BOB KAY REAL ESTATE PTY LTD v AMALGAMATED TELEVISION SERVICE PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, HOPE and CLARKE JJA 29 June 1988, 29 June 1988 [1988] NSWCA 17 COSTS SCR Pt52 RULE 24 COSTS — where verdict in defamation matter less than $10,000. Clarke JA On 18 August 1986 the trial of actions brought by the two appellantsagainst the respondent commenced before McInerney J and a jury. Both appellants had sued the respondent claiming damages for allegedly defamatory imputations which were made in a television programme which was broadcast on Channel Seven on 7 May 1984. The imputations asserted serious misbehaviour both by the second appellant and the first appellant, which was in effect his company. The respondent denied the imputations, denied that the first appellant was defamed or, more accurately, identified in the material published, and pleaded qualified privilege and justifications. At the end of the trial the jury returned verdicts of $5000 for each appellant. Following the jury verdict McInerney J was required to decide whether qualified privilege had been made out and also to rule upon various applications for costs. In the event, he rejected the defences and ordered that the respondent pay those costs of the appellants, including fees for two counsel, appropriate for a verdict of less than $50,000. The appellants have appealed from the trial Judge's refusal to exercise his discretion in such a manner as to allow them full costs. The respondent has cross-appealed, in turn challenging the decision to award the appellants any costs at all. In the cross-appeal it also challenged the allowance of fees for two counsel but has not maintained that challenge in this hearing. It is convenient to deal first with the cross-appeal because the appeal is concerned with what was essentially a consequential order. At the time McInerney J made his order the relevant cost rule, which was found in Pt52 r 24(2), read as follows: "(2) where (d) in proceedings commenced after the commencement of Schedule 1(1) to the District Court Amendment Act 1982 a plaintiff recovers a sum not more than $10 000 he shall not be entitled to payment of his costs of the proceedings unless it appearing to the court that he had sufficient reason for commencing proceedings in the court the court makes an order for payment". The learned trial Judge decided that sufficient reason had been shown and that he ought exercise his discretion to allow the appellants to recover costs. It is said by the respondent that his judgment contained two legal errors. Firstly, he failed to pay due regard to the low amounts awarded to the appellants and, secondly, he placed an onus on the respondent to demonstrate that the verdicts were contemptuous. 2 UNREPORTED JUDGMENTS In his reasons for judgment McInerney J referred to the principles expressed by Stephen C J in Minehan v Clark (1870) 9 SCR 227 at 229 and proceeded to cite the following passage from the judgment of Hunt J in Toomey v John Fairfax & Sons Limited (Supreme Court, 22 May 1985, unreported). "1. That a plaintiff had sufficient reason for commencing the proceedings in the Supreme Court. 2. Defamation actions generally satisfied this test where there is at least the prospect of a reasonably substantial verdict subject to a discretion to be exercised where the jury's verdict demonstrated that it regarded the plaintiff's claim trivial or one that ought not to have been brought and 3. That the sum fixed from time to time by Pt52 r 24(2) does not indicate a legislative intention that any lesser verdict prima facie demonstrates the claim was a trivial one." Having indicated that those were the appropriate principles he then made three critical findings. Firstly, he found that in all the circumstances the case was a complicated one raising difficult questions of law and fact and was a proper case to be brought in the Supreme Court on that basis. Secondly, he found that there was the likelihood of a reasonably substantial verdict following the broadcast of the material complained of to a large viewing audience having regard to all the circumstances and that therefore there ought to be an award for costs. Thirdly, he was of opinion that $5000 for each plaintiff could not be demonstrated to be a contemptuous verdict. The respondent's first submission focuses on particular features of the trial. The second appellant did not give evidence. There was limited identification evidence linking the first appellant with the broadcast and no evidence was called by the first appellant of any loss of profits or by the second appellant of any hurt feelings. These factors were said to explain the low verdicts and required the trial Judge to pay special regard to the amounts awarded in approaching the question whether a reasonably substantial verdict could have been expected. I would not wish to be seen to be suggesting that those factors may not in an appropriate case have been material but the submission fails to point to any error in his Honour's approach. He had heard the case over nine days. He knew that the imputations asserted serious misconduct and misbehaviour on the part of the appellants and he expressly directed his attention to those matters raised now by the respondent. Thus, no failure to consider the matters raised by