Channel Seven Sydney Pty Ltd v Mahommed (No 2) [2011] NSWCA 6 (11 February 2011)

Last Updated: 31 October 2011

This decision has been amended. Please see the end of the decision for a list of the amendments.

Court of Appeal New South Wales

Case Title:	Channel Seven Sydney Pty Ltd v Mahommed (No 2)
Medium Neutral Citation:	[2011] NSWCA 6
Hearing Date(s):	On the papers
Decision Date:	11 February 2011
Jurisdiction:
Before:	Spigelman CJ at 1 Beazley JA at 2 McColl JA at 3 McClellan CJ at CL at 74 Bergin CJ in Eq at 79
Decision:	Order the appellant to pay 90 per cent of the respondent's costs of the appeal and of and incidental to the proceedings at first instance including the s 7A hearings, as agreed or assessed. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	COSTS - meaning of "settlement offer" - whether offer to settle genuine offer to settle proceedings - reasonableness of offer as regards prospects of success - time offer made - relevance of ultimate success - s 48A Defamation Act 1974 (NSW) COSTS - offer of compromise - interest accruing after offer of compromise made not to be taken account in determining whether offeror obtained judgment no less favourable - Uniform Civil Procedure Rules 2005, 42.14, 42.16 COSTS - application of general rule - Uniform Civil Procedure Rules 42.1 - discretion to award - multiple issues in proceedings - costs orders to reflect degree of success of parties WORDS AND PHRASES - "settlement offer"
Legislation Cited:	Civil Procedure Act 2005 (NSW) Defamation Act 2005 (NSW) Defamation Amendment Act 2002 (NSW) Interpretation Act 1987 (NSW). Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	AWB Ltd v Cole (No 6) [2006] FCA 1274; (2006) 235 ALR 307 Channel Seven Sydney Pty Limited v Mahommed [2008] HCATrans 270. Channel Seven Sydney Pty Ltd v Mahommed [2010] NSWCA 335 Channel Seven Sydney Pty Ltd v Mohammed [2008] NSWCA 21; (2008) 70 NSWLR 669 Davis v Nationwide News Pty Ltd [2008] NSWSC 946 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Mahommed v Channel Seven Sydney Pty Ltd [2006] NSWCA 213 Mahommed v Channel Seven Sydney Pty Ltd [2009] NSWSC 631 Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16
Texts Cited:	Defamation Amendment Bill, Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard); 12 November 2002, p 6558
Category:	Consequential orders
Parties:	Channel Seven Sydney Pty Ltd (Appellant) Peter Mahommed (Respondent)
Representation
- Counsel:	Counsel: KP Smark SC (Appellant) CA Evatt with RKM Rasmussen and K Rollinson (Respondent)
- Solicitors:	Solicitors: Mallesons Stephen Jaques (Appellant) Michael Corrigan Lawyer (Respondent)
File number(s):	CA 2009/40300
Decision Under Appeal
- Court / Tribunal:	Supreme Court
- Before:	Kirby J
- Date of Decision:	09 July 2009
- Citation:	Peter Mahommed v Channel Seven Sydney Pty Ltd
- Court File Number(s)	SC 2005/20064
Publication Restriction:

JUDGMENT

1. SPIGELMAN CJ: I agree with McColl JA

2. BEAZLEY JA: I agree with McColl JA

3. McCOLL JA: Channel Seven Sydney Pty Ltd, the appellant, appealed from a decision of Kirby J in which his Honour determined the issues of defences and damages under the Defamation Act 1974 (NSW) (the "1974 Act") in favour of Mr Peter Mahommed, the respondent, and awarded him $240,000 damages, plus interest and costs: Mahommed v Channel Seven Sydney Pty Ltd [2009] NSWSC 631 (the "primary judgment").

4. Judgment allowing the appeal in part was delivered by this Court on 7 December 2010: Channel Seven Sydney Pty Ltd v Mahommed [2010] NSWCA 335 (the "appeal judgment"). The Court set aside the verdict insofar as it related to one of the three matters complained of the subject of the proceedings. The Court ordered that in lieu of the $140,000 the primary judge had awarded in respect of that matter complained of (the "programme") there should be substituted a verdict for the respondent of $125,000. The Court directed the parties to calculate interest on the revised damages in accordance with the Court's reasons and to file short minutes of order setting out the substituted judgment within seven days. The Court also reserved the costs of the appeal and the trial and directed the parties to file and serve written submissions going to that issue.

