Lee & Ors v Sheen (No 2)[2021] QDC 211

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   On 12 February 2021, judgment and reasons (“the primary reasons”) were delivered in the substantive proceeding.^[1] In that proceeding the first plaintiff succeeded against the first defendant and damages were awarded in the sum of $60,000, plus interest. The first plaintiff’s claim against the second defendant was dismissed, as were the claims of the second, third, fifth, sixth, seventh and eighth plaintiffs against each of the first and second defendants. The dispute between the fourth plaintiff and both defendants settled prior to trial.
2. [2]
   The issue of costs now falls for determination. 
3. [3]
   As the first plaintiff was the only plaintiff to (partially) succeed in the actions, her position sits differently to the rest.  It is convenient to refer to the other plaintiffs in these reasons - but not in the final orders - as the second to eighth plaintiffs even though the fourth plaintiff settled prior to trial.. 

Offers to settle and other relevant conduct

4. [4]
   The various complaints to regulatory bodies have been referred to in the primary reasons,^[2] as has the history of the abandonment of a counterclaim and certain pleaded defences.^[3] 
5. [5]
   The statement of claim was filed on 19 December 2017. On 20 February 2018, and before the first defendant had been served with the Claim and Statement of Claim, both defendants wrote to the first plaintiff on behalf of all plaintiffs contending that, in effect, all proceedings against both defendants should be dismissed and all parties should bear their own costs (“the defendants’ first offer”).^[4] At that early stage the defendants noted that there had not been any allegation of publication pleaded against the second defendant, which was in any event denied. The offer was expressed to be, in effect, a Calderbank offer.^[5] There was no time limit stipulated. There is no evidence before me of any reply from the plaintiffs. At face value, the offer required complete acceptance by all plaintiffs of the proposal in order to be effective. It also referred to an intention to serve a counterclaim which it was said had been filed.^[6] There was no mention as to what would occur with that counterclaim if the offer were accepted. 
6. [6]
   On 15 August 2018, and after the plaintiffs had provided further and better particulars, the defendants wrote to the plaintiffs contending that their actions had no reasonable prospects and that, even if liability were established, there was no evidence of quantifiable damages and hence the likely award of damages would be insignificant.  It was proposed that all proceedings be discontinued with no order as to costs and that a Deed of Settlement be executed containing “an appropriate non-disparagement clause” (“the defendants’ second offer”).^[7] The offer was expressed to remain open for 14 days and was also expressed to rely upon Calderbank principles as well as Part 5, Chapter 9 of the UCPRs. At face value, the offer required complete acceptance by all plaintiffs of the proposal in order to be effective. Again, there was no mention in the offer as to what would occur with that counterclaim if the offer were accepted.
7. [7]
   On 20 February 2020, the defendants wrote again separately offering to settle all proceedings on the following bases: (“the defendants’ third offer”)^[8]

1. The second defendant offered to settle the first plaintiff’s claim against it, relevantly by payment of $50,000 damages plus costs on the standard basis together with an apology to be posted on “its” WeChat site, in the English language, and expressed in terms which effectively withdrew the allegations and apologised for all hurt and damage the first plaintiff suffered as a result.  It was also proposed that a Deed of Settlement and Release be executed on terms including a release, confidentiality and “mutual non-disparagement” clauses.
2. The first defendant proposed to the first plaintiff that all proceedings involving him be dismissed with the parties to bear their own costs and on execution of a Deed of Settlement and Release on the same terms as referred to above.
3. The first and second defendant jointly proposed separately to each of the other plaintiffs that all proceedings involving them be dismissed with the parties to bear their own costs and on execution of a Deed of Settlement and Release on the same terms as referred to above.
4. All offers were expressed to remain open until 5 March 2020 and each were said to be made in light of Calderbank principles and also with reference to section 40 of the Defamation Acy 2005 (“DA”).

