Supreme Court New South Wales Medium Neutral Citation: Mundine v Brown (No 7) [2011] NSWSC 170 Hearing dates: 11 February 2011 Decision date: 18 March 2011 Before: Harrison J Decision: 1. Order the first and third defendants to pay the plaintiff's costs of the proceedings. 2. Order the first defendant to pay the costs referred to in order (1) on the ordinary basis. 3. Order the third defendant to pay the costs referred to in order (1) on an indemnity basis. 4. Order the plaintiff to pay the second defendant's costs of the proceedings. 5. Order the plaintiff to pay the costs referred to in order (4) on the ordinary basis. Catchwords: COSTS - defamation - apportionment of costs - Defamation Act 2005 s 40(2) - indemnity costs - where plaintiff succeeds on one only of a number of imputations - whether costs should be apportioned to reflect time taken dealing with issues where plaintiff unsuccessful - whether plaintiff entitled to indemnity costs - whether interests of justice required otherwise where defendants unable to refer to what occurred during mediation - where defendants could have made offers not embargoed by Civil Procedure Act 2005 s 30(4) - defendants to pay plaintiff's costs on indemnity basis Legislation Cited: Civil Liability Act 2002 Civil Procedure Act 2005 Defamation Act 2005 Evidence Act 1995 Cases Cited: Ahmadi v Fairfax Media Publications Pty Ltd (No 2) [2010] NSWSC 1191 Azzi & Ors v Volvo Car Australia Pty Ltd (Costs) [2007] NSWSC 375; (2007) 71 NSWLR 140 Channel Seven Sydney Pty Ltd v Mahommed (No 2) [2011] NSWCA 6 Davis v Nationwide News Pty Ltd [2008] NSWSC 946 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Forsyth v Sinclair (No 2) [2010] VSCA 195 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Mundine v Brown (No 4) [2010] NSWSC 516 Mundine v Brown (No 6) [2010] NSWSC 1285 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Roads & Traffic Authority v McGregor (No 2) [2005] NSWCA 453 Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 Sydney Ferries v Morton (No 2) [2010] NSWCA 238 Turkmani v Visvalingam (No 2) [2009] NSWCA 279 Waters v P C Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 Category: Consequential orders Parties: Lana Mundine (Plaintiff) Avery Brown (First Defendant) APN News and Media Limited (Second Defendant) Daily Examiner Pty Ltd (Third Defendant) Representation: Counsel: T Molomby SC with R K M Rasmussen (Plaintiff) P M Sibtain (First Defendant) A T S Dawson (Second and Third Defendants) Solicitors: Slater & Gordon (Plaintiff) Holding Redlich (First Defendant) Banki Haddock Fiora (Second and Third Defendants) File Number(s): 2009/297431 Judgment 1HIS HONOUR: On 5 November 2010 I published my reasons for judgment in the principal proceedings: see Mundine v Brown (No 6) [2010] NSWSC 1285. There was a verdict for the plaintiff for $60,000 against the first and third defendants. The second defendant had previously ceased to be involved in the proceedings when the issue of publication by it of the matter complained of was taken from the jury: see Mundine v Brown (No 4) [2010] NSWSC 516. I directed argument on the question of costs of the proceedings. These reasons deal with that issue. 2Three general issues separate the parties. First, the defendants contend that Ms Mundine only succeeded on a narrow or limited basis and that any costs order that might be made in her favour should reflect an apportionment between those issues upon which she succeeded and those issues upon which she failed. Secondly, the second defendant contends that Ms Mundine should be ordered to pay its costs. Thirdly, Ms Mundine argues that any costs that may be ordered in her favour should be payable by the first and third defendants on an indemnity basis. 3Several statutory provisions and rules require consideration in this context. It is convenient to set them out before proceeding further. 4Section 98 of the Civil Procedure Act 2005 is in the following relevant terms: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. (5) ..." 5UCPR 42.1 is in these terms: " 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 6Section 30(4) of the Civil Procedure Act is in the following terms: "(4) Subject to section 29 (2): (a) evidence of anything said or of any admission made in a mediation session is not admissible in any proceedings before any court or other body, and (b) a document prepared for the purposes of, or in the course of, or as a result of, a mediation session, or any copy of such a document, is not admissible in evidence in any proceedings before any court or other body." 7Section 131 of the Evidence Act 1995 provides in part as follows: "131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. (2) Subsection (1) does not apply if: ... (h) the communication or document is relevant to determining liability for costs..." 8Finally, s 40 of the Defamation Act 2005 is as follows: "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." Costs as between Ms Mundine and the first and third defendants 9Ms Mundine alleged that an article that was published in The Daily Examiner on 18 August 2008 defamed her. She is and was at the time of the offending publication a mental health worker employed by the Aboriginal Medical Service in Grafton. The paper circulated in the Clarence Valley, a geographical area that includes Grafton and surrounding districts. Ms Mundine provided services to the Aboriginal community in that area. The article complained of suggested that she fell short of her professional obligations as a mental health worker for the Aboriginal community in a number of respects. The defamatory imputations for which Ms Mundine contended were as follows: 1. As a mental health worker she was failing to meet her obligations to the aboriginal community. 2. As a mental health worker in the aboriginal community she bears a responsibility for the gross over representation of the aboriginal community in the courts. 3. As a mental health worker she was incompetent. 