FEDERAL COURT OF AUSTRALIA

Hanson-Young v Leyonhjelm (No 5) [2020] FCA 34

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant’s application for a permanent injunction be refused.

2.    The Respondent is to pay the Applicant’s costs of and incidental to the proceedings, other than the costs which are the subject of the Court’s previous orders, on an indemnity basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WHITE J:

1    On 25 November 2019, I delivered judgment finding that the respondent had defamed the applicant in publications on 28 and 29 June 2018, and on 1 and 2 July 2018. I assessed the applicant’s damages at $120,000 and said that I would hear the parties on the issues of interest, the application for the grant of injunctions, and costs: Hanson-Young v Leyonhjelm (No 4) [2019] FCA 1981 (the Primary Judgment). I heard submissions on these matters on 17 December 2019.

2    This judgment concerns those issues. It should be read in conjunction with the Primary Judgment.

Interest

3    During the course of the hearing on 17 December 2019, I assessed the applicant’s entitlement to interest at a lump sum of $5,000 and entered judgment for the applicant in the sum of $125,000. I said that I would provide reasons later for that conclusion. Those reasons follow.

4    Section 51A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides (relevantly):

(1)    In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)    order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)    without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

…

5    As is apparent, the effect of s 51A is to require the Court to include interest in a monetary judgment unless good cause to the contrary is shown. The Court has a discretion as to both the rate and period for which interest is to be allowed, as well as to whether the interest is to be calculated by reference to the whole or part of the sum awarded.

6    Neither party submitted that the rate of interest should be determined by reference to the Court’s Interest on Judgments Practice Note (GPN-Int).

7    The applicant sought $5,079.45 for interest. This sum was calculated on the sum of $120,000 for the whole of the period from 28 June 2018 until 25 November 2019 at a rate of 3%.

8    Counsel for the applicant noted that interest is commonly allowed on the sum awarded for non-economic loss in defamation actions and accepted that interest usually takes account of the fact that some of the damage to reputation and distress for which the damages are awarded may be taken to have accrued over the whole of the period between publication and judgment. At the same time, the cases recognise that the harm suffered by an applicant is usually greatest at, and shortly after, the time of publication, so that the harm should not be regarded as having accrued at a constant rate over that period. Counsel referred to cases in which interest has been calculated on this basis at 3% (Davis v Nationwide News Pty Ltd [2008] NSWSC 946 at [12]-[14] and [20]; Trkulja v Yahoo! Inc LLC [2012] VSC 88 at [61]; Cerutti v Crestside Pty Ltd [2016] 1 Qd R 89, [2014] QCA 33 at [92] and [102]) and at 3.5% (Greig v WIN Television NSW Pty Ltd [2009] NSWSC 877 at [8]; Prendergast v Roberts [2012] QSC 144 at [39]; and Hallam v Ross (No 2) [2012] QSC 407 at [48]-[49]).

9    The respondent submitted that no amount should be included in the judgment by way of interest. He submitted, first, that interest is intended to compensate a successful applicant for either:

(a)    the interest which the applicant has incurred on borrowings which might have been retired between the date when a payment should have been recovered and the date of judgment; or

(b)    the interest which the applicant has foregone on funds which might have been invested between the date when a payment should have been recovered and the date of judgment.

The respondent cited Hungerfords v Walker (1989) 171 CLR 125 in support of this submission. He contended that neither of the two circumstances existed presently.

10    Hungerfords v Walker does not support the respondent’s submission. It was concerned with a different issue, namely, an award of damages for the loss resulting from a defendant’s tortious conduct resulting in the loss of use of money otherwise available to the plaintiff. Moreover, the respondent’s submission as to the purpose of an award of interest in contexts like the present is inconsistent with well-established authority – see M.B.P. (S.A.) Pty Ltd v Gogic [1991] HCA 3, (1991) 171 CLR 657 at 666; Haines v Bendall (1991) 172 CLR 60 at 66.

11    Secondly, the respondent submitted that, because damages for non-economic loss in a defamation action are analogous to the damages for non-economic loss awarded in a personal injury claim, the Court should apply the provisions in the uniform civil liability legislation which preclude the recovery of interest on the amounts awarded for non-economic loss for personal injury – see Civil Liability Act 1936 (SA), ss 51 and 56 and Civil Liability Act 2002 (NSW), ss 11A and 18.

12    However, the respondent did not identify any reason why the Court should impose such a limitation when the States and Territories have not included it in the uniform civil liability legislation or in the uniform defamation legislation. In these circumstances, it would not be appropriate to reason by analogy in the way for which the respondent contends.

