Megna v Marshall (No 2) [2011] NSWSC 52 (18 February 2011)

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Megna v Marshall (No 2) [2011] NSWSC 52 (18 February 2011)

Last Updated: 7 March 2011

Supreme Court New South Wales

Case Title:	Megna v Marshall (No 2)
Medium Neutral Citation:	[2011] NSWSC 52
Hearing Date(s):	27 August 2010
Decision Date:	18 February 2011
Jurisdiction:
Before:	Simpson J
Decision:	The parties to provide Short Minutes of Order to reflect the conclusions in this judgment.
Catchwords:	COSTS - successful action by plaintiffs in defamation - claim for interest and costs - offers of compromise rejected by defendants - method of calculating interest - applicable interest rate - order for costs on an ordinary basis - order for costs on an indemnity basis
Legislation Cited:	Civil Procedure Act 2005 Defamation Act 1974 Uniform Civil Procedure Rules 2005
Cases Cited:	Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55 Australian Consolidated Press v Driscoll (1988) Aust Torts Reports 80-175 Channel Seven Sydney Pty Ltd v Mahommed [2010] NSWCA 335 Greig v WIN Television NSW Pty Ltd [2009] NSWSC 877 John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 MBP (SA) Pty Ltd v Gogic [1991] HCA 3; 171 CLR 657 Megna v Marshall [2010] NSWSC 686 Tory v Megna [2007] NSWCA 13
Texts Cited:
Category:	Procedural and other rulings
Parties:	Michael Megna (First Plaintiff) Russell James Lloyd (Second Plaintiff) David John Marshall (First Defendant) Richard Martin Tory (Second Defendant)
Representation
- Counsel:	Counsel: T Molomby SC (Plaintiffs) J Hmelnitsky (First Defendant) A T S Dawson (Second Defendant)
- Solicitors:	Solicitors: Etheringtons Solicitors (Plaintiffs) Horowitz & Bilinsky (First Defendant) Osborne Bricknell Howell (Second Defendant)
File number(s):	2004/181254
Publication Restriction:

Judgment

1

On 25 June 2010 I delivered judgment in proceedings in defamation brought by Michael Megna and Russell James Lloyd against David John Marshall and Richard Martin Tory: Megna v Marshall [2010] NSWSC 686. I awarded damages to Mr Megna against each defendant in the sum of $395,000; and to Mr Lloyd against each defendant in the sum of $220,000.

2

Two supplementary questions now arise. Mr Megna and Mr Lloyd claim orders for interest on the damages awarded, and orders for costs, to be assessed on the usual basis from the commencement of the proceedings until 25 January 2006, and on an indemnity basis from 26 January 2006. By reason of the extensive and complicated history of the proceedings, determination of those claims has considerable complexity.

3	I set out a brief history of the proceedings at [4]-[21] of the judgment. Because the unusual history is relevant to the issues now to be determined, I recapitulate, so far as is necessary, the factual background.

4

The publications the subject of the claim were a series of newsletters circulated anonymously in the Drummoyne Municipality between March 1998 and September 2003 at approximately monthly intervals. In February 2004 Mr Megna sought and was granted an order of the kind made in Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55. This led to the filing of a statement of claim on 8 April 2004, naming Mr Marshall and Mr Tory as defendants, in which Messrs Megna and Lloyd asserted that, of the 28 newsletters, 17 conveyed imputations that defamed one or both of them. Pursuant to s 7A of the Defamation Act 1974 ("the Act"), a jury was empanelled to determine whether Mr Marshall and/or Mr Tory were responsible for the publication of the newsletters; whether the newsletters conveyed any or all of the imputations pleaded; and, if so, whether any or all of them defamed either or both of the plaintiffs. That trial proceeded over 15 days in August and September 2005, and resulted in findings in favour of the plaintiffs on all issues. As I understand it, whether either or both of the defendants was or were responsible for the publication of the newsletters was a hotly contested issue in those proceedings and occupied virtually the whole of the hearing time. In all, 89 defamatory imputations (54 of Mr Megna, 35 of Mr Lloyd) were pleaded and found to have been conveyed.

5	The plaintiffs applied to Studdert J for an order for the costs of those proceedings, which his Honour declined to make. He expressly reserved the question of costs. That matter remains outstanding.