4. As a mental health worker she was unwilling to go out to the locations where her services were needed. 5. She was not appropriately accredited for her job as a mental health worker when compared to mainstream service providers. 6. She lacks commitment to her job as a mental health worker. 10Of these, Ms Mundine only succeeded in establishing that the third imputation was made out. However, the case was conducted throughout upon the basis that she was seeking to establish all of the imputations. The first and third defendants submitted in these circumstances that "some other [costs] order should be made" in the way contemplated by UCPR 42.1. I was referred to Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98. These defendants submitted that costs are awarded as compensation to the successful party and that the Court is required to take a practical, rather than a highly technical, approach to the issue: Ahmadi v Fairfax Media Publications Pty Ltd (No 2) [2010] NSWSC 1191. In particular, my attention was directed to the helpful summary of the authorities assembled in Ahmadi by Rothman J at [8]. That summary included a reference to Waters v P C Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328. 11The first and third defendants therefore submitted that in the present case, the issues upon which Ms Mundine succeeded and those upon which these defendants succeeded are clearly identifiable and that this identification should inform the question of where the burden of the costs of the litigation should fall. They submitted that to do otherwise would cause hardship to the first and third defendants because they succeeded on what they characterised as "issues that occupied the bulk of the time taken in [the] proceedings". They submitted that Ms Mundine should accordingly bear the expense of litigating those discrete issues upon which she failed. An apportionment of that order involves an exercise of discretion depending on matters of impression and evaluation without recourse to mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261. 12The first and third defendants contended in the present case that so much of the hearing as involved the jury's consideration of the imputations was clearly severable from the rest of the trial as it was determined separately. In those circumstances, there was no reason why these defendants ought not to have the costs of the argument before the jury on the question of the imputations: they succeeded on all but one of the six imputations litigated. The jury found that only two of the meanings were conveyed to an ordinary reasonable reader and that only one of them was defamatory of Ms Mundine. The jury retired to consider questions concerning identification and defamatory meaning and returned with answers to those issues on day eleven of the proceedings. The first and third defendants submitted that most of the first two weeks of the trial was concerned with the question of imputations. 13The second set of questions that the jury was asked to consider dealt with the defence of honest opinion. They found in favour of the first and third defendants on the first question, namely, that the article would have been understood by an ordinary reasonable reader to be an expression of opinion rather than a statement of fact. They also found that in respect of question two, 14 of the 18 matters in the article were substantially true facts as at the date of publication, or in other words that the expression of opinion was based on substantially true facts in over 75 per cent of the time. 14The first and third defendants successfully defended a claim of malice. They sought their costs of doing so. These defendants contended that approximately six days of the trial were spent on submissions in respect of malice, formulation of questions for the jury concerning the opinion defence and addressing the jury on that defence. 15In summary, the first and third defendants submitted that Ms Mundine should have only 25 per cent of her costs against them. 16Ms Mundine did not challenge these defendants' apportionment concerning the time taken to deal with various issues but did contest an award of costs to reflect it. She referred to what was said by Mahoney JA in Waters in these terms: "Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed." 17Waters was cited with approval in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]. See also Roads & Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [17]; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6]; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64] - [65]; Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 at [115]; Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [9] - [10]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]. 18In James the Court said this at [34]: "[34] Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter..." 19Ms Mundine described the contention of the first and third defendants, that they should have the costs of the argument before the jury on the question of imputations because they succeeded on five of the six pleaded imputations, as an entirely superficial approach. She reasoned as follows. 20The courts have very considerable experience of hearings dealing with the question of imputations in jury trials. This flowed from the regime as it operated under s 7A of the previous Act. Mr Molomby of senior counsel for Ms Mundine contended that hearings involving imputations arising from a single publication, where no other complicating issues such as publication or extrinsic facts or identification arose, often took only one day and rarely more than two days. The reason why the issue touching the imputations in the present case took so much longer was related to the issue of identification of Ms Mundine. The first and third defendants disputed that issue and lost. All of the evidence before the jury on the question of imputations, with the exception of the issue of publication, went to identification. 