13    The respondent then submitted, in the alternative, that if interest is to be included, account should be taken of the fact that the applicant’s damages for non-economic loss were assessed at the time of judgment and not at the time that her causes of action crystallised. This had the consequence, he submitted, that the applicant had not been disadvantaged by the inflation which occurred between mid-2018 and the time of judgment.

14    The respondent is correct in this submission and I accept it – see Gogic at 663-4, 666-7. However, as the respondent recognised, this does not mean that the applicant is disentitled to interest, only that the rate at which the interest is calculated should be reduced so as to avoid any allowance for inflation. This consideration has been one of the factors leading to the use of the figures of 3% and 3.5% in the authorities mentioned earlier.

15    In Gogic, the High Court accepted that, in the circumstances then prevailing, an interest rate of 4% was appropriate for the calculation of interest for non-economic loss. The respondent submitted that an appropriate rate of interest in the present case should be around 4% but with that figure reduced to reflect the fact that the applicant’s loss had been suffered progressively. This meant, he submitted, that a rate no higher than 3%, “adopted quite conventionally in defamation cases”, should be adopted.

16    Thus, the respondent’s proposed rate effectively matched that proposed by the applicant and I accept that it is appropriate. I derived the lump sum of $5,000 by some rounding off, to take account of the fact that the applicant commenced her proceedings on 1 August 2018, approximately one month after the publications of which she complained.

Injunctive relief

17    At the hearing on 17 December 2019, the applicant sought a permanent injunction in the following terms:

The Respondent be permanently restrained from publishing the imputations found by the Court to be carried by the Matters Complained Of, of and concerning the Applicant, and any imputations that do not differ in substance.

18    This form of injunction was in the terms of the second injunction sought in the Originating Application. The applicant did not pursue her claim for the first and third injunctions sought in that Application.

19    The Court’s power to issue an injunction in the present circumstances is derived from s 23 of the FCA Act. It is for the applicant to show that the discretionary power contained in s 23 of the FCA Act should be exercised in her favour.

20    Permanent injunctions to restrain the further publication of matters found to be defamatory are not issued as a matter of course as part of the relief in a defamation action: Hockey v Fairfax Media Publications Pty Ltd (No 2) [2015] FCA 750; (2015) 237 FCR 127 at [13]-[15] and the authorities cited therein. See also Carolan v Fairfax Media Publications Pty Ltd (No 7) [2017] NSWSC 351 at [13]-[15]. The public interest in free speech, to which reference was made in Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 at [19] and [31] (Gleeson CJ and Crennan J) and at [73] (Gummow and Hayne JJ) in relation to the grant of interlocutory injunctions to restrain the publication of defamatory material, is no less important in relation to the grant of permanent injunctions. So also is the reluctance of the Court to engage in the role of censor: ABC v O’Neill at [31] (Gleeson CJ and Crennan J) and at [82] (Gummow and Hayne JJ).

21    A critical matter bearing on the exercise of the discretion to issue an injunction is the Court’s assessment of the existence and degree of any threat or risk of repetition of the publication of the defamatory matter upon which the applicant successfully sued: Hockey at [15]; Carolan at [15]; Harbour Radio Pty Ltd v Wagner [2019] QCA 221 at [52].

22    The applicant submitted that the Court should be concerned about the respondent repeating the defamatory imputations, with the consequence that the grant of an injunction is appropriate. In support of this contention, her counsel referred to the following matters:

(a)    the number of publications initially made by the respondent. Counsel characterised this as a “campaign” by the respondent and referred to the finding made in [331]-[332] of the Primary Judgment concerning statements made by the respondent of the applicant in the period between 3 July 2018 and 20 September 2018 which I had found to be belittling of her and to be part of the respondent’s conduct warranting an award of aggravated damages;

(b)    the circumstances more generally which were found to warrant an award of aggravated damages, including the respondent’s response to the applicant’s Concerns Notice and his response to her offer of settlement – see the Primary Judgment at [328]-[329] and [333]-[335];

(c)    the other statements made by the respondent on 2, 5 and 22 July 2018 concerning the applicant which were proved at the trial; and

(d)    the conduct of the respondent following the publication of the Court’s reasons.

23    The applicant also emphasised that the respondent is an individual and not a media organisation which can be expected to respect the Court’s judgment and to act responsibly.

