The Hon. Peter Howard Costello and Tanya Pamela Costello v Random House Australia Pty Limited and The Hon. Anthony John Abbott and Margaret Veronica Abbott v Random House Australia Pty Limited (No. 2) [1999] ACTSC 63 (21 June 1999)

Last Updated: 6 October 1999

THE HON. PETER HOWARD COSTELLO and TANYA PAMELA COSTELLO v RANDOM HOUSE AUSTRALIA PTY LIMITED

AND

THE HON. ANTHONY JOHN ABBOTT and MARGARET VERONICA ABBOTT v RANDOM HOUSE AUSTRALIA PTY LIMITED

(NO. 2)

[1999] ACTSC 63 (21 June 1999)

CATCHWORDS

COSTS - award on indemnity basis - defamation action - exercise of judicial discretion - whether departure from usual costs order justified - whether justified by circumstances of case - whether justified by conduct of defendant -- relevance of course of negotiations between parties.

COSTS - award on indemnity basis - award to include all costs except costs unreasonably incurred or of an unreasonable amount.

Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115, considered

Hewitt v Queensland Newspapers Pty Ltd [1996] ACTSC 78 (18 July 1996), considered

Cairns v John Fairfax & Sons Ltd; Morosi v John Fairfax & Sons Ltd [1983] 2 NSWLR 708, considered

Kelson v David Syme & Co Ltd [1998] SCACT 87 (27 August 1998), applied

Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727, at 732-733, applied

Nos. SC 224 & 228 of 1997

Coram: Higgins J

Supreme Court of the ACT

Date: 21 June 1999

IN THE SUPREME COURT OF THE )

) No. SC 224 of 1997

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: THE HON. PETER HOWARD COSTELLO and TANYA PAMELA COSTELLO

Plaintiff

AND: RANDOM HOUSE AUSTRALIA PTY LIMITED

Defendant

IN THE SUPREME COURT OF THE )

) No. SC 228 of 1997

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: THE HON. ANTHONY JOHN ABBOTT and MARGARET VERONICA ABBOTT

Plaintiff

AND: RANDOM HOUSE AUSTRALIA PTY LIMITED

Defendant

ORDER

Judge: Higgins J

Date: 21 June 1999

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay the plaintiffs' costs of, and incidental to, the proceedings generally, including the costs of, and incidental to, this application.

1. Following my decision in this matter, handed down on 5 March 1999, the plaintiffs applied, on 23 April 1999, for an order for costs on an indemnity basis.

2. This Court, in Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115, affirmed a practice of, in appropriate cases, awarding costs to a party to litigation on a more favourable basis than would ordinarily be the case. The authority for doing so arises from the general discretion to award costs. No particular rule of court is necessary.

3. In that case, it was the unreasonable refusal of the defendant to negotiate settlement which was held to justify a decision to award costs on an indemnity basis.

4. Mr Tobin QC, for the plaintiffs, acknowledged that more than mere success in the litigation is required to enliven the discretion to award indemnity costs. However, he contended that the following circumstances warranted an award of costs on a more favourable than usual basis.

5. First, there was a large discrepancy, in favour of the plaintiffs, between the damages awarded to them and the sums they were prepared to accept. This indicated, it was submitted, that the plaintiffs were prepared to compromise. As opposed to the reasonableness of that conduct, the defendant was not prepared to offer a reasonable apology and damages or to accept what, with hindsight, was a reasonable compromise offered by the plaintiffs.

6. Second, in any event, the defendant had, from the outset, conducted itself unreasonably in failing to apologise and correct the defamatory anecdote sued upon, notwithstanding that it was accepted by the defendant that the anecdote was untrue. That had been the principal reason for my decision to award aggravated damages.

7. Mr Stretton, for the defendant, though conceding that the plaintiffs were entitled to a costs order on the usual party/party basis, contended that no more favourable order was warranted.

8. He submitted that the defendant had, in fact, some success in the litigation. Some alleged imputations were found not to arise. One, though it arose, was not found to be defamatory.

9. Further, the defendant was successful in opposing an award of exemplary damages. It had not raised issues at trial other than those seriously in context. There had never been a contention that the matter complained of could be justified. Rather, the issue was whether it conveyed a defamatory imputation.