5. Judgment for the respondent in the amount of $258,953 as at 9 July 2009 (the date of the primary judge's decision) was filed in the Court Registry on 14 December 2010.

6. Submissions on the outstanding costs issues were duly exchanged and filed. The controversy between the parties turns on the question as to the extent of the costs contemplated by the Court's order insofar as the trial is concerned, whether the respondent is entitled to the entirety of his costs of the appeal and the trial on an indemnity basis, and, if not whether those costs should be apportioned to reflect the parties' relative success in the proceedings.

7. The respondent's applications for indemnity costs proceed on the premise that notwithstanding the appellant's partial success on appeal, he is entitled to the entirety of his costs of the trial and the appeal. Insofar as the trial is concerned, he relies upon s 48A(2) of the 1974 Act. Insofar as the appeal is concerned, he relies upon an offer of compromise served after the notice of appeal was filed.

Legislative framework

8. Section 98 of the Civil Procedure Act 2005 (NSW) confers a broad discretion on the Court, subject to the rules of Court and to that Act or any other Act, to award costs, including as to the extent to which a party bears costs and whether or not they are awarded on the ordinary basis or on an indemnity basis.

9. Section 100(1) of the Civil Procedure Act provides:

"(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid ..."

10. The general rule is that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs: Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") 42.1.

11. Other statutory provisions relevant to the issues which arise are:

" Part 42 Costs

...

Division 3 Offers of compromise

42.13 Application

This Division applies to proceedings in respect of which an offer of compromise (the offer concerned) is made under rule 20.26 with respect to a plaintiff's claim (the claim concerned).

42.14 Where offer not accepted and judgment no less favourable to plaintiff

(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25)

(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim:

(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis:

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

...

42.16 Costs with respect to interest

(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31A, rule 20)

(1) If a plaintiff obtains an order or judgment for the payment of a debt or damages and:

(a) the amount payable under the order or for which judgment is given includes interest or damages in the nature of interest, or

...

then, for the purpose of determining the consequences as to costs referred to in rule 42.14, 42.15 or 42.15A, the court must disregard so much of the interest, or damages in the nature of interest, as relates to the period after the day on which the offer was made. ...."

12. Part 51 of the UCPR deals with proceedings in the Court of Appeal. Division 8, Subdivision 1 deals with offers of compromise relevantly as follows:

"51.46 Interpretation

In this Subdivision:

"initiating party' means an applicant, appellant or cross-appellant (as the case may be).

"opposite party" means a prospective respondent, respondent or cross-respondent (as the case may be).

"party" means an initiating party or opposite party.

"proceedings" in the Court includes a notice of intention to appeal that has been filed even if proceedings in the Court have not been formally commenced

51.47 Making of offers of compromise

(1) In any proceedings in the Court, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, in whole or in part, on specified terms.

(2) The provisions of Division 4 (Compromise) of Part 20 apply to any offer of compromise made under subrule (1), subject to the following modifications:

(a) a reference to a court is a reference to the Court,

(b) a reference to proceedings is a reference to proceedings in the Court,

(c) a reference to a plaintiff is a reference to an initiating party in the Court,

(d) a reference to a defendant is a reference to an opposite party in the Court,

(e) a reference to a trial is a reference to a hearing in the Court that is not limited to questions of practice or procedure,

(f) a reference to a verdict for the defendant is a reference to a judgment for the opposite party,

(g) a reference to the period for acceptance for an offer is a reference to the period until:

(i) the expiration of the time limited by the offer or otherwise 28 days, or

(ii) the time when the Court begins to give its decision or reasons for decision, whichever is the earlier, on a judgment (except an interlocutory judgment),

(h) such other modifications as are necessary."

whichever first occurs,

51.48 Application of Division 3 of Part 42 to offers of compromise made in proceedings in Court [of Appeal]

(1) If an offer of compromise is made under rule 51.47, Division 3 of Part 42 applies, subject to subrule (2), rule 51.49 and the following modifications:

(a) rule 42.13 is to be read as if it provided that the Division applies where an offer of compromise (the offer concerned) is made as provided by rule 51.47 with respect to a plaintiff's claim (the claim concerned),

(b) a reference to a court is a reference to the Court,

(c) a reference to proceedings is a reference to proceedings in the Court,

(d) in the case of appeal proceedings:

(i) a reference to the plaintiff is a reference to the party who was a plaintiff in the court below, and

(ii) a reference to the defendant is a reference to the party who was a defendant in the court below,

...

(f) a reference to a trial is a reference to a hearing in the Court that is not limited to questions of practice or procedure,

(g) a reference to a verdict for the defendant is a reference to a judgment for the defendant,

(h) such other modifications as are necessary."

