Defamation Actions: What are the costs of partial success?

litigation defamation actions
25 July 2016

Two recent appeal decisions – Hardie v Herald and Weekly Times Pty Ltd (No 2) [2016] VSCA 130 by the Victorian Court of Appeal and De Poi v Advertiser-News Weekend Publishing Company Pty Ltd (No 2) [2016] SASCFC 45 by the South Australian Full Supreme Court - have provided important practical guidance on two aspects of defamation practice.

Both of these decisions provide important insights into the attitudes that Courts will adopt when required to make decisions regarding the costs consequences of:

  • a defendant who enjoys partial success at trial; and

  • an offer of settlement made prior to trial (that includes obligations beyond the payment of a settlement sum).

Partially successful defendants

In both the De Poi and Hardie decisions, publishers who achieved partial success in defending defamation proceedings brought against them failed in their bids to have costs assessed on the basis of individual issues raised at trial.

While of itself this may not appear to be a controversial in the context of ordinary commercial litigation, defamation proceedings are unique, as every “imputation” pleaded at trial forms an individual cause of action. A plaintiff might succeed on one cause of action and fail on another. For example, one imputation may be found to have arisen on a publication, but justified (proven to be true), while another may be found but not successfully defended. Especially when the first imputation is more serious than the second, publishers may (not unreasonably) consider that any award of damages should be significantly curtailed. This is because the plaintiff’s reputation (which is what defamation law seeks to protect) has not been damaged as a consequence of wrongdoing on the part of the publisher.

Not so, according to both the Full Court of the Supreme Court of South Australia in De Poi and the Victorian Court of Appeal in Hardie. Both Courts concluded that even though each publisher successfully defended two of the primary imputations pleaded by each plaintiff, the respective plaintiffs were still justified in bringing their substantive actions to obtain judgment on the imputations which were found to arise. Neither Court was interested in arguments relating to the relative severity or seriousness of the relevant imputations. Partial success, in both cases, was sufficient to found the basis for a costs order in favour of the plaintiff with respect to the entire proceedings.

Offers of settlement

In both Hardie and De Poi, the Courts also took the opportunity to provide some guidance as to what constitutes a strong offer of settlement in the context of defamation proceedings.

Another distinctive feature of the law of defamation is that offers of settlement can (by virtue of s 40 of the Defamation Act 2005 (Vic) and its counterparts in other jurisdictions) have a profound effect on the costs awards that may be made after trial.

In De Poi, the Full Court rejected an argument made by the publisher that the plaintiff should not receive costs on a solicitor-client basis (permissible under s 40) because the publisher rejected an early settlement offer made by the plaintiff. This settlement offer would have required the publisher to consent to judgment in relation to six imputations - two of which were subsequently struck out before trial,[1] and one of which was successfully defended at trial and not disturbed on appeal.

In deciding, as required under s 38 of the South Australian Act[2], whether “the offer was significantly more favourable than the judgment of the Full Court”, the Court focused on the comparison between the monetary component of the settlement offer ($40,000 plus costs) against the judgment award ($75,000 plus costs). It did this rather than focus on the holistic consequence of the publisher having accepted the settlement offer, which would have amounted to an admission that its publication made more defamatory imputations about the Plaintiff, and therefore was more damaging to the Plaintiff’s reputation than the ultimate outcome of the proceedings revealed.

In Hardie, the Court of Appeal ordered the publisher to pay the plaintiff’s costs, on an indemnity basis, for failing to accept an offer of settlement that was more favourable to the publisher than the ultimate judgment award – but only from 30 April 2015 onwards (the point at which the defendant rejected the offer). All offers made by the plaintiff before this date contained additional demands for the publisher to make written retractions and apologies.

Although not explicitly addressed by the Court, it is apparent that, had these earlier offers not contained these additional conditions, they may have become the operative offer for the purposes of determining when the defendant would be required to pay the plaintiff’s costs on an indemnity basis. This is particularly so considering the plaintiff received a greater award at trial ($250,000) than it demanded in its initial offer of settlement ($200,000, plus a set amount for costs, plus an undertaking, written retraction, and apology). Put simply, the task of comparing the value of an undertaking, retraction and/or an apology in determining whether a plaintiff had “bettered the offer” at trial would have been too precarious to undertake.

Another significant aspect of the Court of Appeal’s decision in Hardie is that it made its decision regarding indemnity costs on the basis of Calderbank principles, rather than on s 40 of the Defamation Act (Vic), which requires a positive finding that the rejection of a settlement offer was unreasonable before an order for indemnity or solicitor-client costs can be made.

Key takeaways

The immediate ramification of both the Hardie and De Poi decisions is, summarily, that parties must give particular and careful thought to formulating offers of settlement in defamation actions.

Plaintiffs may need to forego demands for apologies and retractions if their offers of settlement are to have maximum effect come judgment on costs. Similarly, defendants should be cautious about demanding confidentiality or other conditions as part of their offers of settlement.

Given that the primary goal of defamation law is to repair reputations (which can often be achieved most readily by prompt and frank apologies and retractions), and not seek monetary windfalls, the effect of both decisions on the conduct of defamation matters in the future may be somewhat unfortunate.

[1] De Poi v Advertiser-News Weekend Publishing Co Pty Ltd [2012] SADC 129.

[2] Equivalent to s 40 of the Victorian Act.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Richard Leder

Partner. Melbourne
+61 3 9672 3489