Federal Court of Australia Dutton v Bazzi (No 2) [2021] FCA 1560 File number: NSD352 of 2021 Judgment of: WHITE J Date of judgment: 8 December 2021 Catchwords: COSTS – application for costs on an indemnity basis by the successful Applicant in defamation proceedings – no special or unusual circumstances to justify costs on an indemnity basis – application rejected. COSTS – unsuccessful party's claim for a reduction of the costs payable pursuant to r 40.08 of the Federal Court Rules 2011 (Cth) – whether the Applicant could have commenced proceedings in a more suitable court – claim for reduction of costs upheld. Legislation: Federal Court of Australia Act 1976 (Cth) s 43 Uniform Defamation Acts Federal Court Rules 2011 (Cth) rr 25, 40.08 Defamation Act 2005 (NSW) s 40 Cases cited: AMP Services Ltd v Manning (No 3) [2007] FCA 510 Australasian Performing Right Association Limited v Metro on George Pty Ltd [2004] FCA 1371, (2004) 64 IPR 57 Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 Dutton v Bazzi [2021] FCA 1474 Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 3) [2008] FCA 896 Hanson-Young v Leyonhjelm (No 5) [2020] FCA 34 Hayson v Age Company Pty Ltd (No 3) [2020] FCA 1163; (2020) 280 FCR 139 Hockey v Fairfax Media Publications Pty Ltd (No 2) [2015] FCA 750; (2015) 237 FCR 127 Murphy v Nationwide News Pty Ltd (No 2) [2021] FCA 432 Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128; (2015) 236 FCR 270 Stead v Fairfax Media Publications Pty Ltd [2021] FCA 15; (2021) 387 ALR 123 Tenji v Henneberry & Associates Pty Ltd [1999] FCA 1259 Umoona Tjutagku Health Service Aboriginal Corporation v Walsh [2019] FCAFC 32; (2019) 268 FCR 401 Division: General Division Registry: New South Wales National Practice Area: Other Federal Jurisdiction Number of paragraphs: 52 Date of hearing: 8 December 2021 Counsel for the Applicant: Mr H Clift Solicitor for the Applicant: Baker McKenzie Counsel for the Respondent: Mr R Potter SC with Mr B Dean Solicitor for the Respondent: O'Brien Criminal & Civil Solicitors ORDERS NSD352 of 2021 BETWEEN: PETER CRAIG DUTTON Applicant AND: SHANE BAZZI Respondent order made by: WHITE J DATE OF ORDER: 8 December 2021 THE COURT ORDERS THAT: 1. Judgment is entered for Mr Dutton against Mr Bazzi in the sum of $35,825. 2. Mr Bazzi pay Mr Dutton's costs, but on the scale appropriate to an action brought in the Queensland Magistrates Court for a defamation resulting in a judgment of $35,825. 3. With respect to disbursements, Mr Bazzi pay only those disbursements which Mr Dutton would have had to pay, had the proceedings been brought and pursued in the Queensland Magistrates Court. 4. Mr Dutton pay 50% of Mr Bazzi's costs of, and incidental to, today's hearing. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. EX TEMPORE REASONS FOR JUDGMENT WHITE J: 1 On 24 November 2021, I delivered judgment in Mr Dutton's defamation action against Mr Bazzi: Dutton v Bazzi [2021] FCA 1474 (the Principal Judgment). I found that Mr Dutton was entitled to judgment against Mr Bazzi for $35,000. I dismissed his claim for injunctions. 2 I said that, before entering judgment, I would hear from the parties on the issues of interest and costs. It is those matters which are the subject of this judgment. These reasons should be read in conjunction with the Principal Judgment. Interest 3 On the topic of interest, the parties agreed that interest should be allowed in the sum of $825. Accordingly, I will enter judgment for Mr Dutton in the sum of $35,825. Costs 4 On the issue of costs, Mr Dutton seeks an order that Mr Bazzi pay his costs on an indemnity basis. 5 Mr Bazzi's approach to costs can be summarised by three propositions: (a) Mr Dutton should not be awarded indemnity costs; (b) because Mr Dutton had only partial success in the proceedings, he should receive only a portion of his costs; and (c) the Court should, in any event, invoke r 40.08 of the Federal Court Rules 2011 (Cth) (the FCR) and reduce the costs to which Mr Dutton is entitled. 6 Both parties accepted that it is the discretion invested in the Court by s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) which is to be exercised presently. While adverting to Hayson v Age Company Pty Ltd (No 3) [2020] FCA 1163, (2020) 280 FCR 139; to Stead v Fairfax Media Publications Pty Ltd [2021] FCA 15, (2021) 387 ALR 123 at [316]; and to Murphy v Nationwide News Pty Ltd (No 2) [2021] FCA 432 at [6], neither party suggested that the exercise of the discretion is governed by s 40 of the Defamation Act 2005 (NSW) and its counterparts in the Uniform Defamation Acts of the States and Territories (the UDA). I will proceed on the basis on which the parties agreed. 