deals with the issue of costs as between Mr Nicol and Mr Douglas. Mr Nicol applies for solicitor and client costs (which I will refer to as indemnity costs) against Mr Douglas, which he says amount to $202,387.40. Mr Douglas argues that costs should lie where they fall.
[3]Broadly speaking, the primary issues that arise are:
(a)what costs did Mr Nicol incur in the proceeding;
(b)whether there are grounds to depart from the starting position under s 24 that Mr Nicol is entitled to indemnity costs; and
(c)if so, what order should be made in respect to costs.
Background
[4] I set out the facts in a judgment of 21 February 2024 (reissued 8 April 2024) which the parties agreed are accurate and appropriate.3 These are substantially reproduced in what follows, with some additional context.
1 Defamation Act 1992, s 24.
2 Nicol v Douglas [2024] NZHC 763.
3 Nicol v Douglas [2024] NZHC 250.
[5] Mr Nicol is a property developer, and is the managing director and shareholder of the Opes Partners group of companies which are concerned with property investment.
[6] Mr Douglas is a businessman and company director with several businesses, including a building company. Mr Douglas and Mr McNicholl are acquaintances and have had business dealings.
[7] Mr Robinson is a property developer and investor known to both Mr Nicol and Mr Douglas.
[8] Opes Group publishes podcasts. On 2 October 2021 and 7 February 2023, the podcasts included material Mr Nicol considered defamatory of him. This provides the background against which Mr Nicol came to suspect that Mr Douglas was spreading rumours about him as an act of spite or revenge.
[9] Mr Douglas sought a meeting with Mr Nicol to address his concerns about the podcasts, which he says Mr Nicol initially ignored. In the event, Mr Nicol did agree to a meeting on 8 March 2023 but there is a dispute as to what occurred at the meeting.
[10] However, prior to the 8 March 2023 meeting, at around 2.10 pm on 10 February 2023, Mr Douglas sent text messages to Mr Robinson. The particular text message that caused Mr Nicol to sue Mr Douglas contained the following:
I had lunch yesterday with a chap who had a very powerful job. I asked him directly about Nicole [sic] and the rape allegations. He confirmed that he is at the centre and that he is 90% facing jail time.
Andrew Nicol
…
Date rape. 88 charges by 34 woman [sic] over 3 years. 2015 – 2018 it’s the development of the mumma [sic] hooch saga
The jury trial starts Feb 23
[11] The “mumma hooch saga” concerned a high-profile prosecution of four men accused of serious sexual offending, including rape, against a large number of female complainants. The trial was scheduled to commence in the Christchurch District Court in February 2023. The Court had made orders suppressing the names of the accused.
[12] Mr Robinson was subsequently to file affidavits in this proceeding. He said variously that he was suspicious of the text and then, later, that he did not believe the allegations in it. This latter position is reflected in a text that has now been provided to the Court. In responding to Mr Douglas’s text, Mr Robinson texted back:4
The case is meant to be named suppressed isn’t it?
I am 99% sure it started last week- Judge alone, I’d be careful who your [sic] listening to and who you tell because if there [sic] wrong which I think they are it’d be some serious defamation.
… I’ve heard alot [sic] about the case from people very close and I can almost guarantee Andrew isn’t involved.
[13] Also on 10 February 2023, Mr McNicholl called Opes Group on an 0800 number and left a message on the answering machine that was listened to by several persons. It was:
Hi, yes, hi, look, I’ve just rung up to enquire, is this the same Andrew Nicol that, um, is up for rape and stupefying girls? I’m just, just not too sure. I wanted to check. Could somebody give me a call back and confirm that it is him. Thank you.
[14] Mr Nicol became aware of Mr Douglas’s text on 1 May 2023 when he had lunch with Mr Robinson and was told of it. He did not raise the matter directly with Mr Douglas, nor did his lawyers write to Mr Douglas advising of his intention to sue or seeking any sort of resolution short of litigation. He commenced this proceeding on 16 May 2023 and at the same time applied for without notice injunctions and search orders.
4 It should be noted that in my judgment dismissing the parties’ competing applications for summary judgment I held that the issues of what Mr Robinson took from Mr Douglas’s text and whether he repeated the defamatory material to others were matters for trial. Mr Robinson’s reply text was not in evidence before me at that time. See Nicol v Douglas, above n 3, at [76].