21Ms Mundine contended that it was wrong to say that the issues on which the first and third defendants seek costs were dominant or separable. The question of whether the imputations arose and were defamatory, though important, was not the dominant question in that portion of the trial. The dominant question was one of identification. Mr Molomby asserted that it achieved that prominence and dominance as a result of the approach of the first and third defendants. It was what he described as by far the major issue in that part of the case. Nor were the questions separable. The imputation upon which these defendants failed was said by Ms Mundine to be "in many respects a synthesis of other aspects of the imputations that were unsuccessfully pleaded". It was submitted that this is reflected in addresses. For example, on the question of whether the imputations arose and were defamatory, counsel for all parties addressed for only 18 out of a total of 107 transcript pages. 22In Davis v Nationwide News Pty Ltd [2008] NSWSC 946, the plaintiff sued over five newspaper articles. The jury found that out of eleven pleaded imputations, two arose from one article, one arose from another and none arose from the other three. The defendant argued that because she had succeeded in relation to only three imputations in two publications, the plaintiff should not be awarded all of her costs. McClellan CJ at CL rejected that. He said this at [31]: "... Because the Act contemplates a single cause of action, even if there is more than one defamatory imputation in a publication (s 8) and the assessment of damages in a single sum (s 39) where there is more than one cause of action, the approach in Windsurfing may have limited application. The special costs rules in the Act are directed towards early settlement of the proceedings. If the failure by the defendant to make a reasonable offer means the proceedings continue to trial and the plaintiff obtains a judgment, the fact that he or she fails in relation to some of the pleaded imputations will be of limited relevance." 23Ms Mundine also referred to Ahmadi , but insisted that it was distinguishable, either because it was wrong or otherwise explicable by reference to its particular facts. 24Ms Mundine then submitted that the second part of the present case determined by the jury was concerned with the question of honest opinion. That defence has several elements, all of which must be established in order to succeed. Ms Mundine argued that it would be both artificial and illogical to say that a defendant, who fails on the defence as a whole, even though it succeeded on some elements within it, should have a costs order in its favour referable to those parts of the defence upon which it succeeded. Ms Mundine argued that success on anything other than all parts of the defence was still a total failure. 25Finally, Ms Mundine argued that the question of malice occupied very little of the total time of the trial. There was little evidence tendered on the issue. The legal argument was confined. It was neither dominant nor separable. It was pleaded in answer to the defence of qualified privilege, to which it was linked, and upon which issue the first and third defendants lost in any event. Consideration of costs as between Ms Mundine and the first and third defendants 26The wisdom that must inform a decision to apportion costs having regard to the successful and unsuccessful aspects of a party's case includes a need to demonstrate that the aspect concerned is dominant or separable. These concepts anticipate somewhat more than a suggestion or even a demonstration that the resolution of an issue or some issues occupied a large amount of court time. As a matter of coincidence, the issue of whether or not the second defendant published the matter complained of falls in my view into the category of one that is separable from others in the proceedings, even if it could not be described as dominant. 27In the exercise of my discretion, as a matter of impression and evaluation, and without recourse to mathematical precision, it seems to me that this litigation has been hard fought by all parties from start to finish. Very few time saving concessions have been proffered by any party on any point. In the context of defamation proceedings such as these it seems to me to be artificial to attempt to find that any one or some of a number of alleged imputations arising out of the same publication can be said to be a discrete issue for determination. At the point at which the six imputations in this case were left to the jury, it could not be said confidently by any party which of the meanings, if any, would be found to have been conveyed to an ordinary reasonable reader or which, if any of those, were defamatory of Ms Mundine. Two of the meanings survived the first inquiry even though only one of those two was found to be defamatory. That final result was clearly the outcome of a jury exercise that started with the opening submissions of counsel and which ended with the jury retiring to consider its verdict. It does not appear to me to be possible or sensible to even attempt to attribute what amounts to four-sixths of the first question and five-sixths of the second question to one side of the ledger and apportion costs accordingly. 28The first and third defendants specifically submitted that approximately six days of the trial were spent on submissions in respect of malice, the formulation of questions for the jury in respect of the opinion defence and addressing the jury on that defence. The jury found that the first and third defendants had established that the matter complained of would have been understood by the reasonable reader as an expression of opinion rather than a statement of fact. However, of those matters found by the jury to have been based on substantially true facts as at the date of publication, they were not satisfied that the first and third defendants had established that the opinion expressed by them was properly based on any of them. The jury was also not satisfied that the first and third defendants were motivated by malice. 