New South Wales Court of Appeal CITATION: Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339 HEARING DATE(S): On the papers JUDGMENT DATE: 28 November 2007 JUDGMENT OF: Mason P at 1; Beazley JA at 2; Basten JA at 30 DECISION: 1. The appellant is to pay the respondent's costs on an ordinary basis up until 16 August, 2006; 2. The appellant is to pay the respondent's costs on an indemnity basis from 17 August, 2006. CATCHWORDS: COSTS – offer of compromise – offer made under Uniform Civil Procedure Rules 2005 – offer not accepted – offeror received judgment no less favourable than terms of offer – offeror entitled to indemnity costs unless exceptional circumstances – offeree submitted judgment amount only slightly greater than offer – offeree submitted it had a reasonable expectation of success on appeal – offeree submitted appeal on defence of comment embodied right to freedom of speech – decision to refuse offer was unreasonable – no exceptional circumstances LEGISLATION CITED: Defamation Act 1974 s 7A, 7A(4), 24(3), 24(4) Uniform Civil Procedure Rules 2005 r 20.26, Pt 20 Div 4, r 42.14, Sch 5 Arthur Dent v Macquarie Radio Network Pty Ltd [2006] NSWSC 186 Connor v Hatgis (No 2) (Court of Appeal, 7 December 1995, unreported) CASES CITED: Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported) Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 PARTIES: Macquarie Radio Network Pty Ltd (Appellant) Arthur Dent (Respondent) FILE NUMBER(S): CA 40244/06 COUNSEL: B R McClintock SC (Appellant) C A Evatt; C J Dibb (Respondent) SOLICITORS: Banki Haddock Fiora (Appellant) Carters the Law Firm (Respondent) LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): SC 20018/03 LOWER COURT JUDICIAL OFFICER: Bell J LOWER COURT DATE OF DECISION: 5 April 2006 LOWER COURT MEDIUM NEUTRAL CITATION: Arthur Dent v Macquarie Radio Network Pty Ltd [2006] NSWSC 186 - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40244/06 MASON P BEAZLEY JA BASTEN JA 28 November 2007 Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) Judgment 1 MASON P: I agree with Beazley JA. 2 BEAZLEY JA: The Court gave judgment in this matter on 27 September 2007 in which it dismissed the appeal from the decision of Bell J in Arthur Dent v Macquarie Radio Network Pty Ltd [2006] NSWSC 186, delivered on 5 April 2006. 3 After the Court delivered judgment, counsel for the respondent made an application for an order that the appellant pay the respondent's costs on an indemnity basis from 16 August 2006. The foundation for this application was an offer of compromise made by the respondent on 16 August 2006. The offer was in the following terms: "The [respondent], offers to compromise the appeal and his claim by accepting the sum of $70,000 plus costs in answer to the cause of action on which he claims and in answer to the [appellant's] application for leave to appeal." 4 The offer was stated as being made in accordance with Pt 20, Div 4 of the Uniform Civil Procedure Rules (the UCPR). There was no time limit within which the appellant was required to accept the offer. 5 The offer was made after leave to appeal had been sought, a Summons for Leave to Appeal having been filed on 27 July 2006. Leave to appeal was granted on 12 December 2006. The appellant did not accept the offer of compromise. 6 Both parties have now filed written submissions with the Court in respect of this application. Background to the appeal 7 The respondent had brought proceedings in the Supreme Court alleging he had been defamed in a radio broadcast by Ray Hadley conducted on the radio station 2GB, of which the appellant was licensee. Following a trial before a jury pursuant to s 7A of the Defamation Act 1974 (the Defamation Act), the jury found that three imputations were conveyed by the broadcast and were defamatory of the respondent. 8 The matter came before Bell J pursuant to s 7A(4) of the Defamation Act for determination of the defences and if applicable, the damages to which the respondent was entitled. The appellant defended the defamation proceedings on a number of bases, including that the broadcast was a 'fair summary' of a 'protected report' within the meaning of ss 24(3) and 24(4) of the Defamation Act, or was 'comment' within the meaning of s 30 of the Defamation Act. Her Honour rejected all defences and ordered a verdict and judgment in favour of the respondent in the sum of $65,000. Interest in the sum of $7,650 was awarded on the judgment sum. As a result, there was a total judgment in favour of the respondent in the amount of $72,650. The appellant was ordered to pay the respondent's costs. 9 On appeal, the appellant was successful in defending two of the three imputations on the basis that the defence of comment applied. However, the challenge to the cause of action based on imputation (b) was rejected and the appellant was entitled to an award of damages. Although no specific challenge was made to the trial judge's assessment of damages, the Court held there was no reason to interfere with her Honour's decision as the damage to the respondent's reputation and the hurt and distress he suffered was not divisible between the three imputations. 