[15] The statement of claim relevantly pleaded that Mr Douglas and Mr McNicholl were friends and associates and that Mr Douglas published the defamatory statements about him “to Mr Robinson, Mr McNicholl and likely other persons”. The assertion that there had likely been wider publication of the defamatory statements by Mr Douglas was part of Mr Nicol’s case from commencement.
[16] Mr Nicol’s applications for injunctions and search orders came before Mander J, who dismissed the applications on 17 May 2023.5 I will come back to the reasons he did so later in the judgment.
[17] Mr Douglas did not become aware of the proceeding until 14 June 2023, almost a month after the without notice applications had been dismissed. On 15 June 2023, and thus immediately following service upon him, Mr Douglas sent an apology by text message to Mr Nicol as follows:
Andrew, I want to sincerely apologise for the situation we are in regarding deformation [sic], it was not, and is not, my intention and I’m [sic] am very sorry for the confusion.
[18] On 30 June 2023 Mr Douglas emailed Mr Nicol, asking to meet with him. Mr Nicol did not accept a meeting. However, on 4 July 2023 Mr Nicol sent Mr Douglas an email containing advice he had received from his lawyers as to the way the claim could be settled. The email stated that Mr Nicol had incurred legal fees of
$43,282.09 (which must relate primarily to the unsuccessful applications for injunctions/search orders) and that an appropriate resolution might be if Mr Douglas and/or Mr McNicholl:
(a)agreed to pay the legal fees; and
(b)admitted that one or both had defamed him and had judgment entered accordingly or made payment in damages.
5 Nicol v Douglas [2023] NZHC 1192.
[19] In his email Mr Nicol said he wanted the action to be “a lesson to anybody else who even thinks of defaming” and that while he would consider a settlement offer, he was seriously considering “pursuing this in full as a deterrent”.
[20] Mr Douglas emailed Mr Nicol on 9 July 2023 and again apologised. He said, “I am very motivated not to waste money on lawyers and find a solution. I’m happy to settle this now and move on with my life.”
[21]Mr Nicol responded on 9 July 2023, stating:
Well I guess we will get to the bottom of who started the rumour. If [sic] would like to tell me who said that to you, it will save the search of your phone records which is our next course of action for both [Mr McNicholl] and yourself. If not, let’s just let the judicial system play out.
[22] Both Mr Douglas and Mr McNicholl filed statements of defence and there followed several interlocutory applications.
[23] On 21 July 2023 Mr Douglas filed applications for summary judgment and/or strike out against Mr Nicol. The applications were made on the basis that, notwithstanding the serious and untrue nature of the allegations he had made, as they had been published only to Mr Robinson (and Mr Robinson neither believed them nor distributed them to other persons) Mr Nicol’s reputation had not been damaged and no substantial tort had been committed.
[24] Mr Nicol responded by first opposing Mr Douglas’s applications, and then applying for an extension of time to apply for summary judgment against Mr Douglas.
[25] In my judgment of 21 February 2024, I granted Mr Nicol an extension of time to apply for summary judgment, but all other applications of both parties were dismissed.6 My primary reason for dismissing the applications was that there were factual issues that could not be resolved concerning whether Mr Douglas had published the defamatory statements only to Mr Robinson, whether Mr Robinson had
6 See Nicol v Douglas, above n 3, at [80]–[89].
published the statements to others and whether Mr Nicol’s reputation had suffered any damage arising from the publication/s. I considered these trial issues.7
[26] On 20 October 2023 Mr Nicol applied for non-party discovery orders against One New Zealand Group Ltd (formerly Vodafone) (One New Zealand) which were granted in part. On 14 November 2023 Associate Judge Lester made an order as follows:
To avoid costs Mr Slevin consents to an order of non-party discovery in terms of paragraph 1(a)(i) of the application dated 20 November 2023. There is no order as to costs. The balance of the application is dismissed. The order is on the usual condition that Mr Nicol is to meet the reasonable costs of One NZ.
(emphasis added)
[27] The non-party discovery order required One New Zealand to make available for inspection records of phone calls, text messages and voice messages between Mr Douglas and Mr McNicholl.
[28] Also on 20 October 2023, Mr Nicol filed and served upon Mr Douglas a notice to answer interrogatories. The interrogatories included, with reference to Mr Douglas’s text to Mr Robinson:
1.What is the name of the man you had lunch with on 9 February 2023?
2.What is the man’s “very powerful job”?
[29] Mr Douglas refused to answer those interrogatories on the basis they did not relate to a matter in question between the parties and were vexatious or oppressive.
