Gary John Humphries v Twt Limited [1993] ACTSC 52; (1993) 113 FLR 422 (13 May 1993)

SUPREME COURT OF THE ACT

GARY JOHN HUMPHRIES v. TWT LIMITED
No. SC621 of 1990
Number of pages - 6
Costs
[1993] ACTSC 52; (1993) 113 FLR 422

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles CJ(1)

CATCHWORDS

Costs - defamation - damages recovered modest - whether action should have been brought in the Magistrates Court - whether Magistrates Court scale of costs applicable - discretion to vary scale.

Costs - offer of compromise - effect of failure to accept a reasonable offer - complexity of issues.

Costs - whether senior counsel fees recoverable - amount recovered - complexity of issues.

Supreme Court Act 1933, s.23

Supreme Court Rules, O.65 r.7, O.65 r7A

John Fairfax & Sons Ltd v. Palmer (1987) 8 NSWLR 297 at 302-303

Minehan v. Clarke (1870) 9 SCR (NSW) 227

HEARING

CANBERRA, 26 March 1993 and 8 April 1993
13:5:1993

Counsel for the plaintiff: Mr. R. Refshauge

Solicitors for the plaintiff: Macphillamy Cummins and Gibson

Counsel for the defendant: Mr. P. Smith

Solicitors for the defendant: Gallens Crowley and Chamberlain

ORDER

THE COURT ORDERS THAT:
1. The defendant pay the plaintiff's costs incurred up to and including 8 December 1992 on a party and party basis and at the Supreme Court scale.

2. Each party pay his and its costs incurred after that date. Certificate for senior counsel refused.

DECISION

MILES CJ On 26 March 1993 the plaintiff obtained judgment against the defendant for $9,000 in an action for damages for libel. The legal representatives for the parties indicated that they wanted to be heard on costs. Written submissions were received. The respective claims in relation to costs are in stark contrast. Whilst the Supreme Court Act 1933, s.23, provides in the clearest terms that costs in any proceedings brought in the Court shall be in the discretion of the Court, there has developed a well-established judge-made principle, almost sacrosanct in the legal culture of Australia, that costs follow the event. A successful party, in the ordinary Supreme Court case, can expect to recover costs from an unsuccessful party, and such costs are recoverable on what is known as a party and party basis fixed at what is known as the Supreme Court scale. The cases are legion. A number of them are mentioned in the judgment of Higgins J in Evans v. John Fairfax and Sons Limited and Alexander (unreported, 23 April 1993).

2. However, for the purposes of costs this was not an ordinary Supreme Court case. First, the plaintiff recovered only $9,000, far less than the threshold amount of $25,000 required to be reached to entitle the plaintiff to recover more than the costs and disbursements recoverable if the suit had been instituted in the Magistrates Court. Secondly, the plaintiff recovered less than the $11,000 plus costs which the defendant had offered in a letter from its solicitors dated 2 December 1992.

3. The plaintiff seeks an order that the defendant pay his costs generally on a party and party basis on the Supreme Court scale, but seeks further and special orders that the defendant be liable for the cost to the plaintiff of the engagement of senior counsel at the trial and for the costs of litigating certain issues to be fixed on a solicitor and client basis.

4. On behalf of the defendant it was submitted that the proper order for costs would be as follows: an order that the defendant pay the plaintiff's costs (presumably on a party and party basis) up to and including 7 December 1992, such costs to be limited to those which would have been recoverable if the proceedings had been instituted in the Magistrates Court (the Magistrates Court scale) and a further order that the plaintiff pay the defendant's costs on and after 8 December 1992 on an indemnity basis.