10 The offer of compromise made by the respondent satisfied the requirements of Pt 20 Div 4 of the UCPR, in particular, r 20.26. As a result, Pt 42 r 42 of the UCPR applies. Relevantly, r 42.14 provides: " 42.14 Where offer not accepted and judgment no less favourable to plaintiff 1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: … (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 11 As the judgment obtained by the respondent was no less favourable than the offer of compromise made to the appellant, unless the court orders otherwise, the respondent is entitled to costs on an ordinary basis up until 16 August 2006 and on an indemnity basis from 17 August 2006. Parties' submissions 12 The respondent's primary submission that he is entitled to an order for indemnity costs was based on an offer of compromise made to the appellant on 16 August 2006. As the respondent received a judgment no less favourable than the offer made to the appellant, it was submitted that the respondent was entitled to such an order. 13 It was accepted by the appellant that UCPR r 42.14 provided that, unless the court orders otherwise, in circumstances where an offer is made but not accepted, and an order or judgment no less favourable than the terms of the offer is obtained, the offeror is entitled to an order for costs assessed on an indemnity basis from the date of the offer. It was further accepted that exceptional circumstances will generally have to be shown in order to justify a departure from the rule. It was submitted that exceptional circumstances existed in this case such that the respondent should not have an order for indemnity costs. 14 The appellant's submission that exceptional circumstances existed was based on four premises. First, the respondent's offer was for an amount only slightly less than the judgment sum obtained at trial. Secondly, it was submitted the offer was made in the context of leave to appeal having been sought where the appellant could reasonably expect the appeal to succeed. The appellant submitted that the reasonableness of its expectation was confirmed by the decision of Basten JA, and the majority judgment which upheld the defence of comment in relation to two of the three imputations such that the appellant achieved substantial success on the appeal. Thirdly, the appellant was entitled to pursue its appeal which in large part focused on the defence of comment which embodied the fundamental legal right of freedom of speech. Finally, it was submitted it was more than reasonable for the appellant not to have accepted the respondent's offer of compromise. Should a different order be made? 15 A court will only deviate from the general rule provided for by r 42.14 of the UCPR and make a different order if it finds that there are exceptional circumstances for doing so. Hunt AJA in South Eastern Sydney Area Health Service v King [2006] NSWCA 2 considered the authorities in relation to Pt 52A r 22 of the Supreme Court Rules (which is relevantly in the same terms as UCPR r 42.14). His Honour (Mason P and McColl JA agreeing) stated at [83]: "The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff's entitlement. See, generally, Fowdl v Fowdl Court of Appeal, 4 November 1993 unreported, per Kirby P at 12, 16; Hillier v Sheather (1995) 36 NSWLR 414 at 422–423; Morgan v Johnson (1998) 44 NSWLR 578 at 581–582. 16 As outlined above, the appellant relied on four main points in its submission that exceptional circumstances existed in this case such that a different order should be made. The respondent's offer was for an amount only slightly less than the judgment 17 In Connor v Hatgis (No 2) (Court of Appeal, 7 December 1995, unreported), Kirby P and Priestley JA, in dismissing an application that costs should not be made on an indemnity basis as prima facie provided for by the Supreme Court Rules Pt 52 r 17 (as then in force) stated: "It will often be the case that the indemnity cost rule will apply to offers close to the sum eventually recovered. The policy behind the rule is to ensure that parties give full and realistic consideration to offers to compromise litigation. Had the respondent's offer…been accepted by the appellant a great deal of public and private cost would have been obviated, as events have demonstrated. To refuse the application of the prima facie rule would be to undermine the achievement of the objects of the rule and to send an undesirable signal as to the way in which the rule should be administered." 18 In that case, although the plaintiff received a verdict amount of only $4,000 more than the offer of compromise, that was not sufficient to displace the operation of the rule. See also Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported) where there Court refused to make a different order than provided for by the relevant rule in circumstances where the was a difference of $750 and Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 where a difference of 2.5 per cent was deemed to be real and not trivial or contemptuous. 19 It should be noted that the appellant before this Court did not seek to challenge the quantum of damages awarded by the trial judge. The appeal was confined strictly to a determination of the appellant's liability. 