8. [8]
   On 24 February 2020 the plaintiffs, without counter-offering, sought clarification of some matters, including whether the apology by the second defendant to the first plaintiff would be posted in both English and Chinese languages and whether the apology would refer to AHL Legal in addition to or in place of the name of the second defendant.^[9]  On 6 March 2020, the plaintiffs wrote to the defendants outlining the reasons why the offers were not accepted^[10] and on 9 March 2020, the defendants declined to re-cast the terms of the proposed settlements.^[11] 
9. [9]
   The defendants’ third offer was expressed in terms of the proposal being jointly made by both defendants but made separately to each plaintiff, apart from the offers to the first plaintiff which were made separately by each defendant.
10. [10]
    Each individual offer comprising the defendants’ third offer was expressed to be a Calderbank offer, and each also referred to s 40 of the DA.

The parties’ submissions

11. [11]
    The plaintiffs seek the following orders;

1. The first defendant pay the first plaintiff’s costs of the proceedings to be assessed on the indemnity basis;
2. The second to eighth plaintiffs pay the first defendant’s costs of the proceedings on the standard basis limited to the additional costs incurred by reason of the inclusion of the second to eighth plaintiffs in the proceeding;
3. All plaintiffs pay the second defendant’s costs of and incidental to the proceedings on the standard basis limited to the additional costs incurred by reason of the inclusion of the second defendant in the proceedings;
4. The defendants’ costs of and incidental to the following matters to be excluded from the assessment in accordance with sub-paragraphs (b) and (c) above:

1. the defendants’ complaints to the Queensland Legal Services Commissioner and the Victorian Legal Services Board and Commissioner;
2. the defence of truth, including inter partes disclosure and non-party disclosure of documents relevant to the defence of truth; and
3. the defendants’ counterclaim, including disclosure of documents relevant to the counterclaim.

12. [12]
    The plaintiffs contend that these orders are justified because, in summary:

1. The defendants’ conduct had been unreasonable because of:

1. a failure to remove the offending article and apologize;
2. the pursuit of a counterclaim and allied defence of truth which was unsustainable;
3. the maintenance of the truth defence after abandoning the counterclaim;
4. the failure to abandon the truth defence until immediately prior to trial;
5. the various complaints to regulatory bodies based on the assertions made in the truth defence and the counterclaim; and
6. the failure to apologize until the first defendant testified at trial.

b) Each of the defendants’ offers to settle were not reasonably made for various stated reasons;

c) That although the defendants’ offers to settle made to each of the second to eighth plaintiffs appeared to be more favourable to the plaintiffs than the outcomes, in truth they were not, for various stated reasons;

d) The real dispute was between the first plaintiff and the first defendant and most of the costs were incurred in relation to that dispute. The costs order should reflect that.

13. [13]
    Alternatively the plaintiffs submit that an appropriate outcome would be to order that the first defendant pay 75% of the costs of the first plaintiff assessed on the indemnity basis with no other orders as to costs in favour of or against any party.^[12] To the extent necessary the plaintiffs consent to that form of order.
14. [14]
    The defendants seek the following orders:

1. The first defendant pay to the first plaintiff one eighth of costs common to all plaintiffs incurred to 20 February 2020 and one seventh of costs common to all plaintiffs incurred after 20 February 2020;^[13]
2. The second to eighth plaintiffs pay the first defendant’s costs of the claims brought by those plaintiffs against him on the indemnity basis; and
3. The plaintiffs pay the second defendant’s costs of the proceedings on the indemnity basis.

15. [15]
    The defendants submit that these orders are justified because:

1. No plaintiff other than the first plaintiff succeeded in their claim, and they had been offered opportunity to avoid the litigation with parties bearing their own costs on multiple occasion;
2. The second defendant succeeded against every plaintiff;
3. The first plaintiff succeeded, but only against one defendant and on terms that did not, in practical terms, substantially differ from an offer that had been made to her on 20 February – that the offer was made by a different defendant from the one she ultimately succeeded against, where the defendants were said collectively to be responsible for the same, single publication does not affect matters – the question whether the first plaintiff was by the offer to be vindicated for the publication of a matter defamatory of her remains the same: she was.  Her rejection of that offer was unreasonable in the circumstances;
4. There is a risk that the first plaintiff will be unjustly compensated for costs and the defendants will be unjustly required to pay the costs of unsuccessful plaintiffs absent an apportionment of costs common to all plaintiffs.