the parties is demonstrated and there is no indication in the reasons that his Honour failed to accord proper weight to the particular matters raised both before him and now before this Court by the respondent. I would therefore reject the first submission. The respondent's second submission was that the passage in his Honour's reasons which read: "Further, I am of the opinion that $5000 for each plaintiff could not be demonstrated to be a contemptuous verdict." indicated that his Honour had mistakenly transferred the onus from the appellants, where it properly lay, to the respondent This submission seems to me to involve a misunderstanding of what Hunt J said in Toomey. In summary, what he was saying in that case was that in defamation actions it could generally be said that a plaintiff had sufficient reason for commencing the proceedings in the Supreme Court if there was at least a prospect of a reasonably substantial verdict. He then proceeded to qualify this general test by saying that it was subject to a discretion which was to be exercised by the judge where the jury's verdict demonstrated that it regarded the plaintiff's claim as trivial or as one that ought not to have been brought. UBB KAY REAL ESTATE PTY LTD v AMALGAMATED TELEVISION SERVICE PTY LTB (Hope JA) It seems to me that McInerney J followed this approach with scrupulous care. He pointed out, as was obvious, that the matter was a defamation case and then concluded that there was the likelihood of a reasonably substantial verdict. Having reached that conclusion he then directed his attention to the question whether the proviso articulated by Hunt J applied. He found that it did not. He was not satisfied that the verdicts were shown to be contemptuous verdicts, to use his words, or as indicating that the plaintiff's claim was trivial or ought not to have been brought. In my opinion far from falling into error his Honour approached the question which was before him in accordance with the principles laid down in the authorities and the respondent has failed to maintain either of the challenges to the award for costs in favour of the appellants. Turning now to the appeal, I observe that it raises the question whether his Honour erred in exercising his discretion against the appellants in respect of their application for full costs under Pt52 r 24(4). By virtue of r24(3) a plaintiff who recovers a sum of not more than $50000 is entitled only to half his costs. Sub-rule (4) then provides that: "In a case to which sub-r (3) applies the court may order that the amount of costs payable to a plaintiff be some greater part or the whole of the amount which would be payable to him apart from that sub-rule." When McInerney J came to deal with the appellants' application he was met with a submission by the appellants' counsel that he should approach the question on the basis that he should investigate whether the appellants were entitled to expect a verdict in a sum exceeding $50000. He then addressed that question and said he found it a difficult task to try and determine just what damages a jury would be likely to bring in a defamation action as damages in defamation cases are at large. He concluded that in the circumstances, and having regard to the evidence adduced on behalf of the appellants and the conduct of their case, he could not conclude that there was a likelihood there would be a verdict in excess of $50000. This decision, I hasten to add, was handed down before this Court had decided the appeal in John Fairfax & Sons Limited v Palmer, (1987) 8 NSWLR 297. In that case the court unanimously held that the factor to which his Honour had directed his attention, at the suggestion of the appellant's counsel, was an irrelevant factor. Insofar as it appears to have been the only matter which his Honour considered in deciding to exercise his discretion, it seems to me that the discretion must be seen to have miscarried as it was based on an irrelevant consideration. In my opinion, the appropriate order in the circumstances is that the appeal be allowed, that part of the order of McInerney J declining to award the appellants' full costs be set aside and the case remitted to the Common Law Division for further consideration. I would add that I take the view that the matter should be remitted because the material to decide the matter is not before this Court and both parties have asked that the matter be remitted to the Common Law Division. In respect of the cross-appeal, I would order that it be dismissed. The respondent should be ordered to pay the appellants' costs of both the appeal and the cross-appeal. Kirby P I agree. Hope JA I agree. KIRBY P: The orders of the court are accordingly as Clarke JA has provided. 4 UNREPORTED JUDGMENTS The appeal be allowed. That part of the order of McInerney J declining to award the appellants' full costs be set aside and the case remitted to the Common Law Division for further consideration. Order that cross appeal be dismissed. The respondent should be ordered to pay 5 the appellants' costs of both the appeal and the cross-appeal. Counsel for the Appellant: C A EVATT & M BIRD Counsel for the Respondent: W H NICHOLAS QC & J S WHEELHOUSE 10 — Solicitors for the Appellant: YANDELLS DENNIS & CO Solicitors for the Respondent: MALLESONS STEPHEN JAQUES