[30] On 5 March 2024 Mr Nicol filed an application for leave to appeal from my decision refusing him summary judgment. That application was never heard as the parties settled.
7 Nicol v Douglas, above n 3, at [62] and [100].
[31]The settlement included the making of consent orders as follows:
1A declaration that Mr Craig Douglas is liable to Mr Andrew Michael Nicol in defamation for making the following false statement about Mr Nicol (the Statement) in text messages to Mr Rowan Robinson:
I had lunch yesterday with a chap who had a very powerful job. I asked him directly about Nicole [sic] and the rape allegations. He confirmed that he is at the centre and that he is 90% facing jail time.
Andrew Nicol.
...
Date rape. 88 charges by 34 woman [sic] over 3 years. 2015
– 2018 it’s the development of the mumma [sic] hooch saga The Jury trial starts Feb 23.
2Costs as between the plaintiff and first defendant are reserved to be determined under section 24 of the Defamation Act 1992 with submissions and any supporting affidavits to be filed according to a timetable that counsel are to agree. If they cannot agree on a suitable timetable counsel should file memoranda and I will impose one. The issue of costs will then be determined on the papers.
The law
[32]Section 24 of the Act provides:
24 Declarations
(1)In any proceedings for defamation, the plaintiff may seek a declaration that the defendant is liable to the plaintiff in defamation.
(2)Where, in any proceedings for defamation,—
(a)the plaintiff seeks only a declaration and costs; and
(b)the court makes the declaration sought,—
the plaintiff shall be awarded solicitor and client costs against the defendant in the proceedings, unless the court orders otherwise.
[33] It appears s 24 has its origin in the Committee on Defamation’s 1977 report, Recommendations on the Law of Defamation, adopted in the Defamation Act 1992.8 The Committee recognised that although the Court has the power to make a
8 Committee on Defamation Recommendations on the Law of Defamation: Report of the Committee on Defamation (Government Printer, December 1977).
declaratory judgment, it is a discretionary matter and untried as a remedy for defamation. It considered the use of this avenue by plaintiffs who merely sought to clear their name should be encouraged, and that:
[402] To further enhance the attractiveness of this avenue for plaintiffs who are not particularly interested in damages, we consider that a successful plaintiff who is sued for a declaration but not for damages should be entitled to solicitor and client costs. ...
[403] The efficacy of this remedy is dependent to some extent on the speed with which it can be heard in court. We have already mentioned the delays in some centres before an action can be heard. It was suggested that the procedure could be streamlined or that such actions should take precedence over others.
...
[405] In spite of possible difficulties with time delays in some centres, we recommend that it should be enacted that an action for a declaration alone can be brought in defamation proceedings. It should also be enacted that in a claim for a declaration only, the plaintiff, if he succeeds, shall be awarded solicitor and client costs, unless the judge orders otherwise.
[34] The authors of Todd on Torts state that s 24 attempts to promote a situation where a plaintiff does not seek damages but only a pronouncement by the Court that a statement made about him or her was defamatory. They say, “[t]he rationale is that such a declaration on its own redresses the injury to the plaintiff’s reputation”.9
[35] Mr Slevin for Mr Douglas submits s 24 was intended as an incentive to steer plaintiffs away from the pursuit of damages against media defendants, and there is nothing to suggest that it was intended to apply to a case such as this involving a private communication to a single disbelieving recipient. I do not accept that submission as s 24 does not make a distinction between media and other defendants.
[36] Mr Campbell for Mr Nicol submits that the right to indemnity costs consequent upon the making of a declaration under s 24 is not discretionary. The authority for that submission is said to be the costs decision of Jagose J in Joyce v Hooton.10 However, Jagose J cited two cases which are authority for the proposition that the
9 Stephen Todd (ed) Todd on Torts (9th ed, Thomson Reuters, Wellington, 2023) at [15.6.4].
10 Joyce v Hooton [2020] NZHC 1299 at [2].
power to award a declaration is discretionary.11 It is plain by the use in s 24(2) of the qualifying words “unless the court orders otherwise” that the Court may, despite making a declaration in favour of a plaintiff, exercise a discretion not to award indemnity costs. The authorities also make this clear.
[37] For instance, in Smith v Dooley the Court of Appeal dealt with a submission that in the High Court Lang J had been wrong to award the successful plaintiff only 70 per cent of indemnity costs because of “pre-proceeding conduct”.12 The Court of Appeal considered that, if anything, Lang J had been generous to award the plaintiff “70 [per cent] of his actual legal costs of establishing defamations that he could very simply have avoided”.