7 Section 43 of the FCA Act provides that, except as may be provided in another Act, the award of costs is in the discretion of the Court. The discretion is to be exercised judicially. That means that, generally speaking, an unsuccessful party will be required to pay the costs of the successful party: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [66]. Costs are awarded in order to compensate the successful party for the costs it has incurred in the proceeding and not as a penalty. Usually, the Court awards costs on a "party and party" basis: Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232. 8 However, there are circumstances in which it is appropriate for the Court to award costs on some other basis, including on a solicitor-client basis or an indemnity basis: Colgate-Palmolive at [233]. Before the Court makes such an order, it should be satisfied that there is some "special or unusual feature of the case justifying the departure from the ordinary practice": Colgate-Palmolive at [233]. Unreasonableness in the conduct of litigation by a party has been recognised as one such special circumstance. Mr Dutton's claim for indemnity costs 9 In seeking an order for indemnity costs, Mr Dutton referred to a number of matters. First, he submitted that, while the Court is not bound by s 40 of the UDA, it is in the public interest that outcomes on costs in defamation cases be consistent across Australian jurisdictions and that, for that reason, the Court should regard the cost provisions in the UDA as an important consideration in exercising its own costs discretion. Mr Dutton submitted that the Court should be satisfied that Mr Bazzi failed unreasonably to make a settlement offer or to agree to a settlement offer proposed by him and, in accordance with s 40(2)(a) of the UDA, require him to pay indemnity costs on that basis. 10 Secondly, Mr Dutton contended that Mr Bazzi's denial from the outset that any of the pleaded imputations arose was plainly unreasonable. 11 Thirdly, Mr Dutton submitted that, while Mr Bazzi had made settlement offers, they were not reasonable settlement offers. 12 Fourthly, Mr Dutton referred to Mr Bazzi's rejection of the settlement offer which he (Mr Dutton) had made on 30 September 2021. 13 In Hockey v Fairfax Media Publications Pty Ltd (No 2) [2015] FCA 750; (2015) 237 FCR 127, I referred to a number of matters which may bear upon the assessment of the reasonableness of a party's conduct in circumstances like the present. I will not repeat them presently. 14 I do not propose to act on the basis of the first matter relied upon by Mr Dutton. As the parties have agreed that it is the general discretion bestowed on the Court by s 43 of the FCA Act which is to be exercised, it would not be appropriate to constrain the exercise of that discretion by a de facto application of the terms of a regime not established by the Commonwealth Parliament. 15 I do not regard the second of the matters raised by Mr Dutton, namely, Mr Bazzi's denial from the outset that the pleaded imputations were conveyed constituted a special or unusual feature of the case which would justify a departure from the usual practice with respect to costs. It is not uncommon in defamation litigation for a respondent to contest the meanings pleaded by an applicant and failure on that account is not ordinarily regarded as constituting a special circumstance warranting indemnity costs. Mr Bazzi's failure on the issue of the pleaded imputations does not, of itself, mean that his conduct was unreasonable, and it is appropriate to keep in mind, in this respect, that Mr Dutton succeeded on only one of his four pleaded imputations. 