13. Section 48A of the 1974 Act upon which the respondent relies provides:

" 48A Costs in proceedings for defamation

(1) In awarding costs in respect of proceedings for defamation, the court may have regard to the following matters:

(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),

(b) whether the costs in the proceedings may exceed the quantum of damages to be awarded in the proceedings,

(c) such other matters as the court considers relevant.

(2) Without limiting subsection (1), a court must (unless the interests of justice require otherwise):

(a) if proceedings for defamation 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

...

(3) In this section:

settlement offer means any genuine 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)."

14. Section 48A continues to apply to the rights the parties acquired under the 1974 Act despite the repeal of that Act by s 46, Defamation Act 2005 (NSW) (the "2005 Act"): s 30(1)(c), Interpretation Act 1987 (NSW).

15. Section 48A was introduced into the 1974 Act by the Defamation Amendment Act 2002 (NSW) (the "2002 Act"). It commenced on 17 February 2003. A similar provision now appears in s 40 of the Defamation Act 2005 (NSW), although it should be noted that s 40(3) provides:

"(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. " (emphasis added)

The emphasised words did not appear in s 48A(3).

16. The 2002 Act was intended to give effect to the principal recommendations of the report of the Attorney General's task force on defamation law reform, released in July 2002: Defamation Amendment Bill , Second Reading Speech, New South Wales, Legislative Assembly, Parliamentary Debates (Hansard); 12 November 2002, p 6558. The Hon Tony Stewart MLA, who delivered the Second Reading Speech illustrated the operation of s 48A as follows (at 6559):

"For example, a plaintiff would be at risk of an indemnity costs order if he or she were not to accept an offer of correction or apology where the offer was reasonable. A defendant would be at risk of an indemnity costs order were it not to make a settlement offer when it would have been appropriate to do so . There is understandable concern about wealthy parties, whether plaintiffs or defendants, using their deep pockets to wear down opponents of modest means to discourage them from continuing, or indeed even commencing, defamation proceedings for fear of a ruinous costs order. It is not unheard of, for example, for property developers to commence proceedings known as SLAPPs-strategic lawsuits against public participation-against individuals or community groups to silence their opposition to a proposed development.

There is also anecdotal evidence of some wealthy individuals pursuing every procedural avenue open to them despite the prospects of success being slim and despite their legal fees far outweighing any potential damages award. The object in such cases is to intimidate the defendant into settling the matter at the risk, however slight, of losing the case and being subject to a large costs order. Such tactics can have the serious consequence of either constraining free speech or allowing a reputation to be irreparably damaged. While the addition of section 48A (2) into the Act will provide greater discretion to a judge than currently exists in awarding costs in instances where parties have been recalcitrant, section 48A (1) makes it abundantly clear that in awarding costs the court may take account of the way the parties have conducted their cases.

The court will be able to take into account such matters as whether either party has used its significantly more powerful financial position in a way that hinders the effective discharge of justice and the relationship between the quantum of any costs order and the quantum of damages awarded in any particular case." (emphasis added)

Trial costs: ambit of order

17. The first issue the respondent raised as to the trial costs was whether the Court's order (appeal judgment at [282](4)) reserving the costs of the trial and ordering submissions on costs referred only to the costs of the proceedings before the primary judge or also to the costs of earlier s 7A of the 1974 Act hearings and interlocutory applications. He took inconsistent positions on this point first contending in his written submissions (para 3) that it should only apply to the former, whereas when making an application for indemnity costs (para 13) he submitted he should have his costs of the proceedings generally including the s 7A trials on that basis.

18. At the end of the primary judgment the primary judge ordered (at [350]) that:

"4 The defendant should pay the plaintiff's costs."

19. The Court's reservation of the issue of the costs "of the trial" recognised the probability that the appellant would wish to argue there should be a variation of that costs order having regard to its success on appeal.

20. However when written submissions were received, the Court's attention was drawn to that fact that when judgment was entered on 28 July 2009, the costs order read:

"5 Defendant to pay the plaintiff's costs of and incidental to the proceedings including the s 7A hearings, as agreed or assessed."

21. This order reflected, according to the respondent's written submissions, the two previous s 7A hearings, each of which went for two days, interlocutory applications and motions in the defamation list, two appeals to this Court in respect of each s 7A trial ( Mahommed v Channel Seven Sydney Pty Ltd [2006] NSWCA 213 (the "first appeal") and Channel Seven Sydney Pty Ltd v Mohammed [2008] NSWCA 21; (2008) 70 NSWLR 669 (the "second appeal") and an application for special leave to appeal to the High Court which was refused with costs: Channel Seven Sydney Pty Limited v Mahommed [2008] HCATrans 270.