24    The conduct of the respondent following the delivery of the judgment on 25 November 2019 on which the applicant relied comprised a Facebook post of the respondent, re-tweets by the respondent of tweets of others, and the respondent’s “liking” of the tweets of others. It is not necessary to quote them presently. It is sufficient to note that, while some were in relatively neutral terms, some of the tweets were critical of the judgment and several were critical of the applicant. I am disinclined to attach significant weight to this material, as sought by the applicant. First, with the exception of perhaps only a few of the tweets, none of the matters to which the applicant referred repeated the imputations found to be defamatory. Secondly, given the publicity associated with the trial, it was inevitable that the judgment would attract public comment, including criticism, by those supporters of the respondent who were disappointed by it. The public interest in free speech to which I referred earlier includes the entitlement of members of the community to comment on judgments of the courts. There are of course limits on what can be properly said by way of disagreement with, or criticism of, a judgment, but in my view, the Court ought to be wary of attaching undue significance to such statements in a context like the present. In addition, the Court should be cautious about attaching significance to the respondent’s retweeting or “liking” of the tweets of others.

25    I think that it is appropriate to take into account that the respondent was present in Court throughout the trial. I had the impression that he found the experience salutary.

26    I do not regard the conduct of the respondent which I found to warrant the award of aggravated damages to be particularly significant in the present context. That conduct occurred well in the past. Apart from the aspects of the respondent’s conduct which occurred after the delivery of the Primary Judgment on 25 November 2019, the applicant did not point to any other more recent examples of like conduct.

27    In all the circumstances, I am not satisfied that the risk of the respondent repeating the imputations found to be defamatory is such that the Court should grant an injunction restraining him from doing so. The application by the applicant for a permanent injunction is refused.

Costs

28    The applicant sought an order that the respondent pay her costs on an indemnity basis. I did not understand the respondent to contest the making of an order that he pay the applicant’s costs on a party-party basis, but he did resist the application for indemnity costs.

29    The applicant sought the order for indemnity costs pursuant to s 40 of the Defamation Act 2005 (NSW) and its State and Territory counterparts. Section 40 provides:

40 Costs in defamation proceedings

(1)    In awarding costs in defamation proceedings, the court may have regard to:

(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), and

(b)    any other matters that the court considers relevant.

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

(a)    if defamation proceedings 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

(b)    if defamation proceedings are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant—order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.

(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.

30    The applicant relied upon both limbs in s 40(2)(a) but placed particular emphasis on the respondent’s failure to make a settlement offer which, she submitted, should be characterised as unreasonable.

31    As already noted, the proceedings were commenced by the applicant on 1 August 2018. By letter dated 31 August 2018, the applicant’s solicitors sent an offer of compromise to the respondent’s solicitors pursuant Pt 25 of the Federal Court Rules 2011 (Cth) (the FCR). The terms of the offer to compromise were as follows:

To the Respondent

The Applicant offers to compromise this proceeding.

The offer is:

a)    An order permanently restraining the Respondent by himself, his servants or agents, from publishing or causing to be published any of the matters complained of, or matters substantially to the same effect.

b)    Judgment for the Applicant in the amount of $75,000.

c)    This offer is in addition to costs.

This offer of compromise is open to be accepted for 28 days after service of this offer of compromise.

The amount of the offer will be paid within 28 days after acceptance of this offer.

This offer is made without prejudice.

32    In the accompanying letter, the applicant’s solicitors said (relevantly):

…

2    If your client does not accept the Offer, and the defence of these proceedings is unsuccessful, then our client will rely upon the Offer in seeking an order under Section 40(2) of the Defamation Act 2005 (NSW). Otherwise, our client will rely upon the enclosed Offer under Rule 25.14(3)(b) of the Federal Court Rules 2011.

3    The Offer is also made in accordance with the principles in Calderbank v Calderbank [1973] 3 All ER 333, and in the event that your client fails to accept our client’s Offer, our client will rely on this letter in respect of any question as to costs, including an application for indemnity costs.

…

33    As is apparent, the offer involved three elements: agreement to the injunction proposed, judgment in the sum of $75,000, and costs.

34    The respondent’s solicitors responded to the letter of offer by letter dated 19 September 2018. They asserted that the offer was “void for uncertainty”, “meaningless”, and did not constitute an “offer lawfully capable of acceptance”:

…

2.    The purported offer is plainly void for uncertainty. Paragraph (c) stipulates that “This offer is in addition to costs” [emphasis added]. That sentence could mean either:

2.1    that your client is offering to pay our client’s costs; or

2.2    that your client wants our client to pay her costs; or

2.3    that the question of costs is not covered by the offer, leaving it as a matter to be determined by the Court if the offer were to be accepted.

3.    Moreover, the purported offer is silent as to how such costs are to be quantified. Possibilities includes (sic):

3.1    that costs are to be taxed on the Federal Court scale; or

3.2    that costs are to be taxed on the basis of the quantum of the amount specified in the offer ($75,000), which would mean taxation on the Magistrate’s (sic) Court scale; or

3.3    that costs are to be fixed by some other mechanism, such as a determination by an independent costs assessor; or

3.4    that costs are to be agreed (which would render the entire offer illusory – a mere “agreement to agree”).