16 With respect to the making of offers, the evidence discloses the following: 17 On 26 March 2021, Mr Dutton's solicitors sent a Concerns Notice to Mr Bazzi. This Concerns Notice alleged the four defamatory imputations pleaded by Mr Dutton in the proceedings. Mr Dutton required Mr Bazzi to agree, by 9 April 2021, to the following: (a) to remove permanently the Tweet and any other tweets, including the imputations to the same or similar effect from his Twitter account, as well as from any other medium of publication he controls; (b) publish an apology for a period of 28 days in a form acceptable to Mr Dutton, which: (i) withdrew the defamatory imputations; (ii) stated that there was no foundation for any of the allegations whatsoever; (iii) stated the publications were made with malice for the express purpose of causing Mr Dutton harm; (iv) stated that the statements were not made for a genuine journalistic purposes; and (v) apologise without reservation; and (c) undertake not to republish the Tweet or any of the pleaded imputations. 18 The Concerns Notice indicated that even if Mr Bazzi had acceded to those requirements, Mr Dutton contemplated bringing proceedings in order that he be "significantly compensated for the damage suffered by him" and went on to state Mr Dutton's current intention to commence such proceedings. 19 In those circumstances, the Concerns Notice cannot reasonably be characterised as an offer of settlement. It was, as Mr Bazzi's counsel submitted, more in the nature of a demand. 20 Mr Bazzi responded to the Concerns Notice on 9 April 2021, by which he agreed to remove the Tweet and, in substance, not to republish the statement it contained. He did not agree to the other requirements of Mr Dutton. 21 The Court ordered mediation in this action took place on 20 August 2021 and did not produce a mediated result. 22 On the same day, Mr Bazzi served an offer of compromise on Mr Dutton's solicitors by which he proposed that the proceedings be discontinued with no order as to costs. Also on 20 August 2021 Mr Bazzi's solicitors served on Mr Dutton's solicitors a Calderbank letter by which he proposed that the proceedings be discontinued with no order as to costs but the parties enter into a deed of settlement containing an undertaking by Mr Bazzi not to publish the pleaded imputations and Mr Bazzi making a statement on his Twitter account to the effect that he had not intended to suggest that Mr Dutton excused or condoned rape. 23 Mr Dutton's first offer of settlement was made on Thursday, 30 September 2021, only four working days before the trial commenced on Wednesday, 6 October 2021. The offer remained open until midday Tuesday, 5 October 2021. The full terms of the offer were as follows: • Mr Bazzi pays a settlement amount of $15,000 (inclusive of GST if applicable) to our client, on account of damages. Our client is willing to offer your client payment terms to allow him to meet that payment obligation if he is unable to do so immediately. • Mr Bazzi publishes the following apology on his Twitter page (twitter.com/shanebazzi) and ensures that it remains published for no less than 28 days: On 25 February 2021, I published a tweet on Twitter about Hon Peter Dutton MP. It said "Peter Dutton is a rape apologist". Mr Dutton was concerned, and I accept, that the tweet was offensive and untrue, and conveyed the meanings that he condoned or excused rape. I also accept that I had absolutely no basis for suggesting any such thing, including that he is a "rape apologist". After proceedings were commenced by Mr Dutton, I continued to make tweets about Mr Dutton and caused my legal representation to make press releases asserting that Mr Dutton is stifling freedom of speech in Australia. I now recognise that it was wrong to portray Mr Dutton's proceedings as an abuse of principles of free speech, rather than vindication of his reputation in the face of an offensive and baseless assertion that I made. I apologise unreservedly to Mr Dutton for the tweet and for my conduct since that tweet. • Judgment for our client with no order as to costs. (Italics in the original) 24 On the same day, 30 September 2021, Mr Bazzi rejected Mr Dutton's offer and, in substance, repeated the terms of his previous offer but with an offer to make an additional statement "I apologise to Mr Dutton if anyone interpreted my Tweet [as suggesting] that Mr Dutton excused or condoned rape". 25 Mr Dutton rejected that offer but repeated his offer of 30 September 2021. 26 Counsel for Mr Dutton contended that Mr Bazzi's rejection of the offer of 30 September 2021 was unreasonable. He submitted that Mr Bazzi should, acting reasonably, have appreciated that the Court would find the pleaded imputations established; that Mr Bazzi's rejection of the offer had been imprudent; and that those two matters by themselves justified an order for indemnity costs. 