16. [16]
    Each party filed replies to the other’s written submissions which effectively sought to cement their own earlier submitted positions.

Consideration

17. [17]
    Costs ordinarily follow the event.^[14] The first plaintiff succeeded in her action against the first defendant. Otherwise, each defendant succeeded in the actions brought against them by each plaintiff. Each party agrees that, broadly speaking, the costs should follow the success of the individual actions, although there is dispute as to the nature and quantum of those awards. 
18. [18]
    For the purposes of s 40 of the DA, the focus is variously on the reasonablenessof the offers made by the defendants, or of the plaintiffs’ refusal to accept the offers.^[15]
19. [19]
    Alternatively, ordering costs on the indemnity basis following the rejection of a Calderbank offer requires satisfaction that the rejecting party acted unreasonably or imprudently in rejecting the offer, although something more than the mere refusal is often required.^[16]  Something more than prospects of success in the litigation may be required for a refusal to be not unreasonable.^[17]
20. [20]
    On the other hand the focus for an award of costs under the rules is a comparison of the final outcome and the offer made.^[18]  From the above summary of the offers made it can be seen that none of the plaintiffs made an offer to settle with either defendant.  Accordingly resort to r. 361 of the UCPR may be appropriate, as opposed to r. 360.
21. [21]
    The parties’ submissions raise the need to look at the individual outcomes of the various actions separately and in isolation, albeit grouped according to the real issues in dispute.  Due to a significant degree of commonality of the issues, and taking an impressionistic and pragmatic approach to what the real heads of controversy were,^[19] that leads to consideration of the actions by the first plaintiff against the first defendant, the first plaintiff against the second defendant and the second to eighth plaintiffs against each of the first and second defendants.

The consideration of the individual actions will then inform the appropriateness of the differing approaches as to how the orders should be structured. In doing so, I recognise that reasonableness must be assessed at the time of the offer or rejection.  I guard against the intrusion of “hindsight bias”.^[20]

First plaintiff v first defendant

22. [22]
    I consider that the first defendant has unreasonably failed to make a settlement offer in terms of s 40(2)(a) of the DA, as the offers were not reasonable at the time they were made.
23. [23]
    The first two offers were made very early after commencement of proceedings.  Leaving aside any hindsight reasoning, the first plaintiff had been specifically named in the offending article which, on any view of the precise meaning of the words used, was defamatory, or at least likely to be so. Given the extent of the involvement of the first defendant in the conduct of AHL Legal as known to the plaintiffs, it was reasonable to expect that he had involvement in the article’s publication. In that context, an assessment of the reasonableness of the settlement offer must recognise that there was no form of apology offered, nor any compensation, nor any mention of the fate of the counterclaim were the offer to be accepted. The lack of these features means that the offer was not reasonable.
24. [24]
    The defendants’ third offer was also not reasonable.  In my view it is not to the point that the second defendant offered damages and a form of apology to the first plaintiff.  While it may be accepted that the first defendant effectively controlled the second defendant at a practical level, they remained separate entities as a matter of law.  It is that fundamental proposition which, in part, justified a conclusion that the liability of the second defendant had not been established.^[21] If they were the same entity, publication by the second defendant would have been proven upon establishing publication by the first defendant. That was not the case. The second defendant cannot have the benefit of that finding on liability and then disavow reliance on it for the purposes of costs in an effort to benefit the first defendant. 
25. [25]
    Further, I think it is telling that the first and second defendants made separate offers to the first plaintiff but joint offers to the second to eighth plaintiffs.  This supports my view that the offer by the second defendant should be considered separately from that of the first defendant.
26. [26]
    In any event, I consider the terms of the apology offered by the second defendant to be such that, even if it were attributable to the first defendant, it was not a reasonable apology and hence the offer was not reasonable. The original post was in the style of a commentary on behalf of AHL Legal.  The first defendant is the face of AHL Legal and his caricature had been used for years as a sign of authenticity of that firm.^[22]  The offending article was published in the Chinese language on a social media platform directed to Chinese language speakers.  However the proposed apology was not from AHL Legal, nor the person readily associated with that entity, and it was not in the language which most users of the social media platform could be assumed to use.  It was in those circumstances of little weight and gave little benefit in terms of vindication of the first plaintiff.
27. [27]
    Further, the defendants’ third offer came only four months prior to the commencement of the trial, and at a time when it is clear from the history of the matter that significant costs had already been incurred. The offer contained no provision for payment of any of the first plaintiff’s costs by the first defendant and that omission, in my view, adds to the overall unreasonableness of the third offer by the first defendant.
28. [28]
    All plaintiffs submit that the inclusion in the second and third offers of a requirement for execution of confidentiality and non-disparagement clauses was not reasonable because they would preclude the pursuit of complaints made to the various regulatory bodies, and defence of those complaints made by the defendants. I cannot accept the submission. The proposal in the second offer was for “an appropriate non-disparagement clause” and in the third offer for “a mutual non-disparagement clause”. The proposal was broadly drafted in those aspects and would have required a better understanding of more precisely what was being proposed before it could be said that the inclusion of that requirement was unreasonable. There was no such enquiry. This finding applies to all of the actions being individually considered.
29. [29]
    Given that the first defendant’s offers were not reasonable in the circumstances when they were made, I consider the first plaintiff’s failure to accept the offers was not unreasonable or imprudent on Calderbank principles. 
30. [30]
    Finally, r. 361 of the UCPR does not apply as the first plaintiff obtained the benefit of an order that is more favourable to her than the offer from the first defendant.
31. [31]
    It follows that, considered in isolation, the first plaintiff is entitled to her costs on the indemnity basis as against the first defendant. Accordingly, I need not consider whether costs should be awarded on the indemnity basis given the asserted unreasonableness of the conduct of the litigation by the defendants.