4.    Further, the proposal for “An order …” (we think you will find that the technical term is “An injunction …”) “… permanently restraining the Respondent by himself, his servants or agents, from publishing or causing to be published any of the matters complained of, or matters substantially to the same effect” would unquestionably be unconstitutional. No court in the land can prevent an elected Senator from speaking in the Senate, on any subject, in such terms as the Senator thinks fit.

5.    For these reasons, we regard the purported offer as both:

5.1    meaningless; and

5.2    not constituting an offer lawfully capable of acceptance.

…

(Emphasis in the original)

35    In so far as this critique of the respondent concerned the issue of costs, it appears to be unduly technical. I consider that the offer of compromise, considered objectively, was well capable of being understood as including a term that the respondent pay the applicant’s costs of the proceedings on a party-party basis on the Federal Court scale. However, it is not necessary to address that aspect of the respondent’s submission further because his critique of the form of the injunction proposed by the applicant does have merit. The subject of the restraint sought by the applicant was “publication of the matters complained of” and not the particular imputations on which she had sued. Further, the restraints sought by the applicant were without limit and, if imposed, would have precluded the respondent from making even the non-defamatory statements contained in the impugned matters.

36    In these circumstances, it should not be held that the respondent failed unreasonably to agree to a settlement offer proposed by the applicant.

37    In the second part of their letter of 19 September 2018, the respondent’s solicitors set out the respondent’s position with respect to the making of an offer:

…

6.    Despite that, we have taken instructions from our client, Senator Leyonhjelm. He is adamant that he will not be making or accepting any offer which involves either:

6.1    a payment to your client in respect of her claim for damages; or

6.2    a payment to your client in respect of her costs; or

6.3    any form of gag (whether by undertaking, permanent injunction, or otherwise) which would inhibit him from making public comments, as he thinks fit, particularly in light of his mandate and duty as an elected Senator for New South Wales.

7.    Senator Leyonhjelm is, however, willing to settle the proceeding on terms that your client discontinue her claim and pay his costs (to be taxed on the Federal Court scale) up to the date of discontinuance.

8.    Senator Leyonhjelm is conscious that, despite your client’s Parliamentary salary and entitlements, her financial circumstances may be somewhat straightened (sic). For instance, there could be no other mitigating factor for her execrable conduct in using $4,000 of taxpayer funds to take her daughter on a whale-watching excursion.

9.    Therefore, as a cumshaw or lagniappe for the benefit of your client, Senator Leyonhjelm is willing – without any form of admission whatsoever – to limit the costs recoverable by him to the amount of your client’s “fighting fund” garnered on false pretences through “crowd funding”.

…

(Emphasis in the original)

38    As is apparent, the solicitors made plain that the respondent would not be making or accepting any offer which involved him making a payment to the applicant for damages or for costs and would not be consenting to any form of injunction. The respondent was, however, “willing to settle the proceeding” on the basis that the applicant discontinue the claim and pay his costs to the date of discontinuance. The solicitors also said that the respondent was willing to limit the costs which the applicant would have to pay to him on the discontinuance to the amount of her “fighting fund”. This “offer” was expressed in a form which appears to have been gratuitously offensive. It is not immediately apparent why solicitors acting with the respect and civility traditionally extended to fellow practitioners, and with the courtesy required by r 4.1.2 of the Australian Solicitors’ Conduct Rules, would have chosen to express themselves in such a way. It was one thing for the respondent to make the belittling statements concerning the applicant to which I referred in the Primary Judgment: it was another for his solicitors, bound by the professional conduct rules, to engage in conduct of that character. However, this is not a matter bearing on the applicant’s costs claim.

39    So far as the Court was informed, neither party made any further offer of settlement. The emphatic terms of the respondent’s solicitor’s letter of 19 September 2019 may well have led the applicant to think that there was little point in doing so.

40    The evident purpose of s 40 is to oblige parties to defamation proceedings to take a reasonable approach to settlement of the proceeding: Davis v Nationwide News at [27].

41    Section 40(2)(a) does not contain any temporal limitation. An unreasonable failure by the respondent to make a settlement offer at any time before judgment will result in the Court making an order for indemnity costs, unless the interests of justice require otherwise.

42    As is usually the case when courts are to assess issues of reasonableness or unreasonableness, regard should be had to all relevant circumstances. These include the number and complexity of the issues in the proceedings, the assessment of the applicant’s prospects of success which could, and should, have been made by the respondent during the currency of the proceedings, the content of the Court’s judgment including whether an award for aggravated damages was made and the circumstances found to justify such an award, the manner in which the respondent conducted the defence of the proceedings, and any offer made by the applicant and the respondent’s response to that offer.