27 It seemed to be common ground that the reasonableness, or otherwise, of Mr Bazzi's rejection of the offer was to be determined by reference to the circumstances in which Mr Bazzi was situated following the receipt of the offer of 30 September 2021. In assessing that reasonableness, it is appropriate to take into account that Mr Dutton sought, by the offer, Mr Bazzi's agreement to forms of relief which he had not sought in the proceedings and which could not, in any event, be the subject of an order of the Court. In addition, he sought a retraction and apology, not only with respect to the publication of the Tweet itself but with respect to Mr Bazzi's subsequent conduct criticising Mr Dutton's bringing of the litigation. 28 It is also appropriate to take into account the lateness with which Mr Dutton made the offer, being only four working days before the commencement of the trial. It was accordingly, made at a time at which it is reasonable to suppose both parties (and in particular Mr Bazzi) had already incurred, at least substantially, the whole costs of the litigation. 29 No explanation has been proffered for Mr Dutton not having made an offer earlier nor has any explanation been provided by Mr Dutton for not serving an offer in the terms contemplated by r 25 of the FCR. There was, of course, no obligation on him to make such an offer but it has to be noted that the Rules regime provides a relatively straightforward means by which parties to litigation can protect themselves with respect to costs and avoid the kinds of arguments about reasonableness or unreasonableness which have arisen in the present case. 30 It is also appropriate to take into account in assessing the reasonableness or unreasonableness of Mr Bazzi's rejection of the offer, that it would have involved, as counsel for the respondent submitted, acceptance that judgment would be entered for Mr Dutton on an imputation which the Court has found was not conveyed and, further, would have required Mr Bazzi to have apologised for conveying an imputation which the Court has found not to have been conveyed. 31 Counsel for Mr Dutton also submitted that it had been unreasonable of Mr Bazzi not to have made a more realistic settlement offer. 32 That is a matter which may have been pertinent had the Court been applying s 40 of the UDA but it is not easy to see that it is pertinent when one is considering whether there is a special or unusual circumstance of the kind contemplated by the authorities as warranting indemnity costs. It is not usually the case that a mere failure by a party to make an offer of settlement warrants a departure from the usual order with respect to costs. 33 For these reasons, I am not satisfied that Mr Dutton has established that there are special or unusual circumstances of the kind which would make an order for indemnity costs appropriate and that application is refused. Incomplete success 34 Counsel for Mr Bazzi submitted that Mr Dutton should receive only a portion of his costs because he was not completely successful in the litigation. He noted that Mr Dutton had succeeded on only one of the pleaded imputations; had failed in his contention that the Tweet was not an expression of opinion; had failed on some matters in relation to the defence of honest opinion and fair comment; had failed to obtain an award of general damages of the order of $100,000 which he had sought; had failed in his claim for aggravated damages; and had failed in obtaining injunctive relief. 35 There are circumstances in which it is appropriate for the Court to apportion costs on the basis of a party's partial success: Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128; (2015) 236 FCR 270 at [11], [18]-[19] and [24]. However, the present case is not of that kind. Mr Dutton succeeded on the single cause of action which he pursued. This is not a case in which he had success on one cause of action but failed on other distinct causes of action. The issues upon which Mr Dutton failed were not separate and distinct from those on which he succeeded, although I accept that there were facets of the claim for injunctions and the claim for aggravated damages which did not entirely coincide with the issues upon which he did succeed. It can, however, hardly be said that those issues prolonged in a discrete or distinct way the trial or involved Mr Bazzi in significant additional expense. 