22. Neither party made any particular submissions about any of those earlier proceedings: the respondent, as I have said, initially sought to carve them out of the Court's reservation of the trial costs, the appellant baldly contending that it was difficult to see why it should pay the costs of the s 7A hearings to the extent to which they involved questions of whether imputations were conveyed or subsequently justified or otherwise defended.

23. Nevertheless it is necessary to look at those earlier proceedings in some detail.

24. At the first s 7A trial, the respondent succeeded on only one imputation, then numbered 3(e) in his statement of claim, but which ultimately was described at trial and on appeal as imputation 12:

"3(e) the Plaintiff is a dishonest financial adviser and mortgage broker;"

See first appeal judgment (at [9]).

25. It is that imputation which this Court found to be substantially true: appeal judgment at [142] - [144].

26. The outcome of the first appeal was that the Court allowed the appeal, set aside the verdicts for the defendant and ordered a retrial in relation to the balance of the imputations. It set aside the costs order made in the defendant's favour. The effect of this order was that the costs of the first s 7A trial were left to abide either the second s 7A trial or the outcome of the proceedings. The Court ordered Channel Seven to pay Mr Mahommed's costs of the appeal.

27. The retrial took place before Adams J on 8 and 9 February 2007. By that time two of the twelve imputations had been amended and a further imputation added: see second appeal judgment (at [11]). The jury determined that each of the three imputations alleged with respect to the first promotion was conveyed, that each of the three imputations alleged with respect to the second promotion was conveyed and that five of the seven imputations alleged to have been conveyed with respect to the programme itself were conveyed; the remaining two of the last-mentioned imputations were not conveyed: second appeal judgment (at [2]). The defendant was unsuccessful in seeking to challenge that outcome in the second appeal.

28. However the defendant was partially successful in challenging the costs outcome of the second s 7A hearing. Adams J had ordered it to pay the plaintiff's costs on an indemnity basis and made that order immediately enforceable. That order had been made despite what Mr Evatt, the plaintiff's counsel, had accepted was the conventional costs order at the conclusion of a s 7A trial where the plaintiff had succeeded in whole or in part that costs be costs in the cause: second appeal judgment (at 81]). However Mr Evatt persuaded Adams J to depart from that practice as to 90 per cent of the plaintiff's costs. It is unnecessary at this stage to explore the reasons his Honour was so persuaded. However it is apparent from the second appeal judgment that the costs order Adams J made did not extend to the costs of the first s 7A trial.

29. In the second appeal, Giles JA (with whom Campbell JA and Mathews AJA agreed) held (at [85], [87]) that Adams J's exercise of his costs discretion had miscarried and that his costs order should be set aside and the costs of the second s 7A trial reserved. Channel Seven was ordered to pay 80 per cent of Mr Mahommed's costs.

30. The effect of the two s 7A trials was that the plaintiff had a cause of action in respect of 12 imputations, one of which (imputation 12) was established at the first s 7A hearing, the balance at the second. Consistent with the conventional costs order of such proceedings, there was no extant costs order of either of those trials and, as is apparent from the primary judge's costs order, no costs of at least some interlocutory proceedings. However the respondent had two costs orders in his favour either as to the whole or part of the costs of the first and second appeals.

31. Quite where the conventional costs order that costs of s 7A applications should be costs in the cause was established is lost in the mists which have enveloped defamation proceedings in this State since the bifurcation of defamation trials by the enactment of s 7A of the 1974 Act. Its practicality cannot be doubted. A plaintiff may persuade a jury that the matter complained of conveyed imputations which were defamatory of him or her but fail ultimately because the defendant successfully establishes a defence to the imputations. The practice recognises that the general rule that costs follow the event should be applied at that stage and, subject to the discretion to otherwise order, should mean that the party who is successful on the whole gets the costs of the proceedings: see Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 (at [6] - [7]).

32. The effect of the appeal judgment was that the appellant successfully defended the cause of action the respondent prima facie established at the first s 7A trial. The second s 7A trial did not touch upon that imputation at all. However it was at the second s 7A that the respondent persuaded the jury that imputation 11 ("The Plaintiff charged Doreen Smith outrageous fees") was conveyed by the programme and was defamatory of him. This Court held (appeal judgment at [146]) that the appellant had successfully established that by reason of the substantial truth of imputation 12, imputation 11 did not further injure the respondent's reputation.