43    In resisting the claim for indemnity costs, the respondent noted that, although the applicant’s Concerns Notice had referred to the “promiscuity imputation”, the applicant had not sued on that imputation and, accordingly, that the Concerns Notice provided did not relate to that on which the Court had been asked to rule. I consider this to be immaterial for two reasons: first, the respondent knew the imputations on which the applicant was suing from an early stage as the proceedings were commenced on 1 August 2018 and were served shortly thereafter, and knew that these did not include the “promiscuity imputation”; and, secondly, whether the respondent could have successfully resisted a claim based on the “promiscuity imputation” is of no importance presently.

44    The respondent also submitted:

[32]    The circumstances where a defendant is subjected to indemnity costs on account of having “unreasonably failed” to make a settlement offer must in any event be rare. Per the definition in s.40(3), an offer is only a settlement offer for the relevant purpose to the extent it is reasonable at the time it is made. Reading s.40(2) purposively, this would suggest an offer that would attract protection under Calderbank v. Calderbank principles. A respondent who goes on to lose the litigation will rarely have been in a position to make such an offer. Therefore, the circumstances in which he “unreasonably failed” to make such an offer will likewise be rare.

[33]    As a final matter, Ms Tannous's affidavit misstates the effect of the settlement offer that the respondent did make on 19 September 2018. Ms Tannous deposes at paragraph 6(b) of the affidavit that the respondent required the applicant to pay the respondent’s costs up to the date of discontinuance. The true effect of the settlement offer reproduced as annexure AT-4 is that the applicant’s exposure would be limited to any amount raised by her through “crowd-funding”. The settlement offer was, as far as the applicant’s own finances were concerned, an offer to settle the litigation on a “walk-away” basis, and contained a genuine element of compromise.

[34]    All other considerations aside, the amount recovered by way of damages (including aggravated damages) did not warrant litigation in a superior court of unlimited jurisdiction. There are many inferior courts – District and County Courts, and even Magistrates or Local Courts – around Australia which could have awarded the same sum in proceedings costing considerably less to either party.

(Emphasis in the original)

45    In the oral submissions, the solicitor for the respondent submitted:

[T]he respondent’s offer was reasonable because it was, essentially, on a walk-away basis. The costs that the applicant would have to pay him would be limited to what she had sourced from crowd funding, so it wouldn’t come out of her own pocket. In respect of his failure to make any other offers, I would submit that he had reasonable prospects based on the defences of qualified privilege and s 16 of the Parliamentary Privileges Act … [M]y client was entitled to his day in court. And, in my submission, he should not be punished for not going out of his way to make a commercial settlement offer in circumstances where he believed he had a reasonable case. And based on his own idiosyncratic beliefs and philosophies, he believed that he was making a point of principle … [M]y submission is that my client did make an offer … and that it was reasonable at the time.

46    These submissions give rise to a number of issues.

Did the respondent make a “settlement offer”?

47    Counsel for the applicant submitted that [7]-[9] of the solicitor’s letter of 19 September 2018 did not contain an offer “to settle the proceedings”. Instead, the respondent was proposing complete capitulation by the applicant because it would have involved her discontinuing her claim and paying the respondent’s costs. Putting to one side for the moment the limit to the amount raised by the applicant by crowd funding, she would then be in the same position as would have been the case had she exercised her ability to discontinue the proceedings pursuant to r 26.12 of the FCR.

48    In some statutory contexts, the term “settle” and its cognate “settlement” may encompass situations in which a respondent concedes everything sought by an applicant or an applicant discontinues the proceedings and meets the respondent’s costs: Transport Accident Commission v Coyle [2001] VSCA 236; (2001) 3 VR 589 at [27]. Authorities in other contexts indicate, however, that offers to settle a proceeding are offers which involve some element of compromise or, at least, that an offer which does not involve some realistic or genuine attempt to resolve the proceedings by agreement, is not an offer of the requisite kind.

49    Many of the decisions on these issues commence with reference to the judgment of Rogers CJ Comm D in Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353. That case concerned a purported rules of court offer of compromise by which the plaintiff had offered to settle for the whole amount claimed together with interest. Rogers CJ Comm D rejected a contention that such an “offer of compromise” was an offer to which the rules referred, saying at 354-5:

To arrive at a correct result it is necessary to remind oneself of the concepts which underlie the whole theory of compromise and of offers of compromise.

