Bill Karageozis as trustee for the bankrupt estate of Siobhan Lamb v Sherman [2024] QCA 12

SUPREME COURT OF QUEENSLAND CITATION: Bill Karageozis as trustee for the bankrupt estate of Siobhan Lamb v Sherman [No 2] [2024] QCA 12 PARTIES: BILL KARAGEOZIS AS TRUSTEE FOR THE BANKRUPT ESTATE OF SIOBHAN LAMB (applicant/appellant) v SHELDON SHERMAN (respondent) FILE NO/S: Appeal No 12902 of 2022 DC No 1634 of 2020 DIVISION: Court of Appeal PROCEEDING: Costs Application ORIGINATING COURT: District Court at Brisbane – [2022] QDC 215 (Jarro DCJ) DELIVERED ON: 9 February 2024 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGES: Mullins P and Dalton and Flanagan JJA ORDERS: 1. Set aside the costs order below and in lieu thereof substitute an order that the respondent pay the appellant’s costs of District Court Proceeding 1634/20. 2. Order 3 made by this Court on 15 December 2023 be vacated and in lieu thereof, it is ordered that the respondent is to pay the appellant’s costs of this appeal, and the application for leave to appeal, save for the costs of and incidental to the applications filed 22 May 2023, 14 August 2023 and 15 September 2023. CATCHWORDS: DEFAMATION – ACTIONS FOR DEFAMATION – COSTS – INDEMNITY COSTS – where the Court of Appeal set aside a judgment of the District Court of Queensland which found that Ms Lamb had defamed the respondent – where the appellant made a Calderbank offer to settle the District Court proceeding – where the appellant withdrew the Calderbank offer before the time nominated for acceptance – whether the respondent should pay the appellant’s costs of the proceeding in the District Court, to be assessed on an indemnity basis pursuant to s 40(2)(b) of the Defamation Act 2005 (Qld), because it was unreasonable for the respondent to fail to accept the Calderbank offer -- 1 of 6 -- 2 DEFAMATION – ACTIONS FOR DEFAMATION – COSTS – INDEMNITY COSTS - where the appellant withdrew a justification defence two business days before the trial in the District Court – whether an order should be made that costs thrown away should be assessed on an indemnity basis PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INTERLOCUTORY PROCEEDINGS – COSTS RESERVED – ALLOWANCE OF RESERVED COSTS AFTER JUDGMENT – where there were interlocutory hearings by way of application in the Court of Appeal – where the need for the applications was a result of the respondent executing orders which the Court of Appeal ultimately set aside – whether the appellant should pay the reserved costs on each application, or alternatively whether fairness dictated there should be no order as to costs in respect of the applications Defamation Act 2005 (Qld), s 40 Uniform Civil Procedure Rules 1999 (Qld), r 72, r 361, r 681, r 692 McGee v Independent Assessor & Anor [No 2] [2024] QCA7, cited COUNSEL: K P Smark SC for the applicant/appellant N H Ferrett KC, with J R Moxon, for the respondent SOLICITORS: BlackBay Lawyers for the applicant/appellant Romans and Romans Lawyers for the respondent [1] MULLINS P: I agree with Dalton JA. [2] DALTON JA: On 15 December 2023 this Court allowed this appeal; set aside the judgment below which found that Ms Lamb had defamed the respondent, and entered judgment for the defendant on the defamation proceeding in the District Court. Written submissions have been received as to costs of the matter in the District Court and on appeal. Costs in the District Court (a) Indemnity Costs [3] The appellant seeks an order that the respondent pay the costs of the proceeding in the District Court, that is, costs should follow the event, see r 681 of the Uniform Civil Procedure Rules (UCPR). That is relatively uncontroversial. However, the appellant seeks that those costs be assessed on an indemnity basis in reliance on s 40(2)(b) of the Defamation Act 2005 (Qld): “(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 -- 2 of 6 -- 3 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)– … (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.” [4] By a letter dated 2 July 2021, the appellant made a Calderbank offer to settle the District Court proceeding. There were two defamatory publications alleged in the District Court proceeding. The letter of 2 July 2021 explained the writer’s view that the action on the first publication would fail because there was available a defence of qualified privilege, and that the action on the second would fail because the respondent could not prove the publication. The first of those views was vindicated in the judgment given by this Court, and the second was vindicated by