29The disposition of these matters does not to my mind throw up any issue or any number of issues capable of being described as either dominant or separable. They were all part and parcel of the litigation as it unfolded. At times it may have appeared that Ms Mundine was in front, whereas at other times it may have appeared that the first and third defendants were in front. The lead may notionally have changed throughout the case. When the finish was reached, Ms Mundine was ahead. It does not in my opinion avail those defendants to say that they should have their costs of that part of the trial when they were "in front", or of those issues upon which they ultimately succeeded, if the end result was that in a claim for damages they lost. By analogy with a claim of contributory negligence in a personal injuries action, it would be remarkable for a plaintiff to be required to pay a defendant's costs related to issues that the defendant established and which reduced the damages, in circumstances where the defendant was ultimately found liable to pay them. 30I am also mindful of what was said by McClellan CJ at CL in Davis at [31]. I respectfully adopt his Honour's formulation of the position that if the failure by the first and third defendants to make a reasonable offer has meant that the proceedings continued to trial, and Ms Mundine obtains a judgment, the fact that she may have failed in relation to some of the pleaded imputations is of limited relevance. 31The significant issue in the proceedings was that of the identification of Ms Mundine by reasonable readers of an article that did not refer to her by name. That issue also became the central theme of the first and third defendants' submissions on the defence of qualified privilege, and their contention, which I rejected, that publication could only have occurred to those readers who identified Ms Mundine, and not to the entire readership of the paper. Consideration of that issue found a place in many other issues that excited the attention of all parties and it cannot conveniently or easily be extracted from any aspect of the case that could then be said to be left as either dominant or separable. 32In my opinion the first and third defendants should pay Ms Mundine's costs of the proceedings. The costs of the second defendant 33The second defendant sought its costs on an indemnity basis. It had unsuccessfully invited Ms Mundine to withdraw her claim against it on many occasions. There was found to be no case on publication by the second defendant that should go to the jury. 34On this issue Ms Mundine observed that the statement of claim was originally filed on 5 February 2009 and joined only the first two defendants. Between then and 1 July 2009 correspondence was conducted with solicitors acting on behalf of the second defendant alone. That correspondence included a letter from those solicitors dated 18 March 2009, which contained the following sentence: "There has been no letter to the editor nor any request for an explanation or apology [that has been sent] to our client." 35Ms Mundine asserted that that amounted in the circumstances, as they then existed, to a representation by the solicitors that they were acting on behalf of the publisher of The Daily Examiner . 36I was referred to the fact that on 14 April 2009 there had been argument in the defamation list before Nicholas J dealing with the second defendant's objections to imputations. On the application of the second defendant his Honour referred the matter to mediation. That took place in June 2009. The solicitors now acting for the second and third defendants appeared there on behalf of the second defendant. Ms Mundine argues that their presence was inconsistent with a later assertion that they were uninvolved in the publication. It was only after the failure to resolve the matter at the mediation that the solicitors acting for the second defendant sent the letter dated 1 July 2009 indicating that they were not the publisher. 37Ms Mundine complains that despite "bald" assertions by the second defendant that it was not the publisher, no supporting basis or explanation for that assertion was provided. Instead, the solicitor for the second defendant wrote letters, such as that written on 15 February 2010, saying, "the second defendant is not a publisher as explained long ago". That letter never referred to the fact, which its counsel would later refer to, that it would have been easy for Ms Mundine to discover that the second defendant was not the proprietor of the business name "Daily Examiner". 38The burden of Ms Mundine's submissions on this point is that the second defendant offered no explanation of its contention that it was not the publisher but that it should have. Much correspondence and ultimately court time was devoted to this issue, culminating in my decision that the issue of publication by the second defendant should not go to the jury. Ms Mundine's submissions then descended into the following propositions: "30. Thus for a protracted period the court was misled and distracted by fundamentally false propositions advanced on behalf of the second defendant. Those propositions concerned matters so basic to the operation of the second defendant, and of such long standing and notoriety, that they could not have been other than lies from those providing instructions on behalf of the second defendant to their legal representatives. This reflects upon the second defendant's whole attitude to the conduct of this issue. It is clear that the unresponsive stonewalling [sic] in correspondence in the two weeks before the trial...was part of a broader position designed to evade the truth. 