[38] Mr Campbell also submits there is no qualification in s 24 to the effect that indemnity costs claimed consequent upon the making of a declaration must be reasonable. He argues that the scope of the right to indemnity is broad so that a successful plaintiff, not concerned with damages, may speedily be reimbursed for costs they have incurred “by way of right”. That submission goes too far.
[39] It is well established that where a party has an entitlement to indemnity costs they may be disallowed when the amounts claimed are not objectively reasonable.13 The point was made in Taharoto Motels Ltd v Ritz Enterprises Ltd where, in the context of a claim for indemnity costs pursuant to a provision in a lease, Moore J noted that the question of whether indemnity costs are reasonable involves an objective assessment of several factors but that there is:14
... “room for robust judgment as to the costs considered reasonable in all the circumstances” as it may not be feasible for the Court to make a detailed assessment of the reasonableness of the indemnity costs claimed.
11 At [2], citing Salmon v McKinnon [2007] NZCA 516 at [47] and Smith v Dooley [2013] NZCA 428 at [95].
12 Smith v Dooley, above n 11, at [127].
13 Black v ASB Bank Ltd [2012] NZCA 384 at [77].
14 Taharoto Motels Ltd v Ritz Enterprises Ltd [2022] NZHC 3553 at [20], citing Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.
[40] It has been acknowledged that the way a successful plaintiff has conducted the litigation may be considered by the Court in deciding not to award indemnity costs under s 24. In Fourth Estate Holdings (2012) Ltd v Joyce, the Court of Appeal said:15
[85] ... It seems to us that a plaintiff who has chosen to seek a declaration under s 24 rather than claiming damages should not lightly be denied any relief at all, and (as a result) exposed to an award of costs. If a claim for damages would have succeeded, it will generally be inconsistent with the policy rationale for enacting s 24 to refuse relief. If the courts are too ready to deny declaratory relief under s 24, plaintiffs will be discouraged from pursuing a s 24 claim for a declaration in place of a claim for damages. Rather, it seems to us that any concerns about the way in which the claim has been pursued by the plaintiff are more likely to be reflected in the costs award that is made following grant of a declaration.
(emphasis added)
[41] The interests of justice will not be served if plaintiffs are awarded indemnity costs that are wholly disproportionate to any damage that has been suffered to their reputation.16 Section 24 is not intended to provide a plaintiff with a blank cheque for payment of any costs incurred, nor is it intended to be used as a means to punish a defendant. This latter point appears to have been recognised in Salmon v McKinnon, where the Court of Appeal said:17
[47] Section 24 does not give a successful plaintiff an entitlement to a declaration. Such relief is discretionary. All recipients of Ms McKinnon’s email were promptly told by her that the car had not been purchased from the advertising fund. Ms McKinnon had, as well, indicated a general willingness to meet Mr Salmon’s reasonable costs. In that context, it is far from clear what additional benefit Mr Salmon would have derived from a declaration that she was liable to him in defamation.
...
[49] All of this raises the question why these proceedings were brought. The most obvious inference is that this was to “fine” Ms McKinnon the amount of the solicitor and own client costs to be incurred. In other words, the proceedings were not motivated by a desire for vindication but rather with the intention of punishing Ms McKinnon. Such inference is supported by Mr Salmon’s over-blown reaction to what at worst was no more than a very minor and quickly abated storm in a teacup and the bullying tone of the correspondence which emanated from his solicitors.
15 Fourth Estate Holdings (2012) Ltd v Joyce [2020] NZCA 479, [2021] 2 NZLR 758 at [85].
16 The Court of Appeal recently confirmed in Television New Zealand Ltd v Talley’s Group Ltd [2024] NZCA 502 that a plaintiff need only satisfy a more than minor harm threshold to have a cause of action in defamation.
17 Salmon v McKinnon, above n 11.
[42] The fact the plaintiff achieved only limited success can also be relevant. In Television New Zealand Ltd v Talley’s Group Ltd, the Court of Appeal said in relation to s 24:18
[47] Whilst there is a discretion in relation to the award of indemnity costs, as the Court indicated it would usually only be appropriate to exercise the discretion not to so award them because of the manner in which the proceedings have been conducted, or if the claim only succeeded in part. Rule 14.7 of the High Court Rules might be applied by analogy in such cases. But discretionary decisions in this respect should not be exercised to undermine the object of s 24.