5. The general provision in s.23 of the Supreme Court Act 1933 that costs are in the discretion of the Court is subject to the Rules of Court. Order 65 r.7 provides that unless otherwise ordered, costs shall be allowed on the scale set out in the Fourth Schedule (the "Supreme Court scale") However, O.65 r.7A, where relevant, provides as follows:
"Costs and disbursements where amount recovered less than

Magistrates Court limit
7A.(1) Where by or under these Rules or any order of the Court the
plaintiff in a suit to which this subrule applies is entitled to the
costs of the suit and recovers by default, judgment or otherwise an
amount (exclusive of costs) which is equal to or less than an amount
specified in Column 1 of the table below, the plaintiff shall be
entitled only to the costs and disbursements specified in Column 2 of
the table below in respect of that amount.
Column 1 Column 2
$25,000 The costs and disbursements, at the appropriate scale,
which the plaintiff would have been entitled to recover if
the suit had been instituted in the Magistrates Court.
$50,000 Two-thirds of the charges and disbursements provided for
in the Fourth Schedule or the amount specified in Order 4,
subrule 6(4), whichever is applicable. "

6. No argument was addressed to the operation of O.65 sub-r.7A(3).

7. The Court has power under sub-r.7A(4) to increase or decrease the costs payable by an unsuccessful party by ordering that they be the costs applicable to a greater or lesser amount specified in sub- r.7A(1).

8. The plaintiff, having recovered less than $25,000, falls within O.65 r.7A(1) and is, on the face of it, restricted to the recovery of costs on the Magistrates Court scale. However, it should be noted that the sub-rule does not apply until the plaintiff becomes entitled to costs by or under the Rules or any order of the Court. There is no Rule that entitles him to costs. Until the Court orders the defendant to pay the plaintiff's costs, the matter of the restriction as to the quantum of costs or the scale of costs does not come into operation.

9. Provisions such as those in O.65 r.7A are sometimes called cost penalties. The policy behind cost penalties imposed where a party has incurred additional costs by bringing the proceedings in an inappropriate court, has been well described by Kirby P. in John Fairfax and Sons Ltd v. Palmer (1987) 8 NSWLR 297 at 302-303:

"1. In the Supreme Court a higher scale of professional costs is
generally payable than in the District Court or Local Court. If
parties could, without sanction, elect to bring proceedings in a
higher court than was appropriate, there would be a natural tendency
(and an economic advantage) to chose (sic) the higher court, thereby
promoting misassignment, even of minor cases, to that court, instead
of assigning each case to the court appropriate to it.
2. It is desirable to confine the Supreme Court to the most important,
large and complex cases, appropriate to a superior court of record and
to the skills and experience of judges appointed to that court.
3. It is important to enhance and recognise, within their respective
jurisdictions, the status and functions of the District Court and
Local Courts. They have their due place in the hierarchy of courts of
the State. If they could be bypassed, without penalty, litigants
would commence proceedings in the Supreme Court and clutter the list
of that Court to the disadvantage of those important, large and
complex cases which are properly awaiting trial in the Supreme Court
list. Furthermore, the District and Local Courts would be deprived of
the variety of cases which are properly theirs, unless the policy
behind the provision in the rules is given full force and effect."

10. Prior to Palmer, the practice in New South Wales was to follow Minehan v. Clarke (1870) 9 SCR (NSW) 227 which laid down certain criteria for the granting of a certificate awarding full scale costs to a plaintiff where the amount recovered failed to reach the required threshold. In Palmer some of those criteria were put aside as inappropriate and it was held that the discretion to vary the scale of costs provided for in Rules is a specific and carefully structured discretion to be exercised with care. Matters relevant to exercising the discretion were said to include the complexity of issues of law and fact, and, in defamation cases, the legitimate desire of the plaintiff to have his or her reputation vindicated by a verdict, irrespective of the amount awarded. Matters not relevant to the exercise of the discretion were said to include the plaintiff's subjective expectation as to the quantum of the verdict and the plaintiff's social and professional standing or status. Whilst the plaintiff is not required to prove "special circumstances", a consideration of whether or not to exercise the discretion should acknowledge "the need to uphold the policy of the rules, which is to deflect smaller cases, demonstrated as such by the judgment returned, to a lower court" (at 305).

11. Although the New South Wales Rules are not identical with those in O.65, the policy is, in my view, indistinguishable and the principles enunciated in Palmer should, generally speaking, be followed in this Court.