33. Accordingly the appellant's success on the appeal reflects upon both s 7A trials at first instance. Neither party argued that any particular interlocutory application was issue-specific so that it should be carved out from any general costs order the Court may make.

34. It is the costs of all the first instance proceedings which are, effectively, the costs of the "trial" albeit that that trial was bifurcated with the imputations issues being determined by the two juries and the balance by the primary judge. There is no suggestion that Order 5 as entered on 28 July 2009 was intended to impinge upon either of the costs orders made after either the first or second s 7A appeal.

35. Save as to those costs, it is appropriate, in my view, therefore, to consider the order made in the appeal judgment as applying to all the costs referred to in order 5 as entered on 28 July 2009.

Indemnity costs applications

36. It is appropriate to deal first with the two applications for indemnity costs.

The trial: application for indemnity costs

37. On 21 May 2009 the appellant offered to settle the proceedings for $50,000 (the "May offer"). The May offer was open for acceptance until 5pm on 29 May 2009. The trial commenced on 1 June 2009. The May offer was not accepted. There was no counter offer.

38. The respondent submits that the May offer was not "a genuine offer to settle the proceedings" as defined in s 48A of the 1974 Act and he is, accordingly, entitled to indemnity costs of the first instance proceedings. He referred to the procedural history of the matter at the time the offer was made, to which I have already referred, as well as the fact that by 21 May 2009 preparation for trial had been undertaken. He submits that an offer of $50,000 at that stage was manifestly inadequate to cover the costs he had already incurred, let alone to provide him with any amount on account of damages. Accordingly he contends it could not be regarded as a "genuine offer to settle the proceedings", and so was not a "settlement offer" for the purposes of s 48A.

39. The appellant submits it is not appropriate for this Court to countenance the respondent's submissions as to the costs of trial based on s 48A(2)(a) in circumstances where no submission to like effect was made to the primary judge either before or after his Honour delivered judgment.

40. If this Court was minded to consider the respondent's submission, the appellant submits that the May offer was a genuine offer to settle the proceedings (s 48A(3)) or that the interests of justice require that an indemnity costs order ought not be made (s 48A(2)). Both submissions are made on the basis that, inasmuch as the appellant was aware the respondent had been "involved in dishonest dealings with the public", it was reasonable for it not to make a more generous offer to settle having regard to the ways in which the proceedings may have developed. The appellant also submits it was in the public interest that the issue of the respondent's dishonesty in his profession be resolved in court, and notes its success on appeal in making out the truth of imputation 12. It contends that it would not be in the interests of justice in such circumstances that it be burdened with a heavy burden of costs in relation to proceedings in which it enjoyed a measure of success.

Consideration

41. The parties did not refer the Court to any authorities on s 48A. This may be because, as McClellan CJ at CL observed in Davis v Nationwide News Pty Ltd [2008] NSWSC 946 (at [25]), s 48A has not been utilised to any significant extent. His Honour regarded s 40(2) of the 2005 Act, relevantly on all fours with s 48A(2), as:

"27 ... oblig[ing] parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party's conduct. The section contemplates that an order for costs on an indemnity basis may be made even if a party making an offer does not do better in the proceedings than the offer which he or she has made ..."

42. McClellan CJ at CL (at [31]) was of the view that when determining the genuineness of an offer which provided for an award of compensatory damages, the reasonableness of that offer might be assessed having regard to the prospects of success in the entire proceedings as assessed at the time the offer was made. That observation clearly turned on the inclusion in s 40(3) of the words I have emphasised (at [15]). However it is, also in my view, appropriate in considering an application under s 48A(2) where the question arises as to whether an offer was a "settlement offer" within the meaning of that provision, to have regard the time the offer was made. That was the basis upon which the respondent made his submissions.

43. The appellant also contended that the parties' ultimate success in the proceedings is a relevant consideration when assessing a s 48A(2) application. I would accept that submission. Section 48A clearly contemplated that the question whether a "settlement offer" had been made in terms which enabled the defendant to resist a s 48A(2) order would take into account the reasonableness of the defendant's approach. That must involve considering what has transpired at the trial after the offer presumably lapsed not merely to determine the s 48A(3) question, but also what the interests of justice require.

44. As is apparent, considerable factual controversies may arise as to whether notwithstanding a plaintiff's success, a defendant has nevertheless "unreasonably failed to make a settlement offer". How would this Court determine whether the appellant's $50,000 offer was "genuine" either at the time it was made or in the light of the outcome? The latter may have depended to a large extent on the impression the respondent made on the primary judge - a matter as to which the appellant could only surmise before the trial commenced.