First plaintiff v second defendant

32. [32]
    In my view, the first plaintiff unreasonably failed to accept the defendants’ third offer, in so far as it applies to the second defendant.^[23]
33. [33]
    It is debateable whether the refusal of the third offer would have been reasonable if there was a case to answer and hence if the focus was on the terms of the offer and particularly on the terms of the proposed apology. But there was no case to answer. There was no allegation of publication ever pleaded against the second defendant, and the plaintiffs had been given notice of that fact as early as 20 February 2018 (when the defendants’ first offer was made). An amended Claim and Statement of Claim was filed on 15 May 2018, but the defect was not rectified.
34. [34]
    Contrary to the plaintiffs’ submission, an acceptance of that offer would not have necessarily precluded pursuit of the first defendant; the two defendants were not joint tortfeasors as there was in fact no allegation of publication by the second defendant nor of some form of joint action. The failure by the second defendant to offer payment of the first plaintiff’s costs was not unreasonable given that those costs were incurred in commencing and pursuing a case that was pleaded in a manner that could not establish liability. The effect of the proposal including a Deed of Settlement has been earlier noted.
35. [35]
    In these circumstances I consider that the refusal by the first plaintiff to accept the offer made separately by the second defendant to be unreasonable.^[24] Accordingly, considered in isolation, the second defendant is entitled to its costs against the first plaintiff on the indemnity basis. The other bases on which it is said costs of this action could be assessed need not be considered.

Second to eighth plaintiffs v second defendant

36. [36]
    For the same reasons, the refusal by the second to eighth plaintiffs of the defendants’ offers was not reasonable given the failure to allege publication by the second defendant in the Statement of Claim.  The pleadings were fundamental and more than a mere point of pleading rather than of substance.^[25] It is a fundamental consideration when assessing the prospects of success and hence the reasonableness of the refusals. 