the trial judge’s reasons, which were not challenged on appeal. Having expressed those views, the letter of 2 July 2021 offered to accept a settlement which saw the proceeding discontinued; the parties bearing their own costs, and a deed of mutual release, confidentiality and non-disparagement. [5] In my view, the offer contained in the letter of 2 July 2021 was plainly a settlement offer as defined by s 40(3) of the Defamation Act. It was reasonable at the time it was made, and it offered a genuine compromise because, by it, the appellant offered to bear her own costs of the proceeding.1 These matters were not contested. However, the respondent argued that the court could not be satisfied that he had “unreasonably failed to accept [the] settlement offer made by the [appellant]”, to use the words of s 40(2)(b). I think that submission is correct. The 2 July 2021 letter said that the offer remained open for 14 days that is, until 16 July 2021. However, on 12 July 2021, the solicitors acting for the appellant wrote another letter withdrawing the offer made in the letter of 2 July 2021.2 1 Jones v Millward [2005] 1 Qd R 498, 500; Pensini & Anor v Tablelands Regional Council & Anor [2012] QCA 137, [67]; both cases cited by Cooper J in McGee v Independent Assessor [2024] QCA 7, [30]. 2 Although the letter of 12 July 2021 itself made a different settlement offer, that was not relied upon as a basis for the award of indemnity costs – see paragraph 9 of the written submissions on this costs application. -- 3 of 6 -- 4 [6] The appellant submitted that, “Although the offer was withdrawn on 12 July 2020, it was open for a week and a half, and there seems no basis to suppose that the plaintiff would have accepted it had it not been withdrawn a few days early”.3 I do not agree with the factual assumptions in this submission. Human nature being what it is, I do not think it logical to conclude that the respondent would only have accepted the offer early in the period it was expressed to be open, particularly as the offer (although it has proved to be realistic) would not have been palatable to the respondent. At law, it was no doubt open to the appellant to withdraw the 2 July offer before the date which was specified as the final date for acceptance. However, doing so meant that the appellant could not contend that the respondent unreasonably failed to accept the offer; at the invitation of the appellant the respondent would reasonably have assumed that he had until the date specified in the 2 July letter to consider the offer made, and accept it if he thought fit. [7] The point I have just explained is enough to dispose of the matter. Independently, there was no material upon which this Court could be satisfied that the respondent unreasonably failed to accept the 2 July 2021 offer. The question is not whether it would have been sensible to accept the offer; it is whether or not it was unreasonable to fail to accept it.4 I do not think that the appellant’s prospects of success at trial were so overwhelming that the respondent’s failure to accept the 2 July 2021 offer could be categorised as unreasonable. The issues for determination at trial were, to a large extent, factual. While qualified privilege seemed to this Court to be a complete answer to one of the defamatory publications, the trial judge did not think so, and, in addition, malice was a live issue at trial. Had different forensic decisions been made as to the evidence called at the trial, the factual matters relating to both publications may have been different, and so might the result of the trial. To say this is not to criticise the decisions made at trial by either side, but to recognise that many of the issues for determination were factual, and mobile, having regard to the evidence which emerged at trial. [8] Although the 2 July 2021 letter was expressed to be made pursuant to UCPR r 361, as well as s 40(2)(b) of the Defamation Act, the appellant recognised that because the offer of 2 July was withdrawn by the letter of 12 July, reliance could not be placed upon r 361. [9] In my view the appellant has failed to demonstrate any basis for the award of indemnity costs. (b) Costs Thrown Away [10] The respondent raises a second issue as to the costs in the District Court. The appellant pleaded a detailed defence of justification which, almost necessarily by its nature, made unpleasant allegations about the respondent. In an affidavit sworn on this costs application, the respondent’s solicitor explains that a considerable amount of work was involved in dealing with those allegations. Two business days before trial the appellant withdrew the justification defence. The letter notifying the respondent about this said that the course was taken, “in the interests of minimising the issues in dispute and minimising unnecessary costs”.5 The respondent says, and 3 Paragraph 10(b) of the written submissions on the costs argument. 