45. The words in s 48A(2)(a) "if...costs are to be awarded..." contemplated, in my view, that such factual controversies should be determined prior to the ultimate costs order being made. I would, accordingly, accept the appellant's submission that the respondent should have made any s 48A(2) application at trial. The primary judge was in the best position to determine the reasonableness of the appellant's offer (and otherwise failure to make any offer) in the light of his overall perspective of the trial.
46. Further, in my view, the respondent's s 48A application is not an application contemplated by the Court's reservation of the costs of the trial and the invitation to the parties to make submissions on those issue. That invitation was intended to permit the parties to make submissions about the costs of the trial (and appeal) having regard to their relative success at both levels. It was not an invitation to open up a new factual controversy not related, for example, to the issues which arise in relation to offers of compromise.

47. I would reject the respondent's s 48A(2) application.

The appeal: indemnity costs application

48. The respondent submits he is entitled to indemnity costs in relation to the costs of the appeal because of an offer of compromise and the application of UCPR 42.14, 51.47 and 51.48.

49. Kirby J's judgment was delivered on 9 July 2009. The Notice of Appeal was filed on 25 August 2009.

50. On 24 November 2009 the respondent made the following offer of compromise to the appellant:

"The Respondent (Peter Mahommed) offers to compromise his claim against the Appellant on the following terms:

1. Verdict and Judgment for the Respondent in the sum of $270,00.

2. The Appellant to pay the Respondent's costs.

3. This offer of compromise is open for acceptance for a period of 28 days from the date of this offer.

4. This offer of compromise is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules."

51. The offer was not accepted.

52. The respondent submitted that post-judgment interest on the judgment of $258,953 from 9 July 2009 to 7 December 2010 amounted to $44,630, and that, accordingly, $303,583 was payable to him as at 7 December 2010, $33,583 more than the offer of compromise. He contends that this entitles him to indemnity costs of the appeal on and from 24 November 2009: UCPR 42.14.

53. The appellant does not dispute the respondent's calculation of interest. However it contends the respondent's application is misconceived because it does not take into account UCPR 42.16, which prohibits (for the purpose of determining the consequences as to costs referred to in, relevantly, UCPR 42.14) taking into account interest that relates to the period after the day on which the offer was made.

54. The appellant submits that the correct approach is to calculate interest accruing on the substituted verdict from 9 July 2009 to 24 November 2009 - which is an amount of $8,875.35 which, when added to judgment for $258,953 amounts to a judgment at that date of $267,828.35. That amount being less than the $270,000 offered, the provisions of the UCPR allowing for indemnity costs to be ordered do not apply.

Consideration

55. The appellant's submissions should be accepted. On the appellant's calculations (which the respondent did not contest) the effect of UCPR 42.16 is that the respondent is not entitled to include interest after the date the offer of compromise was made. Accordingly, the respondent did not obtain a judgment no less favourable to him than the terms of the offer: UCPR 42.14(1).

Costs: general rule

56. Both parties submitted that if the indemnity costs applications were unsuccessful the other should pay a proportion of its or his costs of both the trial and the appeal.

Respondent's submissions

57. In the alternative to his indemnity costs application, the respondent submitted there was no reason to interfere with the primary judge's costs order but that if the Court was so minded, any reduction should be by no more than 5 per cent.

58. Insofar as the appeal costs are concerned, the respondent argued he was entitled to all the costs of the appeal to be assessed on the ordinary basis: UCPR 42.2. He submitted the $15,000 (or 6.25 per cent) reduction the appellant achieved in the damages represents a pyrrhic victory. Alternatively, the respondent submits the Court could order the appellant to pay 95 per cent of his appeal costs.

59. The respondent also submitted that in awarding costs the Court should take into account "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)": s 48A(1)(a) of the 1974 Act. It argued the appellant's attitude to the proceedings was difficult to understand. He relied on the fact that the appellant had not pleaded any defences to the two promotional broadcasts and what he contended was a "half hearted contextual defence" to the programme. He also argued that the "programme was the result of deception by the complainant Doreen Steele..." and "the Plaintiff gave enough information to Channel Seven prior to the programmes going to air to warrant its cancellation".