20 Apart from the judgment amount of $72,650, the appellant was also liable to pay interest on this amount while the amount remained outstanding. Judgment was delivered by the trial judge on 5 April 2006, while the offer of compromise was made on 16 August 2006. The appellant was required to pay interest on this amount during this period at the rate of 9 per cent per annum: Sch 5 of the UCPR. This meant that at the time of the offer of compromise, the award in favour of the respondent had accrued to $74,829.50. As at the date of offer, therefore, there was a difference between the judgment amount and the offer of compromise in the vicinity of 7 per cent. The appellant would also have been aware that any failure with respect to a subsequent appeal, would result in further interest accruing on the judgment amount. Having regard to those matters and the authorities of this Court outlined above, the appellant's submission on this ground should be rejected. Timing of the offer and reasonableness of the appeal 21 The timing of the offer of compromise made by the respondent in this case was significant. As stated above, the offer was made after the Summons for Leave to Appeal had been filed but before the hearing of the leave application, which was some four months after the offer was made. In addition to the costs associated with the hearing of the application for leave to appeal (leave being granted), there were the costs incurred for both sides in the hearing of the appeal before this Court. The costs associated with these matters could have been avoided had the appellant accepted the respondent's offer. 22 The appellant asserts, however, that it was entitled to reasonably expect that it would be successful on the appeal and in fact, that this expectation was confirmed by fact that the decision of this Court was a majority decision. This argument must be rejected. The outcome of an appeal in any court cannot be predicted with any measure of certainty. Litigation inevitably entails risks and uncertainties of which no party can reliably foresee. This point is illustrated in the present case by the appellant's failure in its challenge to the trial judge's decision in a case in which it believed it could "reasonably expect the appeal to succeed". 23 The appellant's submission that it achieved substantial success on the appeal should also be rejected. The appellant's principal challenge to the trial judge's decision, and that to which its written submissions were directed, was that the radio broadcast was protected by s 24 of the Defamation Act, and in particular, that Mr Hadley's broadcast was a later publication of a 'protected report', or a 'fair summary' of a 'protected report' within the meaning of s 24(3), or alternatively, was a fair summary of a purported protected report within the meaning of s 24(4). The appellant was unsuccessful on both of these points. 24 It was not until the hearing of the appeal that senior counsel for the appellant advanced any submisisons in relation to the defence of comment. Although the appellant was partially successful in defending the imputations based on this defence, ultimately the appellant was unsuccessful on the appeal with this Court affirming judgment in favour of the respondent. Freedom of speech 25 The appellant submits that the appeal in large part focused on the defence of comment, which embodies the fundamental legal right of freedom of speech. While there can be no doubt that the freedom of speech plays an important role in any modern democratic society, in the present context with which this Court is concerned, this right has to be weighed against the policy imperatives which underpin the rules regarding offers of compromise. 26 The objects of the rule were discussed by this Court in Maitland Hospital v Fisher [No 2] where the Court (Kirby P, Mahoney JA and Samuels AJA) stated at 724: "The objects of the rule include: 1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court; 2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation." 27 Having regard to the policy considerations and the particular circumstances of this case, including, the quantum of the respondent's offer and the subsequent legal costs that were incurred following the appellant's refusal to accept the offer of compromise, a departure in this case from the usual order as provided by r 42.14 would only serve to undermine the objects behind the rule. 28 Having regard to all the circumstances of the case, the appellant's submission that it was more than reasonable for it to not have accepted the respondent's offer should be rejected. 29 The appellant has not shown that there was anything exceptional about its case such that an order for indemnity costs should not be made in favour of the respondent. Therefore, I propose the following orders: 1. The appellant is to pay the respondent's costs on an ordinary basis up until 16 August, 2006; 2. The appellant is to pay the respondent's costs on an indemnity basis from 17 August, 2006. 30 BASTEN JA: I agree with Beazley JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.