36 I decline, therefore, to engage on this basis in the process of apportioning the costs to which Mr Dutton is entitled. FCR 40.08 37 Rule 40.08 of the FCR 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. 38 As is apparent, the effect of r 40.08 is to permit the Court to order that the costs and disbursements payable in the proceedings, be reduced if an applicant is awarded by way of damages a sum less than $100,000, or if the proceedings could more suitably have been brought in another Court or Tribunal. 39 It was not in dispute that the first limb of r 40.08 is established in the present case, but counsel for Mr Dutton did contend that the proceeding could not have been more suitably brought in any other Court. The satisfaction of the first limb means that the discretion under r 40.08 is enlivened. 40 A number of matters concerning the application of r 40.08 have been discussed in the authorities. In Umoona Tjutagku Health Service Aboriginal Corporation v Walsh [2019] FCAFC 32; (2019) 268 FCR 401, the Full Court said: [57] [R]ule 40.08 enlivens a discretion in the Court … and does not establish a prima facie rule that a specified reduction should be made where the damages are less than $100,000. In this regard, it may be contrasted with its predecessor, O 62 r 36A(1) of the Federal Court Rules 1979 (Cth). Order 62 r 36A(1) and (2) provided for a one-third reduction in costs where damages were less than $100,000 unless the Court or a Judge otherwise ordered or where the Court considered the claim could more suitably have been brought in another court. Nonetheless, Perram and Besanko JJ observed in Loyola v Cryeng Pty Ltd (No 2) [2012] FCAFC 98 that: 15. Plainly, the purpose of the two costs rules is to penalise parties who, through oversight or incompetence, bring and continue proceedings in an inappropriate Court in the judicial hierarchy. The qualifying factor for the operation of the rules is the decision to bring and maintain a case in a particular Court. (Citation omitted) 41 Matters which bear upon the appropriateness of a reduction of costs under r 40.08, include the complexity of the claims (AMP Services Ltd v Manning (No 3) [2007] FCA 510 at [3]); whether the matter involves a subject matter suitable for determination by the Federal Court (Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 3) [2008] FCA 896 at [12]); whether the law is undeveloped or unclear (Tenji v Henneberry & Associates Pty Ltd [1999] FCA 1259 at [10]-[12]); and whether relief of a non-monetary kind has also been awarded (Australasian Performing Right Association Limited v Metro on George Pty Ltd [2004] FCA 1371, (2004) 64 IPR 57 at [10]-[12]). 42 In the context of defamation proceedings, Lee J in Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 at [134], stated: [T]he potential consequences of the operation of FCR 40.08 ought to be borne in mind by those acting for applicants in determining whether a proposed defamation action (which if successful, is unlikely to attract compensatory damages of substance) should be commenced in the Federal Court, rather than another court of limited monetary jurisdiction. This is not to say that the anticipated quantum of damages is the sole consideration in assessing whether the proceeding should be commenced in this Court, but it is clearly a highly relevant one. 43 I also refer to my own judgment in Hanson-Young v Leyonhjelm (No 5) [2020] FCA 34, a defamation action in which I found at [65] that it would not be appropriate to determine the matter by reference only to the amount recovered by the applicant because a defamation action is not just a money claim, but has at its heart, an applicant's claim for vindication of his or her reputation. I also referred to authority in which the Court has accepted that the court in which the applicant obtains the vindication can be an important element in the nature and extent of the vindication obtained. 44 In resisting a reduction of costs pursuant to r 40.08, counsel for Mr Dutton submitted that the issues in the proceedings were complex and serious, evidenced, he suggested by the fact that both parties had retained senior counsel; that the Federal Court has relevant expertise in defamation; that the parties to the litigation are residents in different states; that the Tweet could be taken to have reached across State and Territory borders with the consequence that, as he submitted, a Commonwealth Court is better placed to deliver justice; and that Mr Dutton's public office made vindication of his reputation by a national court appropriate. 