12. However, I do not agree with the suggestion in Palmer (at 306) that the discretion to permit a higher award of costs will be exercised more readily in the plaintiff's favour in an action for defamation than would be the case in an action for debt or damages for personal injury. The reason advanced by Kirby P. for such an approach is that in defamation cases, damages are at large and the jury may be given little guidance as to its function. In the ACT, where defamation actions, like all civil suits, have been tried by Judge alone, the range of damages likely to be awarded is within the contemplation of the Court, the parties and their legal advisers. Considerations applicable to jury trials are of little relevance. Nevertheless, it may well be that defamation cases frequently do present issues of greater subtlety and complexity than, say, personal injury cases. Every individual case will depend upon its own circumstances and not whether it is labelled as falling into one category or another.

13. Moreover, in the present case, both sides recognized prior to the hearing that the permissible range of damages was well within the limits of what was recoverable in the Magistrates Court. The plaintiff made an offer in a letter of 2 November 1992 to accept $30,000, inclusive of costs, which offer remained open until 5.00 p.m. on 13 November 1992 and then lapsed without further notice. On 2 December 1992 the defendant made an offer (without prejudice save as to costs) to pay $11,000 plus costs. On 8 December 1992 the plaintiff rejected the defendant's offer and renewed his offer of 2 November 1992 (without reference to an expiry date). On the evidence adduced in the trial, it is clear that both offers are explicable, not on the basis that both or either contained an element of compromise, but by the mutual recognition that the plaintiff had a case strong on liability and weak on damages.

14. The crucial consideration is whether the case raised issues of sufficient complexity, whether of fact or law or both, to justify bringing it in the Supreme Court. At the time of the rejection by the defendant of the plaintiff's offer, the issues raised by the pleadings included: whether the publication bore the defamatory meanings alleged, whether the meanings alleged were defamatory, whether the circumstances of publication attracted qualified privilege, and, in respect of publication in New South Wales, whether the defence provided by s.13 of the Defamation Act 1974 (NSW) was available. There was also the issue of damages which extended to the aggravated and punitive damages claimed by the plaintiff as well as the matter of damage to reputation, vindication and hurt to feelings.

15. After the rejection by the plaintiff on 8 December 1992 of the defendant's offer the further issue arose of whether the plaintiff's failure to file a reply should be rectified. A reply should have been filed in order to raise the issue of malice in response to the defendant's defence of qualified privilege. Without a reply the plaintiff's solicitor should not have signed a certificate of readiness. There was some acrimonious correspondence on this subject, which does credit to neither side. The defendant's solicitors indicated that they would not consent to the filing of the reply unless there was an affidavit admitting personal fault on the part of the senior partner of the plaintiff's solicitors. At the commencement of the trial it was announced that the defendant would not rely upon the defence of qualified privilege and the issue of the reply would have become academic, but for claim and counter-claim over costs.

16. All this goes to show that, on the one hand, it could not have been reasonably contemplated at any stage that the likely damages to be recovered by the plaintiff would have been anywhere near the threshold figure of $25,000 as specified in sub-r.7A(1) let alone likely to exceed the $50,000 limit of jurisdiction in the Magistrates Court. Whether it could have been in the reasonable contemplation of either party at the commencement of proceedings that the matter could have proceeded on relatively simple issues, I do not know. The fact is that by 2 December 1992, and more so by the date of hearing, the matter had become somewhat complex. The complexity arose partly because of the plaintiff's insistence on his claim for aggravated and punitive damages (a claim later shown to be unjustified) and the defendant's raising matters by way of defence which were abandoned at the hearing. Having particular regard to the latter factor, I conclude that it was reasonable for the plaintiff to maintain the proceedings (if not to commence them) in the Supreme Court rather than the Magistrates Court.

17. The next question is about the impact on the matter of costs of the plaintiff's refusal to accept an amount greater than what he recovered. It is now recognized that it is in the interests of all litigants that it be encouraged that litigation which is capable of settlement by agreement between the parties be disposed of in that way rather than taking up time and incurring expense in an unnecessary court hearing. Hence, where a plaintiff has refused to accept a reasonable offer of settlement (made without prejudice except as to costs) an order for costs may require the plaintiff to forego costs that would otherwise be recovered. When a defendant has refused to accept a reasonable offer (made without prejudice except as to costs), the order for costs may require the defendant to pay costs increased beyond what would ordinarily be payable. These matters were considered by a Full Bench of this Court in Quirk v. Bawden (unreported, 3 December 1992). Practitioners in this Territory might find that case as instructive as those discussed in the article "Offers of Settlement - Costs Ramifications" in the ACT Law Society's Gazette for April 1993 at 78.