[43] A case where the Court did not award indemnity costs is Cao v Stuff Ltd.19 This was an action by the plaintiffs against Stuff seeking only declarations that Stuff and its reporter were liable in defamation. The case was heard by a jury. The jury found that the plaintiffs had been defamed in one respect, but not in others, and a declaration was made in the plaintiffs’ favour.
[44] Stuff applied for costs on the basis that before trial they made without prejudice except as to costs offers which had not been accepted. Johnstone J recognised s 24(2) established a presumption that successful plaintiffs who sought only a declaration of liability and costs should be awarded indemnity costs, which was intended “to support non-monetary vindication of reputation by providing that unsuccessful defendants to such claims should ordinarily face a severe costs consequence”.20 The Judge also noted that the presumption applies only to successful plaintiffs, and plaintiffs should not be encouraged to bring unmeritorious claims.21 Johnstone J said, “[r]ather than placing an unacceptable chill upon such claims, the disciplinary effect of unsuccessful plaintiffs being exposed to a potential costs award continues in my view to be important”.22
[45] Johnstone J held the plaintiffs achieved only the barest of success in their claims to have been defamed, and had one of the offers of settlement made been accepted it would have been more beneficial to the plaintiffs than the judgment they
18 Television New Zealand Ltd v Talley’s Group Ltd, above n 16.
19 Cao v Stuff Ltd [2024] NZHC 1367.
20 At [8].
21 At [9].
22 At [9].
obtained. He then applied r 14.11(3)(b) of the High Court Rules 2016 and held that Stuff and the reporter were entitled to scale costs on steps taken in the proceeding after the offer was made.
[46] In the present context then, in assessing whether to award indemnity costs to Mr Nicol I am entitled to take into account factors such as the manner in which Mr Nicol conducted the claim, whether the work undertaken was reasonably necessary and the degree of success he enjoyed on the applications he pursued and in the proceeding as a whole.
Submissions
Mr Nicol
[47] Mr Nicol says the indemnity costs he seeks are, in any event, reasonable.23 He says factors relevant to the amount claimed include that senior counsel was engaged for much of the proceeding; steps were taken under urgency given the seriousness of the defamation in question; and the irrevocable harm that could and likely would have been occasioned to his reputation and businesses had the steps not been taken. Mr Nicol says his reputation is critical to the success of his business and of great importance to him personally.
[48] He also submits that the case raised an unsettled question of law as the New Zealand Courts had not definitively ruled on whether what are respectively referred to as the Jameel or Thornton approaches were to be applied where a defendant alleges a defence of limited publication, justifying skilled and experienced counsel to be engaged.24
[49] Mr Nicol argues Mr Douglas was uncooperative in the proceeding. He says Mr Douglas was given an opportunity to settle on terms that were not less favourable than were finally awarded, but declined to do so. He also submits Mr Douglas claimed
23 Taharoto Motels Ltd v Ritz Enterprises Ltd, above n 14, at [19].
24 Jameel (Yoursef) v Dow Jones & Co Inc [2005] EWCA Civ 75; and Thornton v Telegraph Media Group Ltd [2010] EWHC 1414, [2011] 1 WLR 1985 (QB).
to have no association with Mr McNicholl, but upon obtaining non-party discovery it was established that was not true.
[50] Mr Nicol has produced his lawyers’ fee accounts and time records for the Court’s inspection, and contends that the rate of fees charged is similar to those charged by others in the market.
[51] Mr Nicol also deposes that Mr McNicholl took no steps in the proceeding other than filing a statement of defence and an affidavit in support of Mr Douglas, and that “[w]here I have incurred costs, it has been pursuing my claim against Mr Douglas”.
[52]Mr Nicol’s position is summarised in his counsel’s reply submissions as:
... Where a declaration alone is sought, an indemnity order ought to follow. To order otherwise would be contrary to the policy of the declaratory remedy and would let people in the defendant’s position think they can make allegations of that ilk with impunity. Mr Nicol should not be out of pocket for adopting what the law deems to be the responsible course in defamation actions.
Mr Douglas
[53] Mr Douglas submits a just outcome would be for costs to lie where they fall or, alternatively, reduced costs be awarded to Mr Nicol assessed in accordance with the High Court Rules.
[54] Mr Douglas’s position is that he agreed to capitulate to Mr Nicol’s claim on a limited basis only because of the potential liability for Mr Nicol’s costs in circumstances where he had no control over how much Mr Nicol might spend on the matter.