31. It is inconceivable that the plaintiff should be required to pay any part of the second defendant's costs. Until 1 July 2009 the second defendant not only made no claim that it was not the publisher, but acted positively in a way that implied that it was. After that date, it acted uncooperatively and negatively, and at the hearing wasted time, and misled the court by maintaining a false basis for avoiding liability. Indeed, if costs could be apportioned, the second defendant should pay on an indemnity basis the costs of all parties wasted by this misbehaviour." 39It goes without saying that the second defendant took issue with these contentions. Consideration of the second defendant's costs 40In my opinion the submissions made on behalf of Ms Mundine appear to lose sight of the fact that she bore the onus of proving her case. That included, relevantly for present purposes, that the second defendant published The Daily Examine r. My earlier judgment on that issue followed extensive argument from both sides. The propositions upon which the parties relied were not at all times easy to understand. This was predominantly the result of a somewhat confusing picture that emerged from corporate publications issued by the second defendant. Ms Mundine asserts that the second defendant in effect was in command of those facts, or should have been, and that in such a case it carried some obligation to explain at an early time the basis for its asserted position that it was not the publisher. 41Ms Mundine chose to join the third defendant when confronted with the second defendant's denial that it was the publisher. She did so by her further amended statement of claim filed on 14 July 2009. By its defence filed on 18 August 2009 the second defendant denied publication. In contrast, by its defence filed the same day the third defendant admitted that it was the publisher. Ms Mundine thereafter persisted with her case against the second defendant notwithstanding that she had both the benefit of the third defendant's admission and was necessarily confronted with the risk associated with continuing against the second defendant in light of its denial. 42It is difficult to see that any so-called representation that may have been made by or on behalf of the second defendant, because it participated at the mediation, could have survived as a significant matter, once these defences had been filed. I am doubtful that it was or became a significant matter in any event. This is because once the defences were filed Ms Mundine was from that time at least plainly on notice of the second defendant's position on this issue, which remained a position from which it did not retreat. If there was some important reason why Ms Mundine needed to keep the second defendant in the proceedings, despite the third defendant's admission, then she did so at her own risk. I do not consider that it was ever the second defendant's obligation to explain its denial. 43The second and third defendants have at all times shared a common legal representation. The costs referable to the second defendant and its contradiction of the allegation that it published the matter complained of must surely be limited to a small proportion of the costs of representation for the second and third defendants taken together. The costs that I am presently dealing with therefore do not include costs of the second defendant's counsel or solicitors when they were providing contemporaneous representation for the third defendant. Upon that understanding I consider that Ms Mundine should pay the second defendant's costs, limited or restricted to the costs solely referable to the publication issue. The question of whether those costs should be paid on an indemnity basis is dealt with below. Indemnity costs 44Ms Mundine seeks payment of her costs on an indemnity basis. She relies upon the terms of s 40(2) of the Defamation Act and s 131 of the Evidence Act earlier set forth. It is said that in the particular circumstances of this case, that brings forth a need to compare the effect of those sections and the operation of s 30(4) of the Civil Procedure Act . 45Section 40 substantially reproduces the former s 48A of the Defamation Act 1974 , inserted by the Defamation Amendment Bill 2002 . Nowhere in the relevant Hansard or Second Reading Speeches is there any discussion of the relationship between s 30(4) and s 131. There is limited case law on the topic. 46In Azzi & Ors v Volvo Car Australia Pty Ltd (Costs) [2007] NSWSC 375; (2007) 71 NSWLR 140, Brereton J was required to rule on the admissibility of a settlement offer made during the course of a mediation. He held that in relation to settlement offers made during a mediation, the general rule in s 131(2)(h) is trumped by s 30(4) of the Civil Procedure Act . His Honour said this: "[12]... Evidence Act, s 131(2)(h), does not make every offer of settlement that may be relevant to a question of costs admissible; rather, it removes, in the case of such offers, the bar to admissibility otherwise imposed by s 131(1). It is only that bar, and not any other bar, that it removes. In particular, it does not remove the bar imposed by Civil Procedure Act, s 30(4). [13]... s 30(4) is a rule of evidence, and not a provision affecting the jurisdiction of the Court. It in no way limits the jurisdiction of the Court to make a costs order or an indemnity costs order. It simply excludes from admissibility (not only on the question of costs, but at all) evidence of what transpires at a mediation session. That it extends to proceedings in respect of costs is plain enough on its face: the provision says that such evidence is not admissible in any proceedings, any court or other body. ***** [18]... while the Evidence Act contains a general provision excluding evidence of settlement negotiations, with an exception to that general exclusion where the negotiations are relevant to costs, Civil Procedure Act s 30(4) is a more specific provision directed specifically to negotiations in a