It is the primary aim of any judicial system to attempt to bring the parties to a point where, with fairness to themselves, they are able to dispose of the dispute between them by compromise. It is only in the last resort that a dispute should proceed to trial and to determination. That is for any number of reasons. It is in the interests of the community that scarce resources, such as the court, should not be over-taxed. It is in the interests of the community and of the parties themselves that they should not engage in the rancour which a dispute in court necessarily entails. It is in the interests of the parties themselves to save themselves the expenditure of time and energy necessarily entailed in participation in contested court proceedings.

…

Unless circumstances are wholly exceptional a demand for payment to the plaintiff of everything, to which it may possibly be entitled, hardly falls in the category of the compromise … What the court is invited to do is to determine whether, in the totality of the circumstances, the offer by the plaintiff represented any element of compromise or whether it was merely, yet another, formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis.

It was never in the minds of the draftsmen of the rule, or the members of the Rule Committee responsible for the passing of this rule, that Pt 22 should be utilised simply as a statutory demand which, other circumstances being equal, will automatically entail the payment of costs on an indemnity basis.

50    In McKerlie v New South Wales (No 2) [2000] NSWSC 1159, Dunford J referred to an earlier unreported judgment of his own in defamation proceedings (Bishop v State of New South Wales, 17 November 2000) in which the plaintiff had been wholly unsuccessful and the defendant had sought indemnity costs by reason of a pre-trial offer that the plaintiff abandon his claim. In refusing that application, Dunford J had said (at [10] of McKerlie):

There was not in any real sense an offer to compromise the proceedings, but merely an offer to induce the plaintiff to abandon his claim …

51    In Leichardt Municipal Council v Green [2004] NSWCA 341, the Court considered a claim for indemnity costs by a defendant (in a non-defamation action) who had before the trial at first instance made a Calderbank offer to the plaintiff for judgment to be entered in the defendant’s favour with each party bearing its own costs. Santow JA, in the judgment of the Court, said that “an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise”, at [23]. His Honour went on to note that particular considerations may apply in the case of defendants.

52    In Nextra Australia Pty Ltd v Fletcher (No 2) [2014] FCA 682 (a non-defamation action), Collier J referred to the need for a rules of court offer under r 25 of the FCR to constitute a genuine offer of compromise:

[16]    While the evidence now before the Court indicates that the costs incurred by the respondent on a party-party basis exceed the amount of the costs the subject of the applicant’s “offer”, and to that extent the applicant claims it has “compromised”, nonetheless in terms of the substantive relief sought by the applicant the letter of 26 February 2013 did not contain any offer of compromise. In substance, the applicant sought complete capitulation from the respondent in terms of the claims of the applicant in its originating application, in addition to assumption of costs liabilities. In this context I note cases including Townsend v Townsend (No 2) [2001] NSWCA 145 at [5] and Hancock v Arnold (No 2) [2009] NSWCA 19 at [17], as well as the discussion and cases cited in Dal Pont GE, Law of Costs (3rd ed, LexisNexis Butterworths, 2013) at 368-369.

[17]    While an offer by an applicant to a respondent for the respondent to capitulate can, in limited circumstances, trigger indemnity provisions of the Federal Court Rules, traditionally Courts have taken the approach that the case of the respondent would need to be something approaching frivolous or vexatious for an offer for the respondent to capitulate to constitute a genuine offer of compromise by the applicant … The rationale for this approach is that if the position were otherwise, the public policy to encourage settlement would rarely be served, in an all or nothing case … In this case I am not satisfied that the defence of the respondent could be characterised as either frivolous or vexatious.

(Citations omitted)

53    In Dometic Australia Pty Ltd v Houghton Leisure Products Pty Ltd (No 2) [2019] FCA 57, I said, in a non-defamation context, that Pt 25 of the FCR contemplates offers of genuine compromise on the part of the offeror:

[27]    … It is well established that the purpose of Pt 25 of the FCR is to promote the settlement of proceedings by the making of offers of settlement involving genuine compromise and, therefore, that if an offer does not involve genuine compromise on the part of the offeror, the Part is not enlivened: Romero v Farstad Shipping (India Pacific) Pty Ltd (No 4) [2017] FCA 120 at [73] (and see the authorities cited therein); The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120, (2006) 67 NSWLR 706 at [8] (and see the authorities cited therein). As Giles J noted in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368, “[c]ompromise connotes that a party gives something away”.