[55] Mr Douglas argues had Mr Nicol agreed to meet with him as asked shortly after the proceeding was issued the subsequent steps taken in the proceeding (and consequent costs incurred) could have been avoided. Mr Douglas says there is no evidence to support Mr Nicol’s submission that he offered Mr Douglas the opportunity to settle on multiple occasions at an early stage.
[56] Mr Douglas then argues that Mr Nicol obtained success on a limited basis because the declaration made relates only to the publication of a single text message to Mr Robinson and goes no further than that. He says the vindication Mr Nicol has obtained can only be relevant to the extent of publication attributable to Mr Douglas and is accordingly slight, and the indemnity costs Mr Nicol now claims from him are entirely disproportionate.
[57] Mr Douglas also submits that the declaration obtained does not reflect the basis upon which the proceeding was pursued by Mr Nicol, which was that Mr Douglas published the defamatory statements to Mr McNicholl and to persons other than Mr Robinson, for which Mr Nicol has never produced any evidence.
[58] While accepting that the allegations made in his text to Mr Robinson are of the most serious kind, Mr Douglas contends Mr Robinson did not believe them and thought no less of Mr Nicol. He says had damages been sought they may not have been awarded.
[59] Mr Douglas also argues that Mr Nicol has acted oppressively in the steps taken in the proceeding and has pursued the claim for an improper purpose, being to identify the person who was the source of the rumours about him. In this regard, Mr Douglas says no notice was given to him of Mr Nicol’s intention to issue the proceeding and no reason existed for Mr Nicol to seek injunctions or search orders on a without notice basis.
[60] Mr Douglas then argues that an award of indemnity costs requires that they be reasonably incurred, and he should not have to pay costs in respect of the several unsuccessful interlocutory applications brought by Mr Nicol or in respect of the non- party discovery application when the Court determined there were to be no costs awarded on that application. He says the indemnity costs claimed by Mr Nicol are more than five times 2B scale costs, which is punitive. He argues that it cannot have been the intention of s 24 to impose such costs.
My analysis
Quantum of costs claimed
[61] Mr Nicol’s counsel advises, and Mr Nicol deposes, that costs of $202,387.40 were incurred in this proceeding. Those costs comprise Mr Nicol’s legal fees and disbursements, along with an amount Mr Nicol was required to pay to One New Zealand for responding to the order for non-party discovery.
[62] Mr Nicol’s lawyers’ fee accounts for the period 1 May 2023 to 30 April 2024 have been produced and total $173,600.51 (including GST and disbursements).25 Adding to that sum the $5,074.52 which Mr Nicol paid to One New Zealand makes a total of all costs of $178,675.03. There is no explanation for the discrepancy between the amount claimed and the amount for which evidence has been provided.
Are there grounds to depart from indemnity costs?
[63] Mr Nicol was successful in obtaining a declaration that Mr Douglas defamed him, and under s 24 the starting point is that he is entitled to indemnity costs unless the Court orders otherwise. A decision to order otherwise is not to be made lightly and must be exercised on a principled basis.26
[64] While Mr Douglas says he was forced to settle because he could not afford the risk of liability for costs following a trial, I agree with the submission made for Mr Nicol that it is not now open to Mr Douglas to ask the Court to regard the declaration as a mere tactical retreat. That said, Mr Nicol must also accept the declaration as a pronouncement as to the manner and extent to which he was defamed.
[65] Mr Nicol submits he has achieved wholesale success and his stated goal of achieving vindication has succeeded. I do not agree with Mr Nicol’s assessment of what amounts to wholesale success. The declaration relates to one text message sent by Mr Douglas to Mr Robinson. Importantly, there has been no acknowledgment or
25 These include senior counsel’s fees as disbursements.
26 Dooley v Smith [2012] NZHC 1553 at [6]–[7].
finding that Mr Douglas made defamatory statements to anyone other than Mr Robinson, or that he acted in concert with Mr McNicholl to defame Mr Nicol.
[66] I also do not accept the submission made that Mr Nicol’s fear of wider publication “was later vindicated”. To the contrary, the declaration reflects the position that Mr Douglas maintained throughout, that he published the defamatory material to Mr Robinson and to no other person. In circumstances where upon receipt of the proceeding Mr Douglas immediately acknowledged his responsibility for the defamatory statements, apologised and sought a resolution, the vindication Mr Nicol obtained from the proceeding was tangible but slight.