Appellant's submissions

60. The appellant submitted that the respondent should pay 50 per cent of its costs of the appeal. It argued that it enjoyed considerable success on the appeal, and succeeded on the issues that took up the bulk of the argument, both written and oral. It pointed to the upholding of the truth of imputation 12 of the contextual truth defence to the imputation that the respondent "charges outrageous fees" as well as the success of its successful submission that the Court overturn Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16.
61. While it accepted that the respondent was left with a substantial verdict it argued it should only be ordered to pay 50 per cent of the respondent's costs of the trial having regard to the central role the issue of the substantial truth of the dishonesty imputation (imputation 12) played at trial.

Consideration

62. In Elite Protective Personnel Pty Ltd v Salmon (No 2) the Court said:

"6 Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which the appellant was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

7 As the appellants submit, the commencing position is that costs follow the event so that a successful party is entitled to costs. In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 (at [24]). A similar approach is adopted in the Court of Appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 (at [27]).

8 Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 (at [18]) per Hislop J (with whom Beazley JA and Tobias JJA agreed).

9 ... A separable issue for these purposes can relate to 'any disputed question of fact or law' before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James and Ors v Surf Road Nominees Pty Ltd and Ors [No 2] [2005] NSWCA 296 (at [34]) ..."

63. I would add to those observations a reference to Young J's remarks in AWB Ltd v Cole (No 6) [2006] FCA 1274; (2006) 235 ALR 307 which usefully collect a number of authorities:

"[12] AWB submitted that the circumstances do not warrant any departure from the usual approach that an applicant who achieves substantial success should have the costs of the proceedings. AWB relied in particular on the following passage from Cretazzo v Lombardi (1975) 13 SASR 4 (' Cretazzo' ) where Jacobs J said at 16:

'But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.'

...

[14] The Court's discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is unfettered, except that it must be exercised judicially. The usual order as to costs is that a successful party will have its costs paid on a party and party basis by the unsuccessful party: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232-234. As the passage from Cretazzo indicates, the mere fact that a substantially successful applicant fails on particular issues of fact or law along the way may not afford an adequate ground for depriving that applicant of some or all of its costs. On the other hand, it lies within the Court's discretion to make a costs order that reflects the degree of success attained: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234-235 [11] and 236 [15]. Depending on the circumstances, it may be an appropriate exercise of the Court's discretion to deprive a party of its costs in respect of an issue which it lost at trial: Cummings v Lewis (1993) 41 FCR 559 at 599-604; and Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 at [3]. Alternatively, the Court can order a successful party to pay some costs in respect of unsuccessful aspects of the case: Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) ATPR 40-748 at 48,136; Forster v Farquhar (1893) 1 QB 564; and Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172.

[15] In many cases, these principles can only be applied sensibly by taking a broad view of the results of the case and the issues that were litigated. An allocation of costs in a case of mixed results can rarely if ever be done with mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272 per Gummow, French and Hill JJ."

64. Subject to what I say below, the respondent has substantially succeeded at both trial and on appeal.

65. The appellant has successful defended 2 out of 12 imputations, to 6 of which it pleaded no defence, but in respect of which (as well as in relation to 4 of the imputations conveyed by the programme), it sought to mitigate any damages the respondent might be awarded by using the dishonesty findings it established at trial. The dishonesty imputation was found to be substantially true. That served to reduce the damages because the respondent had failed on that cause of action and also on that based on imputation 11 to which the appellant established its defence of contextual truth: see appeal judgment (at [146], [277] - [278]). It was substantially unsuccessful in using the dishonesty established at trial to reduce the damages to any significant degree. It also failed at trial to establish the substantial truth of contextual imputations 13 and 15-17.

66. While the appellant succeeded in having the Court overrule Rochfort , that success, in my view, should not be at the respondent's expense. Rochfort bound both parties in the conduct of the trial.

67. I have no doubt that the appellant's attempt to prove the truth of the imputation 12 and its contextual imputations 13 and 15-17 occupied the large part of the factual controversies explored over the 9-day trial. However the appellant's ultimate success on those issues had, as I have pointed out, little impact on the respondent's damages. I would not embrace the respondent's description of the appellant's success as pyrrhic, but it was modest.