[28]    In my view, the Respondents’ offer cannot be characterised as a genuine offer of compromise in this sense. In effect, the offer contemplated only that each party would discontinue its claim or cross-claim (as the case may be) and pay the costs of the other with respect to that claim or cross-claim. It did not involve an offer by the Respondents to do more than r 26.12(7) of the FCR would have required if they had discontinued the cross-claim. The Respondents did not offer any concessions with respect to the amount to be paid by Dometic in the event that it discontinued the primary claim. It was not, for example, an offer by the Respondents to pay their own costs, or to accept only a portion of their costs, in respect of the claim in the event that it was discontinued or dismissed. The offer was, in effect, for a complete, although mutual, capitulation.

54    Some authorities indicate that an offer to settle by a respondent which is not reasonable may not be a “settlement offer” for the purposes of s 40 of the Defamation Act and its State and Territory counterparts: Cornes v Ten Group Pty Ltd (No 2) [2011] SASC 141 at [25]-[30]; Holt v TCN Channel Nine Pty Ltd (No 2) [2012] NSWSC 968, (2012) 82 NSWLR 293 at [50]; and Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2. In the third of these cases, Gleeson JA in the judgment of the Court said:

[59]    To qualify as a “settlement offer” for the purposes of s 40, the offer to settle the proceedings must answer the description of a “reasonable offer at the time it was made”. If the offer of amends is not a reasonable offer, then it is not a “settlement offer” for the purposes of s 40: Holt v TCN Channel Nine Pty Ltd (No 2) (2013) 82 NSWLR 293; [2012] NSWSC 968 at [50] (Adamson J).

55    The question of whether an offer is a genuine offer of compromise or merely a demand to capitulate depends upon an assessment of all the circumstances of the case: Leichardt Municipal v Green at [27].

56    In light of these authorities, the first question is whether the respondent did, by his solicitor’s letter of 19 September 2018, make a “settlement offer” of the kind to which s 40(2)(a) refers. The respondent submitted that, because he had indicated the willingness to cap the costs which the applicant would have to pay him at the amount she had raised through crowd funding, his offer had contained a genuine element of compromise.

57    I do not accept this submission. In reality, the respondent sought complete capitulation by the applicant. His offer to cap the costs to be paid to him at the amount the applicant had raised through crowd funding constituted no more than a token or gratuity. This is confirmed by the grandiloquent terms (“cumshaw” and “lagniappe”) which the solicitors used to convey the “offer”. It would not be reasonable in this circumstance to regard the “concession” as made as part of a genuine attempt to compromise.

58    Even if that conclusion be wrong, there is a further reason why the respondent’s submission cannot be accepted. That is, that the respondent made no attempt to establish that his “concession” did in fact involve any benefit to the applicant. He did not, for example, seek to prove the costs he had incurred at 19 September 2019, nor seek to have the applicant identify the amount which she had raised by crowd funding. No comparison between these two amounts can be made. For all the Court knows, the respondent’s offer to cap his costs at the amount of the applicant’s crowd funding would have had no practical effect.

59    Even if these circumstances be wrong, and the respondent had made an offer, it could not, for the reasons given in the next section of this judgment, be characterised as reasonable. On the basis of the authorities to which I referred earlier, the offer could not, for this independent reason, be regarded as an offer for the purposes of s 40(2)(a).

Did the respondent unreasonably fail to make an offer?

60    The second issue for consideration is whether the respondent’s failure to make a settlement offer was unreasonable. In my view, it should be so characterised for the following reasons:

(a)    at the trial, the respondent accepted that he had published each of the impugned matters and that they had conveyed the defamatory imputations alleged by the applicant – see [7]-[8] of the Primary Judgment. Further, at the trial, the respondent abandoned several of his pleaded defences. There is no apparent reason why the respondent could not have taken account of the same matters at 19 September 2018, or thereafter, when considering the compromise of the proceedings;

(b)    it should have been apparent to the respondent from at least 7 November 2018 (when judgment was delivered on his strike out/permanent stay application (Hanson-Young v Leyonhjelm [2018] FCA 1688; (2018) 364 ALR 624) that his defence based on s 16(3) of the Parliamentary Privileges Act 1987 (Cth) may not succeed. His appreciation that this may be so should have increased when leave to appeal from this decision was also refused: Leyonhjelm v Hanson-Young [2019] FCA 156;

(c)    given the number of previous instances in which politicians have succeeded in claims for defamation, it should have been apparent to the respondent that he may be wrong in his contention that the admitted imputations had not defamed the applicant by reason of her status as a politician holding views generally opposed to his own;

(d)    given that the respondent knew that he could not state the actual words spoken by the applicant in the Senate on 28 June 2018 on which he relied for his defence of justification, it should have been apparent to him that his defence of justification may be difficult to establish. That was especially so after the applicant filed the affidavits containing the proposed evidence in chief from other Senators in which they deposed to their recollection of the words spoken by the applicant in the Senate, none of which supported the respondent’s own account; and

(e)    by the conclusion of the trial, the issues had become more refined and the respondent had heard all the witnesses give their evidence. He was then in a position to make a reasonable assessment of the risk that his defence would not succeed. As s 40 does not contain any temporal limitation, it was still open to the respondent to make a reasonable offer, following the Court reserving its judgment, but he did not do so.