Second to eighth plaintiffs v first defendant

37. [37]
    At the time each of the defendants’ three offers were made, each of the second to eighth plaintiffs’ claims against the first defendant appeared to have merit.  That they did not ultimately succeed on the issue of identification is not to the point.  Although obviously not as strong as the first plaintiff’s case, their cases were reasonably arguable. 
38. [38]
    The defendants’ first offer asserted that there were no reasonable prospects of success because the defendants’ conduct was defensible. The second offer in effect asserted that the proceedings should be dismissed because, even if liability was established, a lack of evidence of quantifiable damages meant any award of damages would be insignificant.  It is notable however that the defendants therein expressly conceded that an application for summary judgment was unlikely to succeed. Neither the first nor second offer referred to the outcome of the counterclaim if the offer was accepted. The defendants’ third offer, made after the counterclaim had been abandoned, offered no express reason as to why proceedings should be dismissed.
39. [39]
    In circumstances where the plaintiffs had apparent prospects of success, where the defendants impliedly accepted that some, albeit small, amount of damages may be awarded if liability was established, where the first two offers did not offer to withdraw the counterclaim and where none of the offers to settle offered monetary compensation as part of the proposed compromise nor any amelioration of the already incurred costs, it was not unreasonable in my view to have declined that offer.  I accept the plaintiffs’ submission that the offer was, in the circumstances, a request to capitulate rather than to compromise. The earlier observations about the confidentiality and non-disparagement clauses do not alter my conclusion in this regard.
40. [40]
    Accordingly, under s 40(2)(b) of the DA each of the second to eighth plaintiffs have not, in my view, unreasonably failed to accept the settlement offers. The first defendant is not entitled to damages on the indemnity basis under this provision.
41. [41]
    For the same reasons, for the purposes of considering Calderbank principles, that the second to eighth plaintiffs did not act unreasonably or imprudently in declining to accept any of the offers.
42. [42]
    Further, those plaintiffs have obtained an order more favourable than the offer made in so far as they are not required to enter into the Deed of Settlement. Accordingly, r.361 of the UCPR does not apply. If I am wrong about that, neither party contends that the staged process of ordering costs to the plaintiff up to one date and to the defendants after that should be adopted.  In the circumstances of this matter I agree, and particularly where the first offer which would attract the operation of r. 361(4) of the UCPR was so soon after the time of commencement of proceedings.
43. [43]
    Finally, there is no “relevant delinquency”^[26] on the part of the second to eighth plaintiffs to justify an indemnity costs order. Accordingly, the costs to be paid by the second to eighth plaintiffs to the first defendant, when considered in isolation, should be on the standard basis.