45 Some of these matters may be more cogent than others. The Federal Court is not the only Court in the Australian judicial system with expertise in defamation, and it is commonplace for small defamation claims to be brought in the lower courts. It would not be appropriate for the Court to exercise the discretion more favourably to Mr Dutton, simply because of the important national office which he holds. All people are equal before the law, irrespective of the positions which they hold. 46 There was some complexity in the litigation, but that is not a matter which is unusual, even in proceedings commenced in Magistrates Courts, or for that matter, in District Courts. As counsel for the respondent noted, defamation litigation is a common feature of the District Court in New South Wales. 47 There is a public policy consideration in litigation being pursued in courts in the judicial hierarchy which are appropriate for the litigation. Rule 40.08 reflects that public policy. Account should be taken of this too, in considering the matters raised by counsel for Mr Dutton. 48 In my view, this is a proceeding which could have appropriately been brought in a Magistrates Court or equivalent. Save that the Magistrates Court in Queensland does not, according to counsel for Mr Dutton, have jurisdiction to grant injunctions, there is no reason, on my understanding, why the litigation could not have been pursued in that Court. It is relatively rare for permanent injunctions to restrain the publication of defamatory material to be issued. The experience has been, so far, at least generally, that a respondent or a defendant who has been found to have defamed an applicant or a plaintiff, has accepted the judgment of the Court and respected it. The sorts of considerations which led the Court in the present case to refuse the injunctions, are the same considerations which have been reflected in numerous other judgments of the Court. So by adding a claim for injunctions to his claim, Mr Dutton raised a matter which, on its face, took the matter outside the jurisdiction of the Magistrates Court, but in a circumstance, in my view, when he could not have reasonably have entertained an expectation that injunctions would be ordered. 49 In my view, this is a case in which the Court should exercise the discretion granted by r 40.08. Mr Dutton has obtained judgment for $35,825 which is well less than the sum of $100,000 to which r 40.08(a), refers. The proceedings could have been appropriately brought in a lower court in the judicial hierarchy. 50 Rule 40.08 requires the Court, when it accedes to an application under the Rule, to reduce the amount of costs by an amount to be specified by the Court. I read that requirement as being satisfied if the Court indicates sufficiently the basis upon which costs are to be awarded even if it is not presently able to quantify the precise amount of the reduction compared with that which would otherwise have been payable. Were it otherwise, the Court would have to engage, in effect, in two forms of taxation of costs and that cannot reasonably be understood to be the intention of r 40.08. 51 For these reasons, I order, with respect to costs of the trial: (1) Mr Bazzi pay Mr Dutton's costs, but on the scale appropriate to an action brought in the Queensland Magistrates Court for a defamation resulting in a judgment of $35,825. (2) With respect to disbursements, Mr Bazzi pay only those disbursements which Mr Dutton would have had to pay, had the proceedings been brought and pursued in the Queensland Magistrates Court. 52 In summary, judgment is entered for Mr Dutton against Mr Bazzi in the sum of $35,825. Mr Bazzi is to pay Mr Dutton's costs of, and incidental to, the action, to be taxed, in the absence of agreement, on the scale applicable to a defamation action brought in the Magistrates Court of Queensland in which the plaintiff obtains a judgment of $35,825. Having regard to the necessity for today's hearing and its outcome, Mr Dutton pay 50% of Mr Bazzi's costs of, and incidental to, today's hearing. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice White. Associate: Dated: 10 December 2021