[67] It is significant in my view that Mr Nicol did not put Mr Douglas on notice of his intention to bring his claim as would normally be expected. The failure to do so may have costs consequences. In Morrell v World Solar Ltd, Associate Judge Osborne said:27
[22] Except sometimes in situations of clear urgency, the Court expects plaintiffs and applicants, before issuing proceedings or making applications, to explore resolution informally. In relation to general proceedings, this is frequently done through a “letter before action”. A failure to pursue resolution through either a non-litigious approach or through a less expensive course of proceeding may attract the Court’s invocation of r 14.7. The Australian commentary in Professor Dal Pont’s Law of Costs, in relation to the disallowance of costs in certain cases, includes the following:
8.18The court’s general costs discretion dictates that, where in accordance with its proper exercise, a court deems that costs should be disallowed to a litigant, even if he or she is ultimately successful, it may make an order to this effect. What costs should be disallowed depend on the circumstances of each case. For instance, Courts have disallowed costs incurred:
…
·that might fairly have been rendered unnecessary by a little forethought (see, for example, Re Commissioners for Railways (1902) 18 WN (NSW) 296 at 297 per A H Simpson CJ);
·as a result of an unnecessary application (see, for example, Re Ewer (1903) 4 SR (NSW) 240);
27 Morrell v World Solar Ltd [2018] NZHC 518, citing G E Dal Pont Law of Costs (3rd ed, LexisNexis, Butterworths, Australia, 2013) at [8.18].
·where a less expensive course of effecting the same outcome was readily available (see, for example, Dore v Gormley (1962) 9 LGRA 187 at 190 per Gibbs J (SC(Qld)); Commissioner of Stamp Duties v Edmunds [1989] 1 QdR 271 at 273 per Matthews J (FC));
...
[68] Here the Court can reasonably infer what Mr Douglas’s response would have been had a letter before action been sent to him. It is most likely he would have responded in the same manner as he did to receipt of the proceeding; that is to acknowledge his wrongdoing, apologise and seek a solution without either party incurring the costs of litigation.
[69] Further, a great deal of the costs Mr Nicol incurred relate to steps taken to establish wider publication of the defamatory statements. These steps were the applications for injunctions/search orders, non-party discovery and the issue of interrogatories. Mr Nicol justifies the steps taken on the basis of the immense severity of the allegations made, and what he considers was a reasonably held fear that Mr Douglas was publishing the defamatory material more widely than just one text message. That was not the view of Mander J in dismissing Mr Nicol’s applications for injunctions and search orders.28
[70] Mander J noted that the applications for injunctions and search orders were made three months after Mr Douglas and Mr McNichol had made their statements, there was no evidence of any other publication of them, and there was:29
... very little, if any, basis upon which to conclude the potential actual loss or damage to Mr Nicol would be serious if he is not able to persevere with his investigation of this matter by obtaining search orders.
[71] Mander J also held the “perceived actual loss or damage to Mr Nicol, given the very limited number of people who received the publications, appears negligible”,30 the application for search orders was not a proportionate response to the known
28 Nicol v Douglas, above n 5.
29 At [31].
30 At [30].
circumstances,31 and there was no reason why the application for the injunctions should be considered on a without notice basis.32
[72] Given the passage of time since Mr Douglas sent the text to Mr Robinson and the lack of any evidence the allegations had been repeated by Mr Robinson or that Mr Nicol’s reputation had been damaged by them, the decision to apply on a without notice basis for injunctions and search orders was heavy-handed and unnecessary. It was certainly not a case of clear urgency requiring immediate Court intervention.
[73] In relation to the application for non-party discovery, while it is correct Mr Nicol obtained some success and an order was made by consent, the terms of the orders sought were overly broad and intrusive. The Court did not grant the orders sought that the non-party telecommunications provider disclose:
(a)all available records (including metadata and contents) of communication (including phone calls, text messages, voice messages);
(i) ...
(ii) between the first respondent as determined by phone number
... (and any other phone numbers assigned to the first respondent) and all other phone numbers between the periods of 7 February 2023 to 15 February 2023.
[74] Furthermore, Associate Judge Lester determined there would be no order for costs on the application, and there have been no submissions made to me that there is a basis for that costs order to now be varied.33
[75] Mr Nicol submits Mr Douglas vigorously defended the claim and thereby created a litigation environment that was enormously more expensive than it needed to be. I do not accept that submission. Mr Nicol created the litigation environment and, with the exception of Mr Douglas’s application for summary judgment, all interlocutory applications to the Court were made by Mr Nicol. It is hard to see how it can be argued that interlocutory applications pursued by Mr Nicol which were
31 At [32]
32 At [35].
33 High Court Rules 2016, r 14.8.
unsuccessful were reasonably necessary in pursuit of the remedy he ultimately obtained.