mediation session, excluding evidence of such negotiations, without any corresponding exception. When it applies, the later and more specific provision prevails over the more general one. [19] The view that I take of the relationship between Evidence Act, s 131(2)(h), and Civil Procedure Act, s 30(4) is substantially the same as that expressed by Palmer J in Rajski v Tectran Corporation Pty Limited [2003] NSWSC 476. ***** [26]... The evidence that Volvo seeks to adduce of the offers made at the mediation is evidence of something said in a mediation session. The present costs application is a proceeding before a Court. By reason of Civil Procedure Act s 30(4)(a), that evidence is not admissible, and I reject it. ***** [28]... as the only matter on which Volvo ultimately relied in support of its indemnity costs order was the offers made at the mediation, there is no material before the Court to support Volvo's application." [emphasis in original] 47McClellan CJ at CL dealt with s 40 in Davis at [25] - [27] as follows: "[25] Section 40 is based on s 48A of the Defamation Act 1974 which was introduced by the Defamation Amendment Act 2002. Although the provision commenced on 17 February 2003 it has not been utilised to any significant extent. [26] The special costs provisions were introduced following a concern that the costs of defamation proceedings may prohibit persons who have a legitimate claim from pursuing relief. Unless in appropriate cases costs were awarded on an indemnity basis a plaintiff may be out of pocket to such an extent that the risks in bringing proceedings were unacceptable. Furthermore, the intention of the legislation was to promote a "speedy and non litigious method of resolving disputes and to avoid protracted litigation wherever possible" (Second Reading Speech, Legislative Assembly, 12 November 2002). When the Amendment Act was introduced, Mr Stewart the Parliamentary Secretary on behalf of Mr Debus the Attorney-General said: 'The normal costs rule is that the successful party recovers costs on a party-party basis. Typically, this amounts to about 60 per cent to 80 per cent of their actual legal costs. Both the Supreme Court and the District Court have a general discretion as to the amount of costs to be paid by parties, including the award of indemnity costs. Indemnity costs are usually awarded where there has been a flagrant breach of procedural rules by the unsuccessful party and can amount to 80 per cent to 90 per cent of actual costs. In practice, indemnity costs are seldom awarded. The bill adds section 48A to the Defamation Act which requires the court to consider an order for costs on an indemnity basis where it forms the view that there has been an unreasonable failure on the part of either the plaintiff or the defendant to resolve the matter. For example, a plaintiff would be at risk of an indemnity costs order if he or she were not to accept an offer of correction or apology where the offer was reasonable. A defendant would be at risk of an indemnity costs order were it not to make a settlement offer when it would have been appropriate to do so.' [27] Section 40(2) obliges parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party's conduct. The section contemplates that an order for costs on an indemnity basis may be made even if a party making an offer does not do better in the proceedings than the offer which he or she has made." 48In that case the defendant made an offer that each party walk away and pay its own costs. His Honour held that the defendant should have appreciated that the plaintiff might succeed on a greater number of imputations than she did, and should have offered an apology and a sum for compensatory damages. 49In this case, neither party actually sought specifically to refer to what occurred in the mediation, although the first defendant somewhat indignantly hinted that an offer had been made to Ms Mundine at the mediation, even if its terms could not be disclosed. The first and third defendants argued that since s 30(4) insulates from disclosure the terms of any settlement offer made during a mediation, I cannot make an order pursuant to s 40(2), because to do so would, or may potentially, be contrary to the "interests of justice". This is because those defendants may in fact have made an offer of settlement at the mediation to the terms of which they are now prevented from referring. The first and third defendants submitted that consideration of that offer might otherwise demonstrate that they could satisfy the Court that they had not unreasonably failed to make a settlement offer or to agree to a settlement offer proposed by Ms Mundine in the way contemplated by s 40(2)(a). An order against them for indemnity costs would, according to these defendants, be contrary to the interests of justice if what occurred at a mediation might otherwise demonstrate that they either made a settlement offer or responded to an offer made by Ms Mundine. 50Counsel for the third defendant made these submissions on the issue: "...the onus is on the plaintiff to invoke that section. The onus is on the plaintiff. What needs to be said about the statutory construction exercise that is now apparently going to fall to your Honour, is this: There is a tension in the definition of "settlement offer", namely, it is any offer to settle the proceedings made before the proceedings are determined. And the other issue that your Honour will have to construe with great respect is what is the meaning of "interests of justice require otherwise". It is my submission in the alternative that if your Honour is against me on the overall point which is section 40 can't be taken to operate to deny a party the ability to rely on what happens at the mediation so as to create an artificial picture about which your Honour will never be sure because your Honour will never have the evidence, the interests of justice would require your Honour not to make the order under section 40 if your Honour knows there has been a mediation and in the circumstances of this case where your Honour knows that was effectively opposed by the plaintiff, having been asked for the defendants, who it may be taken were keen to settle the matter at an early point in the litigation." 