10. An award of indemnity costs generally, rather than from the date of unreasonable failure to compromise, would usually require a finding that to bring or defend the claim was itself sufficiently unreasonable to warrant such an award.

11. I did make an award on such a basis in Hewitt v Queensland Newspapers Pty Ltd [1996] ACTSC 78 (18 July 1996).

12. In this case, while it is true that the defendant had been unsuccessful in having the pleaded imputations struck out, that does not imply that there is no seriously arguable case that those imputations either do not arise or are not, in the circumstances of the case, defamatory.

13. The matter of Cairns v John Fairfax & Sons Ltd; Morosi v John Fairfax & Sons Ltd [1983] 2 NSWLR 708, illustrates the point that a real issue may well arise as to whether an allegation of departure from accepted sexual moral standards will, in a particular case, be defamatory.

14. Thus, it is not the conduct of the defendant in failing to admit liability which would warrant an indemnity costs order. It may be justified on the basis that some other conduct, such as refusal of offers of compromise, would warrant that course.

15. In coming to a view on that issue I would respectfully support the opinions expressed by Crispin J in Kelson v David Syme & Co Ltd [1998] SCACT 87 (27 August 1998) at para 13:

"...an order for indemnity costs is not necessarily justified by one or more unreasonable decisions in the course of negotiations or by subsequent offers which proved to be significantly less than the damages ultimately awarded. The real question is whether the conduct of the defendant has been so unreasonable that a departure from the normal practice is warranted and an indemnity costs order justified."

16. It is, therefore, necessary to consider the course of negotiations in this case. They commence, of course, with the complaint by the plaintiffs of the untrue statement conveyed concerning them by the matter published.

17. The defendant did, relatively promptly, ascertain that the matter complained of was untrue and take steps to withdraw the first edition of the book from further dissemination.

18. I have commented already that these efforts were less than effective. However, although not "every reasonable step" (Phillips Fox to Middletons, Moore and Bevins, 25 March 1997) was taken, there was not an unreasonable refusal to take remedial action. Indeed, had the defendant followed the logic of its denial of liability, it had no legal reason to withdraw the first edition of the book. I accept, of course, that given that the story told was untrue and, to quote the author, "filthy", it was quite appropriate for it to be withdrawn from further dissemination.

19. It would, as I also commented, have been better if the defendant had publicly disavowed the story told concerning the plaintiffs and apologised for telling it.

20. On 5 August 1997, some five months after the initial publication, the defendant put its first offer to the plaintiffs to settle the litigation. It offered only an "explanatory statement", albeit to be nationally published, and costs. Liability was denied.

21. Certainly, this could not be regarded as a reasonable offer of settlement but one has to accept that, in a negotiating process, it is not unreasonable to commence with an offer extremely favourable to the party making it.

22. The response, of 2 September 1997, from Messrs Colquhoun Murphy, not unreasonably, rejected this offer and warned of punitive damages and indemnity costs. That was not, however, a counter-offer.

23. That came on 22 September 1997. It was a reasonable offer. It offered, at that relatively early stage, to accept $50,000 plus "solicitor and own client" costs. It did not refer to the "explanatory statement" offered. I would assume that the basis for costs as offered was the same as "indemnity costs". This offer was made only on behalf of Mr and Mrs Abbott.

24. On 25 September 1997, an offer came on behalf of Mr and Mrs Costello. Mrs Costello would accept $125,000 and Mr Costello $25,000. They also required an apology and indemnity costs. In aggregate, this offer was also reasonable. It is true that the apportionment, compared with my award of damages, was somewhat over-generous in the case of Mrs Costello and somewhat parsimonious in the case of Mr Costello.

25. The defendant replied to both offers on 23 October 1997, treating them as one. It offered $40,000 as opposed to the $200,000 requested, but agreed to pay legal costs. No proposal was put concerning an apology.

26. The response on behalf only of Mr and Mrs Costello, expressed in suitably indignant terms, decried the counter-offer in the following terms:

"Our clients are understandably appalled at the paltriness of your counter-offer, and we are instructed to reject it. The inconsequential sums you have offered bear absolutely no proportion to the seriousness of the "filthy" libels contained in the matter complained of, as well as the feelings of outrage our clients have suffered."