6	An appeal by Mr Tory against the jury verdict was dismissed on 19 February 2007 ( Tory v Megna [2007] NSWCA 13).

7	Mr Marshall (acting for himself) and Mr Tory (through legal representatives) filed defences. Mr Marshall pleaded defences of truth (s 14 of the Act), contextual truth (s 16), comment (s 32), statutory qualified privilege (s 22) and unlikelihood of harm (s 13).

8	The plaintiffs filed offers of compromise on 25 January 2006 (expiring on 27 February 2006) and again on 16 August 2006. These offers were not accepted, and were in sums less than those eventually awarded.

9

The trial commenced on 18 February 2008. Mr Marshall represented himself; Mr Tory was represented by counsel. Mr Marshall cross-examined Mr Megna. By 25 February it was apparent that Mr Marshall needed legal representation. He sought, and I granted, a short adjournment, which, for reasons that need not be here explored, extended for almost two years. The trial resumed on 17 November 2009 and continued, without further interruption, until 3 December 2009, resulting in the verdicts I have mentioned above.

10	From the resumption of the trial, each defendant relied upon a single defence - that of qualified privilege at common law.

11	I found that 29 of the 54 defamatory imputations pleaded by Mr Megna, and 28 of the 35 imputations pleaded by Mr Lloyd were protected by qualified privilege; but that 26 of the imputations pleaded by Mr Megna and seven of those pleaded by Mr Lloyd were not.

12	It was in respect of those 33 imputations that the awards of damages were made.

13	Some of the circumstances I have here recounted are relevant to the questions of costs. Most are not relevant to the question of interest.

Interest

14

It is not in contest that each plaintiff is entitled to an order for interest on the verdict sum. What is disputed is the manner in, and the rate at, which that interest ought to be calculated. The plaintiffs claim that interest ought to be calculated at the rate of 3.5 per cent per annum. The defendants contend that the appropriate rate is 2 per cent per annum.

15

The principles upon which interest is awarded in respect of an award of damages for defamation were stated by McHugh JA in John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131, and adopted in Australian Consolidated Press v Driscoll (1988) Aust Torts Reports 80-175. (Both decisions need some modification to accommodate the later decision of the High Court in MBP (SA) Pty Ltd v Gogic [1991] HCA 3; 171 CLR 657, but that does not affect the approach in principle.) In Gogic , in respect of damages for non-economic loss (not confined to defamation cases), an interest rate of 4 per cent per annum was fixed. Interest is awarded from the date on which the damage is sustained.

16

The principle underlying the award of interest seems to be this: where damage is sustained at the time of the commission of the tort (or, presumably, other wrong), interest is calculated at a prescribed or selected rate and multiplied out over the number of years between that date and date of verdict. However, where the damage is of an accumulating, accruing or ongoing kind (for example, pain and suffering in a personal injury case), an apportionment is made so that a plaintiff does not receive interest on damages during a period when the damage had not been suffered. To date the award of interest from the date the cause of action arose, in circumstances where the injury was ongoing, would be to award interest on part of the verdict before the damage for which it was awarded was suffered.

17	In theory, that would require a stepped approach to the award of interest. That is plainly an unsuitable way to proceed, and, instead, the interest rate is adjusted.

18

Commonly, the adjustment is made by halving the rate. This implies that the damage has been assessed as accruing at a steady rate from the date when the injury was suffered. Where it can be seen that the damage has in fact accrued more recently, it would be appropriate further to reduce the interest rate; where it can be seen that the bulk of the damage was suffered nearer to the date the cause of action arose, the interest rate may be higher.

19

In the Court of Appeal both Kelly and Driscoll distinguished between that part of the award of damages for defamation that represented vindication of reputation, and that part that represented consolation for injured feelings. Implicit in these cases is the notion that damage to reputation occurs (and is complete) at the time of publication; injury to feelings accrues and accumulates with the passage of time. That would suggest a bifurcated approach to the question of interest.

20

Two circumstances that differentiate each of these cases from the present must be borne in mind. Kelly and Driscoll were both concerned with verdicts following jury trial; and each concerned a single publication. The significance of the first of these circumstances is that the jury award does not dissect the verdict into the quantum awarded for vindication of reputation, and that awarded for injured feelings. Just how much of the award of damages represented damage to reputation, and how much injury to feelings, could not be known (if, indeed, the jury treated the two separately). Here, although the calculation of damages was made by judge alone, and I did not in the judgment embark upon that break up, it is not impossible now, if it is appropriate, to do so.