51There is no direct evidence before me of any settlement offer that may have been made by the first and third defendants before or after the mediation. Ms Mundine has asserted that these defendants "made no offer". That submission has distressed the first defendant at least, as appears below. In the context of the present dispute it seems to be an inescapable inference that no settlement offer was made outside the context of the mediation. Ms Mundine's submission can permissibly be understood only in that context. She submitted that such a failure by the first and third defendants was unreasonable in the circumstances. She contended that the particulars of identification gave these defendants a complete opportunity to check and to discover that Ms Mundine had been identified and referred to in the article. She contended as well that these defendants must have realised that it was highly likely that some at least of the imputations pleaded would be held to arise and to be defamatory. Ms Mundine submitted that none of the imputations could be taken lightly and all were attacks upon her in her local community. She contended that the defences could never reasonably have been assessed as having prospects of success. It was said in those circumstances to be unreasonable to make no offer and that there could be no basis for concluding that the interests of justice require otherwise than that Ms Mundine as the successful plaintiff should be entitled to her costs on an indemnity basis. 52The first defendant took particular exception to some of these submissions by Ms Mundine to the extent that they suggested that the first and third defendants had made no offer of settlement. He asserted that they were "a direct and deliberate attempt by [Ms Mundine's] representatives to mislead the Court on the question of costs". He submitted that the first and third defendants attended the mediation in good faith, which they had sought from the outset, but that Ms Mundine resisted it. The first defendant's written submissions in reply then continued in these terms: "2. The plaintiff's representatives know that the first defendant would be in breach of s 30(4) of the Civil Procedure Act 2005 if he seeks to have admitted into evidence, what transpired at that mediation. Accordingly, the first defendant can say nothing properly about what transpired at the mediation by way of rebuttal. However, s 30(4) of the Act ought not allow a party to assert, falsely, that the defendants 'did not make any offer' and in those circumstances the plaintiff has not and cannot (without breaching s 30(4) of the Act) put before the Court any evidence that "no offer was made" to support her submissions. 3. Alternatively, the [submission of Ms Mundine to which objection is taken] allows the first defendant to rebut the submission and assert that the defendants did make an offer to the plaintiff to resolve the proceedings: Somatra Ltd v Sinclair Roche & Temperley (a Firm) [2000] 1 WLR 2453 (CA)." 53This somewhat unsubtle line of reasoning, however, fails to take account of the simple fact that it was at all times open to the first and third defendants to make an offer of settlement that was not subject to the disclosure constraints that applied to anything occurring within a mediation. The rationale behind maintaining the sanctity of what occurs at a mediation is clear: parties must feel free to negotiate in the confident expectation that nothing that is said or done within a mediation can be used at a later time to their disadvantage in the proceedings if they are not resolved. No part of that reasoning applies to the right or the entitlement of any party at any time outside the context of the mediation to communicate settlement offers and responses on without prejudice terms save as to the question of costs. This applies equally to offers of compromise in accordance with the rules or Calderbank offers as generally understood. Reference to such offers is not embargoed by legislation or in any other way at all. In my opinion s 40(2) operates in favour of a plaintiff such as Ms Mundine if no offer which can permissibly be referred to has been made by the first or third defendant. The interests of justice do not compel a different result simply because, if it be the fact, the defendants made an offer of settlement at a mediation which they now find themselves unable to utilise to improve their position in response to an application for indemnity costs. Section 40(2) clearly contemplates parties relying upon offers of settlement that are not excluded from view by s 30(4) of the Civil Liability Act . I am unable to see that there is any artificiality in this approach of the sort that the third defendant attempted to identify. There was nothing to prevent the first and third defendants from making such an offer at any time prior to a verdict in Ms Mundine's favour. 54This type of approach was endorsed in Forsyth v Sinclair (No 2) [2010] VSCA 195 as appears at [13] - [14] as follows: "[13] In Pinot Nominees Pty Ltd v Federal Commissioner of Taxation, Siopis J held that ss 53A and 53B of the Federal Court of Australia Act 1976 (Cth), which are similar to s 24A of the Supreme Court Act and s 30(4) of the Civil Procedure Act 2005 (NSW), could be 'reconciled' with s 131(2)(h) of the Evidence Act (Cth): 'on the basis that s 131(2)(h) applies to "without prejudice" communications other than those communications which are made during the course of a mediation conference to which s 53B applies.' [14] In our opinion, this is a sensible outcome in that it leaves the parties free at the mediation to explore all avenues of settlement without the fear that something said or done will be referred to later without their agreement. Positions eventually reached at the mediation can be relied on, if a party wishes to do so, by making an offer of compromise or an offer to compromise the appeal in accordance with O 26 of the Supreme Court (General Civil Procedure) Rules 2005 ('the Supreme Court Rules'), or by making a Calderbank offer, following the mediation. Thus, it would have been preferable, in our opinion, for the respondent to have made its position on the costs of the appeal clear by correspondence after the mediation rather than attempting to refer to what was said at the mediation." 