18. In the present case, I am satisfied that the defendant's offer of $11,000 plus costs was a reasonable offer in the light of the plaintiff's recovery of only $9,000 by way of damages. That offer was made some two months before the hearing date. If it had been accepted within a reasonable time, some costs would have been avoided. A period of no more than fourteen days was necessary for the plaintiff to have considered that offer. On the other hand, I find it difficult to assess the reasonableness or otherwise of the plaintiff's offer to accept $30,000 inclusive of costs, because that offer does not distinguish between the damages component and the costs component. Notwithstanding that difficulty, it is evident that both parties considered that the value to the plaintiff of the plaintiff's offer exceeded that of the defendant's offer. Otherwise the plaintiff would not have refused the defendant's offer and would not have renewed his own offer; conversely the defendant would have accepted the plaintiff's offer once made.

19. The point was made that in a defamation case the plaintiff has a special right to a "day in court" to enable reputation to be vindicated. I have already remarked that in the ACT the costs of defamation cases are not to be approached in exactly the same way as in New South Wales. The matter of the plaintiff's vindication is a factor to be taken into account. It is not decisive. It may be important where, as sometimes happens, the defendant is prepared to pay money to the plaintiff but only in secret and by means of an agreed settlement which does not involve a judgment or order of the Court. But the defendant's offer in this case was not limited by any such conditions. Moreover, it followed a history of partial correction and substantial apology in respect of the defendant's defamatory publication.

20. Thus, being positively convinced of the reasonableness of the defendant's offer, and not being able to come to a conclusion as to the reasonableness of the plaintiff's offer, I think that the difference between the amount of the defendant's offer and the lesser sum recovered is sufficient to deprive the plaintiff of a right to costs incurred after 8 December 1992.

21. The defendant submits, however, that, not only should the plaintiff be deprived of costs after that date, but the plaintiff should pay the defendant's costs incurred after that date. I reject that submission in the light of three factors already mentioned. They are: the actions of the defendant in unsuccessfully maintaining its denial of liability throughout the proceedings, in maintaining certain defences until the hearing date and then abandoning them, and the defendant's conduct in relation to the filing of a reply.

22. The plaintiff seeks a positive ruling that he is entitled to the costs of litigating certain issues relating to liability on a solicitor and client basis. It is true, as is submitted on the plaintiff's behalf, that he was put to needless expense in preparing to resist defences that were abandoned at the trial and it is true also that the defendant's case was always and obviously weak on liability. But these matters in themselves are not sufficient to attract costs in the plaintiff's favour at an increased level beyond the usual party and party basis. Moreover, the issue of liability did not loom large at the hearing. It was the plaintiff's own case on damages that occupied most of the time at the hearing. Whatever the plaintiff's personal view of the matter, viewed objectively, his case simply did not attract more than a modest sum and it failed altogether on aggravated and punitive damages.

23. The plaintiff makes the further claim that he was entitled to brief senior counsel for the hearing and that there should be a certificate to that effect for the guidance of the taxing officer. My previously expressed view that the case justified its continuance in the Supreme Court does not imply that it was reasonable to brief senior counsel. In view of the monetary value of the claim the case did not justify the luxury of senior counsel at the expense of the defendant. Further, there were no particular aspects of the case which can be identified as demonstrating the need for counsel of such seniority and expertise. The plaintiff should himself bear the cost of senior counsel. I would add that had it been suggested (as it was not) that no junior counsel in the Territory was of sufficient experience and expertise in defamation matters to conduct the case on behalf of the plaintiff, then I would have inclined to the view that, either junior counsel from elsewhere should have been engaged, or, if senior counsel were engaged, whether local or from elsewhere, then the difficulty and complexity of the case was not such as to justify engaging junior counsel to assist the leader. An instructing solicitor familiar with the case would have been adequate. There is no rule that senior counsel must always be accompanied by junior counsel.

24. In the light of the above, I make the following orders. The defendant is to pay the plaintiff's costs incurred up to and including 8 December 1992 on a party and party basis and at the Supreme Court scale. Each party is to pay his and its costs incurred after that date. Certificate for senior counsel refused.