27. There was a response on behalf of Mr and Mrs Abbott on 30 October 1997. It was couched in less florid terms. It offered to accept $45,000 plus costs.

28. The defendant neither accepted that offer nor did it make any counter-offer. The plaintiffs did not re-agitate the question of settlement until 12 October 1998. They did not, however, put a counter-offer until 14 October 1998.

29. On behalf of Mr and Mrs Costello an offer was put to accept $100,000 for Mrs Costello and $20,000 for Mr Costello. There was to be an apology and costs. For Mr and Mrs Abbott a similar offer was put, but with $30,000 for Mrs Abbott and $20,000 for Mr Abbott.

30. The defendant did respond. It did not reject the offers in their entirety. Its counter- offer was to pay $20,000 to each of Mrs Abbott and Mrs Costello and $10,000 to each of Mr Abbott and Mr Costello.

31. That was not found acceptable. The offer was conditional on all four plaintiffs accepting it.

32. It is, I think, appropriate to view the reasonableness of the offers globally. Thus, although more was offered on behalf of Mrs Costello than she was awarded, the total the plaintiffs collectively were prepared to accept was considerably less than was ultimately awarded. The difference, in any event, even if Mrs Costello's case is viewed in isolation, was not so great as to suggest that the offer put on her behalf was unreasonable.

33. On the other hand, absent considerations as to liability, it is clear that the defendant's offer was unrealistically low.

34. While that circumstance invites consideration as to whether an indemnity costs order should be made, it does not suffice to justify the making of such an order.

35. The Full Court of the Federal Court expressed the underlying principle appropriately, in my respectful opinion, in Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727 at 732-3:

"In order to exercise the discretion [to award indemnity costs] judicially the following principles have been accepted by the court as applicable:

(a) the court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the court in departing from the usual course;

(b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course;

(c) while the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis."

36. If made, I accept that such an order ought to be in the form pronounced in Re Wilcox (supra) namely, (735):

"...such costs are to include all costs except in so far as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the [party in whose favour the costs order is made] will be completely indemnified by [the unsuccessful party] for [his, her or its] costs."

37. Such a departure from the usual rule might more readily be made if a defendant offers a ridiculously low sum for damages where the plaintiff's entitlement to damages is not in issue and all relevant facts are known.

38. It would be more difficult to justify a departure if liability, or facts relevant to assessment of damages, were seriously in contest. Nor does it suffice that a defendant took an unduly optimistic view of the prospects for success.

39. Nor, as Crispin J pointed out in Kelson's case (supra) at paras 21-23, does it follow that, because the defendant's conduct of the litigation had involved a failure to realise that it had no viable defence and rejection of reasonable offers of settlement from the plaintiff, an indemnity costs order should be made.

40. That case differs from the present in that in Kelson's case there had been an apology. There was no unreasonable refusal to apologise. It is similar in that there were real issues as to what, if any, defamatory imputations were conveyed by the matter complained of. There were in each case serious issues as to the assessment of damages.

41. The ultimate question is whether, notwithstanding the criticisms which may be and which were made of the defendant's conduct leading to, and in the course of, the litigation, that conduct may be characterised wholly or partially as so unreasonable as to warrant an order for indemnity costs.

42. I have to bear in mind too, that the failure of the defendant to understand and accept the defamatory character of the matter complained of and, in any event, to proffer an apology, has already attracted an award of aggravated damages.

43. Notwithstanding the careful and eloquent submissions on behalf of the plaintiffs, I find myself unpersuaded, though with some hesitation, that an unusual costs order should be made.

44. Nevertheless, I am persuaded that it was a reasonable application to pursue. There will be an order that the defendant pay the plaintiffs' costs of, and incidental to, these proceedings generally, including the costs of, and incidental to, this application.

I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Higgins.

Associate:

Date: 21 June 1999

Counsel for the Plaintiffs: Mr T K Tobin QC with Mr P W Gray

Solicitor for the Plaintiffs: Colquhoun Murphy

Counsel for the Defendant: Mr G Stretton

Solicitor for the Defendant: Phillips Fox

Date of Hearing: 23 April 1999

Date of Judgment: 21 June 1999