55In the case of the third defendant, I can see no reason why an order for indemnity costs should not be made against it. 56In the case of the first defendant, my attention is directed to his unchallenged evidence in an affidavit affirmed on 9 February 2011. That affidavit is in these terms: "1. I do not have, and have never had, sufficient assets or funds to make a monetary offer of settlement or compensation to the plaintiff. 2. I am, and have always been, willing to fully cooperate with the plaintiff in order to resolve the matter which is the subject of the proceedings. 3. My current annual salary for my employment is $48,000 before tax. 4. I have engaged solicitors and legal counsel for these proceedings on a pro bono basis." 57The first defendant is a client liaison officer with the Aboriginal Legal Service. Part of the evidence he gave in the proceedings concerned his experiences with clients in need of the service of the Aboriginal Medical Service, which employed Ms Mundine as an Aboriginal mental health worker. I take it to be the first defendant's submission that an indemnity costs order should not be made against him because his financial position is such that he was never in a position to make an offer of settlement and he should not therefore be burdened with such an order, because in terms of s 40(2) "the interests of justice require otherwise". 58The first defendant submitted that because he was, financially speaking, not in a position to make any independent offers to Ms Mundine, he did not therefore unreasonably fail to make a settlement offer. The cases make it clear that there is justification, which the Act recognises, that costs in defamation proceedings should be approached in a different manner to costs in other civil litigation: see, for example, Channel Seven Sydney Pty Ltd v Mahommed (No 2) [2011] NSWCA 6 per McClellan CJ at CL at [74] - [76]. 59What is or is not an unreasonable refusal to make a settlement offer must depend upon the particular circumstances of the case. The first defendant's evidence is that he was unable to make an offer and presumably did not propose a settlement for himself because he frankly had nothing to give. In circumstances where his evidence about that state of affairs was not challenged, and where this Court can confidently assume that for all relevant purposes no offer from the first defendant alone was ever possible, there must arise some disquiet with the proposition that he has acted unreasonably in the circumstances. The position would arguably be different if there were a genuine contest about his financial position and his capacity to compromise the proceedings by making a payment to Ms Mundine. It seems to me that if, as here, a party adequately explains why he has not offered to settle the proceedings, the Court should be slow to characterise his conduct as unreasonable. In the same way, it would not in my view be in the interests of justice to award indemnity costs against a party for failing to take a step that the evidence established he was unable to take. 60In my opinion the first defendant should pay Ms Mundine's costs on the ordinary basis. 61Finally, I do not consider that Ms Mundine should pay the second defendant's costs on an indemnity basis. Section 40(2)(b) provides for costs 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. The second defendant does not seek to invoke that provision, presumably for the reason that no settlement offer triggering its operation can be nominated. Section 40(3) defines "settlement offer" to mean 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. It is surprising that the second defendant did not make some relevant offer to Ms Mundine, particularly given its trenchant approach to the allegation that it published the matter complained of. It would have been a simple matter for the second defendant to have included some suitable offer that would have attracted the operation of the section when it made its unambiguous position clear in its 1 July 2009 letter. Other opportunities were also available over an extended period before the case concluded. The rules provide for offers of compromise and Calderbank letters are in regular use. The second defendant did not take any step to put Ms Mundine on notice by these methods or in any other way that it would seek its costs on an indemnity basis but proceeded to defend the proceedings in an otherwise orthodox fashion. Victory alone does not lead to an order for indemnity costs. Something more is required. In this case, nothing more than victory by the second defendant is evident. Ms Mundine should pay the second defendant's costs on the ordinary basis. Conclusions and orders 62In these circumstances I consider that the following orders should be made: 1. Order the first and third defendants to pay the plaintiff's costs of the proceedings. 2. Order the first defendant to pay the costs referred to in order (1) on the ordinary basis. 3. Order the third defendant to pay the costs referred to in order (1) on an indemnity basis. 4. Order the plaintiff to pay the second defendant's costs of the proceedings. 5. Order the plaintiff to pay the costs referred to in order (4) on the ordinary basis. ********** 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. Decision last updated: 18 March 2011