[76] I also do not accept the submission by Mr Nicol that he gave Mr Douglas many opportunities to settle. I presume what is being referred to is Mr Nicol’s email to Mr Douglas of 4 July 2023. In fact, Mr Nicol did not make an offer to settle in that email. He did not meet with Mr Douglas, despite a request to do so, and asserted an intention to pursue the claim as a “deterrent” to others. While he said he would consider an offer, the “appropriate resolution” being advanced included payment of a large sum for his legal costs of pursing the injunctions and search orders which the Court had refused to make.
[77] The amount claimed as indemnity costs is to my mind very high, notwithstanding the involvement of senior counsel. While it is argued the litigation raised an unsettled question of law, there was in fact Court of Appeal authority on the issue in Craig v Slater,34 albeit I accepted in my earlier judgment that there was uncertainty and the law was developing.35 A review of the lawyers’ time records suggests the approach taken was that no stone would be left unturned in pursuit of this claim and there are attendances I do not accept were necessary.
[78] For example, it appears that following Mander J’s refusal to grant injunctions and search orders there were attendances preparing an appeal from that decision, which ultimately was not pursued. The amounts billed to Mr Nicol for that work were not insubstantial.
[79] Another example is that at the summary judgment hearing Mr Nicol was represented by senior counsel (with which I take no issue) but also by junior counsel. Mr Douglas should not bear the cost of junior counsel, given the nature of the application and its relative lack of complexity.
[80] I also do not accept Mr Nicol’s evidence that the costs he claims were incurred only in pursuing Mr Douglas. The proceeding was filed against both Mr Douglas and
34 Craig v Slater [2020] NZCA 305.
35 Nicol v Douglas, above n 3, at [45]. It appears there was less uncertainty than I had believed, as confirmed by the Court of Appeal in Television New Zealand Ltd v Talley’s Group Ltd, above n 16.
Mr McNicholl, injunctions and search orders were sought against them both. Mr McNicholl took some steps in the proceeding to which Mr Nicol responded, and there are specific time entries on the lawyers’ time records that relate to Mr McNicholl for which Mr Nicol has been billed. There has been no attempt to apportion such costs.
[81] Standing back and looking at all these matters, the position can be summarised as follows. I consider the decisions to commence this proceeding without notice to Mr Douglas and to apply for injunctions and search orders were unreasonable. Mr Nicol then pursued a litigation strategy intended to establish that there had been wider publication of the defamatory statements than proved to be the case. He achieved limited success and vindication in the proceeding beyond what Mr Douglas offered immediately upon being notified of the claim. The steps taken for which he incurred legal and other costs were not all reasonably necessary in pursuit of his claims, and at least some of the costs now claimed must relate to Mr McNicholl. I consider it would be unjust to award Mr Nicol indemnity costs in those circumstances.
What order should be made in respect to costs?
[82] That said, I also do not accept Mr Douglas’s submission that costs should lie where they fall. The allegations made by Mr Douglas were outrageous. Mr Nicol has been successful in obtaining the declaration and a formal apology. Further, it was open to Mr Douglas to offer the declaration that has now been made earlier but he did not do so. The step he took to seek summary judgment was an unfortunate one, causing both parties to incur significant costs that could have been avoided. Further, I also accept that Mr Douglas was less than forthright in relation to the nature of his association with Mr McNicholl, the true extent of which became clear from the non- party discovery.
[83] I also do not consider it would be correct to award Mr Nicol only scale costs, which would not reflect the intention of s 24. I prefer to adopt the approach of Lang J in Dooley v Smith and award a percentage of Mr Nicol’s actual costs.36 The assessment of what is fair and reasonable in all the circumstances is not capable of
36 Dooley v Smith, above n 26; upheld on appeal in Smith v Dooley, above n 11
calculation with mathematical precision. My best assessment is that an award of one third (33.33 per cent) of Mr Nicol’s actual costs (at [62]), rounded to $59,500 (inclusive of GST and disbursements), is just and appropriate.
Result
[84]Mr Nicol is awarded costs in the proceeding against Mr Douglas in sum of
$59,500 inclusive of GST and disbursements.
O G Paulsen Associate Judge
Solicitors:
Wynn Williams, Christchurch Davidson Legal Ltd, Christchurch
0
13
0