Structure of the costs orders

44. [44]
    Each party contends for a different structure to the costs orders to reflect what, each contend, is the justice of the situation. 
45. [45]
    There can be no doubt that there was considerable commonality of issues in the actions, as they have been grouped for the purposes of this costs judgment. For example, the second to eighth plaintiffs’ cases relied essentially on the whole of the matters relied on to prove the first plaintiff’s case, but also involved the expert evidence which was not relevant to the first plaintiff’s case.  Similarly, there was effectively no additional evidence adduced in the case against or for the second defendant than was adduced in the case against or for the first defendant.
46. [46]
    The defendants contend that the so-called “rule of thumb”, that is the process of dividing the common costs attributable to all actions, should be applied, citing the observations of Einstein J in Currabubula v State Bank NSW^[27] in support of its submission. It is said that the unsuccessful plaintiffs will get a “free ride” if the first defendant was ordered to pay to the first plaintiff all of the plaintiffs’ common costs.
47. [47]
    While I am conscious of the force of that submission, there are some factors that must be recognised, and which detract from the attraction of that structure.
48. [48]
    First, it was the first plaintiff’s name which was directly published. This gave rise to a different style of action on her part, as compared to the other plaintiffs. I accept that her action was the main action, or the real dispute, which would have been brought regardless of whether the other plaintiffs had elected to be joined in the action. She should therefore be entitled to her costs that would have in any event been incurred.
49. [49]
    Second, the “rule of thumb” referred to by Einstein J in Currabubula may apply where there are separate defendants who are variously successful or unsuccessful, but even then the prevailing factual circumstances may mean that it is inappropriate to apply.^[28] As his Honour observed, it is not an appropriate approach when considering the position of separate plaintiffs who are variously successful and unsuccessful, ^[29] partly because of historical considerations about apportioning costs between defendants as opposed to plaintiffs.^[30] The limitations of the rule of thumb were confirmed by Kourakis CJ in Rasch Nominees Pty Ltd & Anor v Bartholomaeus & Ors (No. 3).^[31]
50. [50]
    There is attraction in avoiding complications in the assessment of the costs by broadly apportioning costs on a percentage basis^[32] as alternatively contended for by the plaintiffs, but that would require some form of nuanced adjustment to accommodate the different allocation of indemnity costs and standard costs.  That seems to me to be impractical in the circumstances of this matter. 
51. [51]
    In the end result, and particularly bearing in mind my acceptance that the action by the first plaintiff against the first defendant was the real dispute in the proceedings which would have been brought regardless of whether the other plaintiffs also joined in, I think a structure reminiscent of, but not exactly repeating, that sought by the plaintiffs best achieves “substantial justice” given the circumstances before me.^[33]
52. [52]
    The plaintiffs submit that certain matters should be excluded from the costs to be paid by the various plaintiffs to each of the defendants. These are costs relating to the ultimately abandoned counterclaim, the pleaded defences under sections 25 and 26 of the DA which were ultimately abandoned and complaints to regulatory bodies. I am in partial agreement with the submission.
53. [53]
    I do not consider the pursuit of the counterclaim to be unreasonable at the time it was commenced. The allegations in the counterclaim, the associated but ultimately abandoned defences and those in the complaints to the regulatory bodies seemed to me to be a logical explanation for how the GoogleAds came into existence. It was on 19 November 2019, when the forensic examination of the plaintiffs’ Google AdWords account was performed, that the theory was dismissed. Even now, it has never been explained in the evidence how the advertisement came into existence. The initial pursuit of the counterclaim, the defences and the complaints to the regulatory bodies were not unreasonable. ^[34]
54. [54]
    I noted in the primary reasons that it was likely that the forensic examination results had a role to play in the abandonment of the counterclaim and the defences.^[35] On 22 November 2019 the plaintiffs wrote to the defendants demanding that they abandon the pleaded defences and noting the ability to pursue costs if they were not abandoned.^[36]
55. [55]
    In my view, the pursuit of the defences and the maintenance of the complaints to the regulatory bodies after the forensic examination, or a short time thereafter, was unreasonable conduct for which the defendants should not be compensated by way of costs.^[37] The counterclaim was dismissed by consent on 3 December 2019, and I consider that to be an appropriate date from which the defendants should not be entitled to their costs for those matters.
56. [56]
    In so concluding I am cognisant that those matters were relied on in part to justify the inclusion of aggravated damages in the overall damages award to the first plaintiff. Nonetheless I consider that the withholding of those costs is justified in the circumstances of the matter, and in order to do “substantial justice” to the circumstances at hand in terms of costs, even though there may be an appearance of some slight double benefit to the first plaintiff. I otherwise don’t consider it appropriate to categorise any of the complained of conduct as being unreasonable in the sense required to found a costs order adverse to the defendants.

Orders

57. [57]
    The orders I make are as follows:

1. The first defendant pay the first plaintiff’s costs of the proceedings to be assessed on the indemnity basis.
2. The second, third, fifth, sixth, seventh and eighth plaintiffs pay the first defendant’s costs of the proceedings on the standard basis, but limited to the additional costs incurred by reason of the inclusion of those plaintiffs in the proceeding and excluding any costs incurred on or after 3 December 2019 in relation to:

1. the defendants’ complaints to the Queensland Legal Services Commissioner and the Victorian Legal Services Board and Commissioner; and
2. the defences pleaded in reliance on sections 25 and 26 of the Defamation Act 2005.

3. The first, second, third, fifth, sixth, seventh and eighth plaintiffs pay the second defendant’s costs of and incidental to the proceedings on the indemnity basis, but limited to the additional costs incurred by reason of the inclusion of the second defendant in the proceedings and excluding any costs incurred on or after 3 December 2019 in relation to:

1. the defendants’ complaints to the Queensland Legal Services Commissioner and the Victorian Legal Services Board and Commissioner; and
2. the defences pleaded in reliance on sections 25 and 26 of the Defamation Act 2005.