21

The second circumstance (that Kelly and Driscoll involved single publications) is relevant because here, the dates of publication - ie the dates that the injury was sustained - are staggered. Theoretically, it would be possible to calculate interest from the date of each individual publication. However, that would be cumbersome and, in my opinion, overly pedantic.

22

Just why it is assumed, in a defamation case, that the entire damage to reputation occurs at the date of publication, but that injury to feelings is ongoing, is not clear to me. But that is how the Court of Appeal has applied the law relating to interest in defamation cases; and, unless there is an evidentiary basis to do otherwise, I must follow that approach. A contrary view received some support from the judgment of McColl JA in Channel Seven Sydney Pty Ltd v Mahommed [2010] NSWCA 335. The assumption is one that can be displaced in order to fit in with the known facts.

23

It may be that the approaches taken in Kelly and Driscoll have been, to some extent, overtaken. In Mahommed , McColl JA, with whom Spigelman CJ, Beazley JA, McClellan CJ at CL and Bergin CJ in Eq agreed, quoted from McClellan CJ at CL in Greig v WIN Television NSW Pty Ltd [2009] NSWSC 877 where his Honour said:

"[i]t is commonly accepted that the primary damage to a plaintiff's reputation and injury to feelings is occasioned at the time of publication and shortly thereafter",

placing emphasis on the word "primary". Her Honour went on to point out that in each case the assessment of damages must be made with reference to the facts peculiar to each case. Her Honour somewhat diluted the concept that injury to reputation occurs (and is complete) at the time of publication, but that injury to feelings accrues. Her Honour pointed out that injury to reputation may accumulate in circumstances where belief in the sting of imputations becomes more entrenched or the number of the plaintiff's acquaintances who are aware of the imputations increases. To this I would add that a relevant circumstance is the nature of the publication. Where, for example, the publication is in book form, there may be new readers over months and years. That can be contrasted with publication by electronic media which, at least until the advent of the internet, was usually transitory, in which case it may be more likely that the bulk of the damage caused to reputation was caused at or close to the time of publication. This conclusion has implications for the manner in which interest is calculated.

24	As I have said above, it is also relevant that the award of damages is that of myself, and not a jury. I am able, if appropriate, to dissect the award into that allowed for damage to reputation, and that for injury to feelings.

25

The other complicating circumstance in this case is that the publications that gave rise to the damages were sequential, from March 1998 to September 2003. No party paid any attention to the question of the commencement date of the award of interest. Clearly, it would be an injustice to the defendants to order commencement from the date of the first publication. It would, equally be an injustice to the plaintiffs to defer it until the date of the last publication. No party suggested that the interest question ought to be decided individually in relation to the damages awarded in respect of each separate publication and I do not propose to do so. However, successive publication is a relevant consideration in the overall determination.

26

There is another consequence of the sequential publication of the newsletters, relevant to the presumption that, in defamation, the damage to reputation is suffered and is complete at the time of publication. In the unusual circumstances of this case, that assumption cannot comfortably be made. That is because each publication was likely to reinforce those which preceded it, particularly where, as often happened, there was repetition of the defamatory material and/or of the defamatory imputations (for example, a recurring theme was the imputation that Mr Megna was dishonest and/or incompetent).

27	That would tell in favour of a reduced rather than higher interest rate, since the more severe damage has occurred at a later date.

28

On behalf of the plaintiffs a global solution was proposed, based upon the further (reasonable) assumption that, in respect of each plaintiff, the damages awarded were evenly divided between those awarded for vindication of reputation and those awarded for solace for hurt and distress. That would mean, on Kelly and Driscoll principles, that interest on the 50 per cent awarded for reputation vindication was at 4 per cent from date of publication (just what date should be selected was not adverted to - to achieve this would, presumably, require hypothesising a date of publication at the mid-point between March 1998 and September 2003); and interest on the 50 per cent awarded for injury to feelings at 2 per cent (from the same hypothetical date). That would produce an average interest rate of 3 per cent. Senior counsel for the plaintiff stated, in written submissions:

"10. Interest at the rate of 3 per cent has often been awarded"

but identified no case in which that had occurred. He went on to argue for an interest rate of 3 per cent, attributing the additional per cent to the length of time that has elapsed since publication. The reasoning behind that submission was not spelled out.

29	Notwithstanding some unusual features, I am satisfied that no sufficient basis has been exposed for departing from the approach taken in Gogic . Countervailing circumstances tend each way, and ought to be balanced against one another.