4 See McGee above, [23]. 5 Exhibit 2 to Mr Roman’s affidavit filed on this costs application. -- 4 of 6 -- 5 it may be accepted, that by that stage he had already incurred significant costs in responding to the factual matters relied upon by the appellant as part of her justification defence. [11] The appellant was content with the position brought about by r 692 of the UCPR: that the appellant pay the costs thrown away by the abandonment of the justification defence, and submitted that there was no need for an order to this effect – it simply followed from the terms of r 692. The respondent asked for an order that the costs thrown away be assessed on an indemnity basis. He submitted that, “The appellant was content to persist in a defence which she ultimately concluded was hopeless. She made grave allegations which she apparently had no intention of proving.”6 Were those factual assertions supported by the evidence, there would be a basis for indemnity costs. However, they are not supported by any evidence. In my view, the respondent has not shown any basis for making an order that these costs be paid on the indemnity basis. Because of the terms of r 692, there is no need for an order to compel the appellant to pay the costs thrown away by the abandonment of the justification defence to be assessed on a standard basis. Reserved Costs in the Court of Appeal [12] There were three interlocutory hearings by way of application in the Court of Appeal. They all had a common factual origin, which is referred to in the first paragraph of the judgment of 15 December 2023: “The appeal is brought by Ms Lamb’s trustee in bankruptcy. He was appointed after, and as a consequence of, the judgment in the District Court. While the judgment was for only $10,000, costs of the proceeding were in the vicinity of $600,000, and caused Ms Lamb to become bankrupt.” [13] Having been made bankrupt, Ms Lamb applied for leave to proceed pursuant to r 72 UCPR (application filed 22 May 2023). This application came on before the President on 5 June 2023. It was adjourned to a date to be fixed and costs were reserved. The appellant did not relist that application promptly, so on 14 August 2023 the respondent applied to strike out the appeal for want of prosecution. This was an ambitious application given that by that stage the appellant had filed a detailed outline of argument; there were negotiations going on between Ms Lamb and her trustee in bankruptcy, and there had been litigation in another jurisdiction to prevent the trustee in bankruptcy selling a house owned by Ms Lamb. That application came on before me on 31 August 2023. It was adjourned to a date to be fixed with costs reserved. It became unnecessary to hear both the 22 May 2023 and 14 August 2023 applications when the parties agreed to substitute the trustee in bankruptcy as applicant/appellant. That order was made on a third application, filed 15 September 2023. The costs of that application were also reserved. [14] The respondent asks for an order that the appellant pay the reserved costs on each of those applications, or alternatively asks that there should be no order as to costs in respect of the applications. The May and September 2023 applications were applications which the appellant was compelled to make. The August 2023 application was, as described, ambitious. All three applications came about as a result of the respondent executing orders which this Court has set aside. In those circumstances, it seems to me that the fairest order is that each party bear their own costs of the three applications. I would order that: 6 Paragraph 22 of the respondent’s costs submissions. -- 5 of 6 -- 6 1. Set aside the costs order below and in lieu thereof substitute an order that the respondent pay the appellant’s costs of District Court Proceeding 1634/20. 2. Order 3 made by this Court on 15 December 2023 be vacated and in lieu thereof, it is ordered that the respondent is to pay the appellant’s costs of this appeal, and the application for leave to appeal, save for the costs of and incidental to the applications filed 22 May 2023, 14 August 2023 and 15 September 2023. [15] FLANAGAN JA: I agree with Dalton JA. -- 6 of 6 --