68. What is also a relevant consideration, in my view, as the respondent submitted, is that the appellant never sought to defend the most serious imputations conveyed by the promotional broadcasts and the programmes namely (appeal judgment [13]):

" Promotion from 22 to 29 June 2004

1. The Plaintiff is a thief.

2. The Plaintiff ripped off $1 million from a dementia patient.

3. The Plaintiff took advantage of a dementia patient and took everything she had.

Promotion - 28 June 2004

4. The Plaintiff ripped off $1 million from a dementia patient.

5. The Plaintiff kept stealing money from a dementia patient.

6. Because of his dealings with a dementia patient the Plaintiff deserved to spend a lot of time in gaol.

Programme - 29 June 2004

7. The Plaintiff ripped off $1 million from a dementia patient.

8. The Plaintiff took advantage of a dementia patient and took everything she had.

9. The Plaintiff swindled Doreen Smith.

10. The Plaintiff is a thief."

69. The gravity of those imputations is apparent from the damages awards.

70. I would not accept the respondent's submission that the Court should take into account Ms Smith's deception or that the information he gave the appellant prior to the programme which "warrant[ed] its cancellation". The mere stating of the latter proposition, in particular, makes apparent the factual inquiry it entails. The primary judge substantially rejected both propositions when dealing with the respondent's claim for exemplary damages in all states other than New South Wales: see primary judgment at [279], [282] - [286]. In short his Honour held (at [282]) that "the difficulty in [the appellant's] investigation ... was the same as that faced by [the respondent]. Doreen Smith was a practised fraudster. She was very plausible" and (at [285]) that:

"...Mr Mahommed thereafter provided documentation, hoping to persuade Channel 7 that the accusations were false. However, the material was voluminous. It simply demonstrated that there had been a series of loans. It confirmed that Doreen Smith, a old woman, and Tony Steele, a schizophrenic and invalid pensioner, had been represented as having earned significant salaries. The documents did not capture Doreen Smith's real personality, and the representations she had made to Mr Mahommed. Nor did they answer the false suggestion made by Trevor Steele that Mr Mahommed had taken Doreen Smith's money and that of Tony Steele."

71. I would not accept the respondent's submission that he has established any conduct of the sort apparently contemplated by s 48A(1)(a).

72. Nevertheless this is a case, in my view, in which the Court should make a costs order that reflects the degree of success the appellant attained. The appellant established that the respondent had behaved dishonestly in the ways the primary judge summarised at [289]. These too were grave findings which enabled the appellant to achieve some measure of success on issues of both fact and law. It is not a case, however, in which the respondent should be ordered to pay any part of the appellant's cost.

73. Taking the broad and overall view of the outcome of the case adopted by Young J in AWB Ltd v Cole (No 6) , in my view the Court should order the appellant to pay 90 per cent of the respondent's costs of the appeal and of and incidental to the proceedings at first instance including the s 7A hearings, as agreed or assessed.

74. McCLELLAN CJ at CL: This case illustrates the difficulties faced by a plaintiff who resorts to the courts for redress for damage to his or her reputation. Although some of the procedural difficulties of the 1974 Act have been removed by the 2005 Act proceedings for defamation are complex and involve significant financial risks for the parties. In general, as in the present case, the financial cost of failure will be a greater burden for a plaintiff than a defendant. When the legislation imposes a "cap" on the possible damages the risks to plaintiffs are such that the potential costs, even if the plaintiff succeeds and an order for party and party costs is obtained, will dissuade many potential plaintiffs either from commencing proceedings or prosecuting them at trial.

75. For these reasons there is justification, as the 1974 Act provides, that costs in defamation proceedings should be approached in a different manner to costs in other civil litigation. In the present case McColl JA has concluded that this Court should not entertain an application from the respondent for indemnity costs. I agree with that conclusion and her Honour's reasons for it.

76. I have been unsure as to whether, notwithstanding the appellant's partial success, both at trial and in this Court the interests of justice required an order that the appellant pay the entirety of the respondent's costs of the trial and the appeal. The appellant succeeded in defending only 2 out of 12 imputations. The imputations on which it failed are set out by McColl JA at [66]. They are grave and both justified the bringing of proceedings and a substantial award of damages.

77. The effect of a confined award for party and party costs must impact upon the respondent's ultimate financial outcome from the proceedings. The possibility of an order for indemnity costs is provided in recognition that an order for party and party costs cannot compensate a party for their entire liability to their legal practitioners. A reduction in an order for party and party costs must further erode the value of an award of damages.

78. In the present case as McColl JA makes plain the appellant has been successful in part in reducing the damages awarded to the respondent. That success resulted in a reduction of the award of damages by $15,000 or 6.25 per cent of the original sum awarded - a very modest result. I agree with McColl JA that the appropriate order is that the appellant pay 90 per cent of the respondent's costs of the appeal and of the proceedings at first instance including the s 7A hearings.

79. BERGIN CJ in EQ: I agree with McColl JA.

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Amendments

03 Mar 2011 Correct date added. Paragraphs: 5