61    Had the respondent taken appropriate account of these matters, he should have made a reasonable offer of settlement.

Application of the Calderbank principles

62    Contrary to the respondent’s submission, there is no warrant in s 40 to confine the settlement offers to which it refers to those to which the Calderbank v Calderbank [1973] 3 All ER 333 principles apply. To do so would be to read into s 40 a limitation which the legislature did not impose. Even if that conclusion be wrong, it is not apparent that this would assist the respondent presently. The respondent’s submissions did not explain how confining s 40(2)(a) to Calderbank offers would be of relevance presently.

The commencement of proceedings in this Court

63    The respondent did not develop the submission that it had been inappropriate for the applicant to commence her proceedings in this Court. The submission was confined to the bare statements in [34] of the written submissions, set out earlier in these reasons. The respondent did not, for example, attempt to compare the costs which may reasonably have been incurred by each party had the applicant commenced her proceedings in some other court.

64    In these circumstances, I propose to indicate only briefly my reasons for rejecting the submission.

65    First, it would not be appropriate to determine the matter by reference only to the amount recovered by the applicant. A defamation action is not just a money claim: it has at its heart an applicant’s claim for vindication of his or her reputation. The Court in which an applicant obtains that vindication can be an important element in the nature and extent of the vindication obtained: Ramsey v Annesley College (No 2) [2013] SASC 145 at [35]; Harrigan v Jones [2001] NSWSC 623 at [184].

66    Secondly, the proceedings were appropriate to be brought in this Court having regard to the complexity of the issues involved. I note that the trial occupied five days and that both parties considered it appropriate to be represented by senior counsel. In fact, the respondent engaged senior counsel before the applicant.

67    Thirdly, the respondent made no attempt to invoke the principles relevant to applications under r 40.08, which provides:

40.08 Reduction in costs otherwise payable

A party other than in a proceeding under the Admiralty Act 1988 may apply to the Court for an order that any costs and disbursements payable to another party in the proceeding be reduced by an amount to be specified by the Court if:

(a)    the applicant has claimed a money sum or damages and has been awarded a sum of less than $100,000; or

(b)    the proceeding (including a cross-claim) could more suitably have been brought in another court or tribunal.

68    An application under r 40.08(a) could not have succeeded as the applicant recovered more than $100,000 in damages. However, in the application of r 40.08 and its predecessor, the Court has on several occasions addressed the question of whether proceedings may have been brought more appropriately in another court: Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd (No 2) [2013] FCA 705 at [32]-[33]; Tu v Pakway Australia Pty Ltd [2006] FCA 34, (2006) 227 ALR 287 at [23]-[32]; Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1994] FCA 302; Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [15]-[16]; Axe Australasia Pty Ltd v Australume Pty Ltd (No 2) [2006] FCA 844. The respondent did not seek to indicate how the principles developed in these cases may be applied in the present circumstances.

The other matters raised by the respondent

69    Contrary to the respondent’s submission, the issue is not whether he was “entitled to his day in court”: it is instead the costs to be paid for that “day”, taking into account the terms of s 40.

70    The question of whether the respondent unreasonably failed to make a settlement offer is to be determined objectively. That being so, limited weight can be attached to the respondent’s “own idiosyncratic beliefs and philosophies”, to which his solicitor referred.

71    Contrary to the respondent’s submissions, there is no basis upon which to suppose that the circumstances in which an order for indemnity costs under s 40 will be rare. Instead, s 40(2) requires that, when the circumstances to which it refers exist, such an order be made, subject to the Court concluding that the interests of justice require otherwise.

Conclusion on respondent’s failure to make a settlement offer

72    For these reasons, I am satisfied that the respondent did unreasonably fail to make a settlement offer. It is therefore unnecessary to consider the alternative basis on which the applicant advanced the claim for indemnity costs, namely, reliance on Pt 25 of the FCR. As the interests of justice do not require a contrary position, I consider that the Court should, as required by s 40(2), order the respondent to pay the applicant’s costs assessed on an indemnity basis.

73    The applicant did not seek any revision of the costs orders previously made in the proceedings.

Summary

74    In summary, the applicant’s claim for injunctive relief is refused. The respondent is to pay the applicant’s costs of and incidental to the proceedings, other than the costs which are the subject of the Court’s previous orders, on an indemnity basis.

Associate:

Dated:    31 January 2020