30	I propose to take a notional publication date for all publications of the mid-point between the dates of publication of the first and last and to award interest on the whole of the damages at 2 per cent from that date. A convenient date to begin is 1 January 2001.

31	It will be necessary for the parties to calculate the figure that results.

Costs

32	Section 98(1) of the Civil Procedure Act 2005 provides:

"98(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."

33

Ordinarily, a successful plaintiff will be entitled to an order for costs that cover the whole of the proceedings. In this case, that must include the costs of the s 7A trial. However, s 98(1)(a) and (b) make it clear that that is subject to variation in order to meet the particular circumstances of that case in question.

34

The plaintiffs are clearly entitled to an order for costs and that is not disputed. What is disputed is the extent of the costs order. Also not disputed is that, having regard to the offers of compromise, the plaintiffs' entitlement extends to an order that some part of the costs be assessed on an indemnity basis: see Pt 42 Div 3 of the Uniform Civil Procedure Rules 2005. It appears to be common ground that the commencement date for that order ought to be 26 January 2006, when the first offers of compromise were made.

35	The defendants propose a somewhat radical departure from the prima facie position. They propose orders as follows:

"(a) The defendants pay 50 per cent of the first plaintiff's costs:

(i) on a party/party basis until 25 January 2006; and

(ii) on an indemnity basis from 26 January 2006;

(b) The defendants pay 20 per cent of the second plaintiff's costs:

(i) on a party/party basis until 25 January 2006; and

(ii) on an indemnity basis from 26 January 2006;

(c) The first plaintiff pay 50 per cent of the defendants' costs;

(d) The second plaintiff pay 80 per cent of the defendants' costs."

36

The basis for this unusual proposition lies in the partial, and significant, success of the defendants in defending a good proportion of the imputations. They calculate that Mr Megna was successful in respect of approximately 50 per cent of the imputations he pleaded, and Mr Lloyd in respect of approximately 20 per cent. I pause to note that the proposal put on behalf of the defendants would involve the two plaintiffs jointly paying 130 per cent of the defendants' costs. That, presumably, was not intended.

37

The proposal is based on a false assumption. That false assumption is that costs were incurred proportionately to the outcome - that is, that, in Mr Megna's case, 50 per cent of the costs were incurred in respect of the unsuccessfully prosecuted imputations, and 50 per cent in respect of the successfully prosecution imputations, and, in Mr Lloyd's case, 80 per cent were incurred in respect of the unsuccessfully prosecuted imputations, and 20 per cent in respect of the successfully prosecution imputations.

38	That is a flagrantly false assumption.

39

It ignores the fact that the costs involve the hearing of the jury trial of the issues to be determined under s 7A of the Act. It was common ground that almost the entirety of that proceeding was concerned with the issue of publication. That would not have involved any less time had the plaintiffs sued only on those of the publications, and those imputations, on which they were ultimately successful. Accordingly, it would not be fair to deprive them of any proportion of their costs of that issue, as would be the case if the defendants' proposed orders were adopted.

40

It is also the case that a significant proportion of the post s 7A trial involved matters relevant other than merely to individual imputations or publications. For example, a good deal of evidence was given about damage to reputation and injury to feelings; this would not have been reduced by a reduction in the claims made. To reduce the costs to which the plaintiffs are entitled in proportion to their level of success only would be to proceed on the same false premise - that premise being that the time taken up by the trial, and the costs incurred, can be decided in the same proportions as the outcome. Costs incurred include such matters as filing fees that do not vary according to the level of success. And, importantly in this case, costs must have been incurred in preparing to resist defences that were later abandoned. There is no reason why these should be reduced according to the level of success.

41

So far as I can tell (and no evidence to the contrary was identified) the only additional costs incurred by reason of the prosecution of claims that were ultimately unsuccessful was that centred on establishing a legitimate public interest in conveying information on the subject matter of the various publications. Although this did have some effect in prolonging the proceedings, and perhaps in preparation, it was, in reality, to quite a small degree.

42

I have concluded that the plaintiffs are entitled to the whole of their costs of and including the s 7A trial. This preceded the offers of compromise; those costs ought be assessed on the ordinary basis. The plaintiffs ought to have an order for 90 per cent of their costs of the proceedings following the s 7A trial; those costs ought to be assessed on an indemnity basis as and from 26 January 2006. I decline to make any order that the plaintiffs pay any part of the defendants' costs.

43	The parties are to make the necessary calculations and formulate the necessary orders to reflect these conclusions.

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