DEFENDANT ASKS FOR INDEMNITY COSTS AGAINST THE PLAINTIFF AFTER THE LATTER REJECTED TWO SETTLEMENT OFFERS

Gatto v Australian Broadcasting Corporation & Ors (Costs Ruling) [2021] VSC 223 (29 April 2021)

This is an application for cost by the defendant alleging that the plaintiff was unreasonable to reject two settlement offers which entitle the defendant indemnity costs.

Facts:

In a judgment delivered on 26 February 2021, the court dismissed the plaintiff’s claim that he was defamed by an article published by the defendants. The defendants made two offers to settle the proceeding, which were rejected by the plaintiff.  The defendants submit a special order for costs should be made. The plaintiff submits the defendants have not established that his failure to accept the offers was unreasonable, and that indemnity costs should not be awarded.

The defendants contend that both offers were made approaching the eve of trial when the issues in dispute were well defined and the parties’ respective prospects ought to have been understood.  The plaintiff’s position in the litigation at the time of the offers was attended by significant risk because of the extremely high level at which the pleaded meanings were pitched, and the strong prima facie fair reporting defenses.  Notwithstanding these inherent weaknesses, the defendants’ offers afforded the plaintiff an opportunity to obtain a degree of vindication for his reputation by amendment of the article and publication of a separate clarification, which was relief the court was unable to grant.  The offers also provided the plaintiff with an opportunity to avoid the costs of a trial. Neither of the offers was an offer to capitulate.  Both offers were reasonable and the plaintiff’s failure to accept those offers was unreasonable.  There are no reasons why the interests of justice would not be served by an order that the plaintiff pay the defendant’s costs of the proceeding on an indemnity basis.

Plaintiff, on the other hand, submits that offers were not made at an early stage of the proceeding when an amendment of the article and publication of a clarification by the defendants may have satisfactorily ameliorated the hurt and distress the plaintiff claimed he suffered by virtue of the article. The parties and their representatives are seasoned litigants, and an early offer (before substantial costs had been incurred) may have been persuasive.  The pleadings give a sufficiently clear insight as to the respective merits of the parties’ claims and position.  This was not a case where the offers could only be made close to trial because the proceedings were complex and the issues in dispute were only well defined at that stage.  Notwithstanding that he was unsuccessful in his claim, the court should not accept the suggestion that the plaintiff’s case was weak, hopeless and/or should not have been prosecuted.  In the circumstances, the settlement offers were well capable of being characterized as offers to capitulate.

Issue: Is the defendant entitled to indemnity costs for failure of the plaintiff to reject the offers?

Law:

• Defamation Act 2005 S.40

Analysis:

The court accepts the plaintiff’s submission that his case should not be characterized as hopeless.  While the defendants successfully argued that the pleaded defamatory meanings were not made out, they accepted the very serious allegations against the plaintiff reported in the article were defamatory, but not at the level pleaded.  The defendants conceded the article meant that the plaintiff was suspected of or had been investigated for the conduct reported in the article, but argued successfully that the article did not mean the plaintiff  was guilty of that conduct.  The defendants did not make a strike-out application at any stage on the basis that the article was not capable of conveying the pleaded meanings. Further, the fair report defenses were not straightforward.  While the article did report on two court proceedings, it contained other information which linked and commented upon the matters reported from the proceedings.  At issue was whether a fair report defence was established if a pleaded meaning was made out by inference from the interlinking information that was reported in the article, and whether there was impermissible intermingling.

The defendants’ offer to amend the article, and to publish a statement on its ‘corrections and clarifications’ website page, was made over 16 months after the article was published and more than 12 months after the proceeding was issued.  The value of that offer was greatly reduced by the length of time which had elapsed since the article was published.  The offer was little more than an invitation to capitulate.

Conclusion:

Taking into account all of the circumstances, in particular the stage of the proceeding at which the offers were received, the extent of the compromise offered, and the prospects of success in the proceeding, the court concludes that the offers did not involve a genuine compromise, and that it was not unreasonable for the plaintiff to have rejected them.

#CostsOrder