CJZ Pty Ltd v Giant Dwarf Pty Ltd; CJZ Pty Ltd v Morrow (No 2)

1. [1]

   WARD P: I agree with Adamson JA.

2. [2]

   MITCHELMORE JA: I agree with Adamson JA.

3. [3]

   ADAMSON JA: On 20 June 2023, this Court made orders and published reasons in this matter: CJZ Pty Ltd v Giant Dwarf Pty Ltd; CJZ Pty Ltd v Morrow [2023] NSWCA 135 (the principal judgment). In substance, CJZ Pty Ltd and Nicholas Murray (the applicants) succeeded in their appeal in proceedings 2022/214083 (the Defamation proceedings) and in resisting the appeal brought by The Checkout Pty Ltd, Giant Dwarf Pty Limited (Giant Dwarf) and Julian Morrow in proceedings 2022/214060 (the Commercial proceedings).

4. [4]

   The orders made on 20 June 2023 were as follows:

5. [5]

   On 19 July 2023, within the permitted time, the applicants applied for an order that Mr Morrow pay their costs of the appeal in the Defamation proceedings on an indemnity basis on two alternative bases:

   1. (1)

      from 24 September 2020 on the basis of an offer made on that date (the 2020 offer), in reliance on s 40 of the Defamation Act 2005 (NSW); and

   2. (2)

      from 7 April 2023 on the basis of an offer (which they contended complied with Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 20.26) dated 6 April 2023 (the 2023 offer).

6. [6]

   By amended notice of motion filed on 25 July 2023, the applicants seek the following orders:

The costs of the Defamation proceedings

1. [7]

   The 2020 offer and the 2023 offer will be addressed in turn.

2. [8]

   Mr Morrow commenced the Defamation proceedings on 11 September 2020. On 24 September 2020, Mr Murray sent an email to Mr Morrow’s solicitor, Ben Kay. Mr Murray contended, in the narrative set out in the letter, that any loss of reputation which Mr Morrow had suffered had “nothing to do with [Mr Murray] or [his] actions.” It contained the 2020 offer, which was a without prejudice offer to settle the proceedings on the basis that Mr Morrow discontinue the Defamation proceedings by 5pm on 30 September 2020, with each party to bear his own costs. This offer was rejected on 28 September 2020.

3. [9]

   A further offer was made on 30 September 2020, which extended the previous offer to 9.30am on 1 October 2020. In this offer, Mr Murray said in part:

4. [10]

   The brief referred to in paragraph 3 of the above extract contained the following:

5. [11]

   The recommendation in the brief was accepted and ABC ceased discussions with Mr Morrow and Giant Dwarf for a proposed new consumer affairs program, to be entitled The Help Desk, on 5 December 2019.

6. [12]

   The offer of 30 September 2020 was not accepted.

7. [13]

   Section 40 of the Defamation Act relevantly provides:

8. [14]

   At the time the 2020 offer was made, the material which tended to establish that Mr Morrow was the author of the damage to his reputation was available and was furnished to him by the applicants in order to persuade him to walk away from the proceedings. While the matters complained of were defamatory, it was inevitable that the measure of damages awarded to Mr Morrow, even if he was successful in defeating the defences raised (including truth and qualified privilege), would be exceeded by the amount of his costs. This is not an uncommon result of defamation proceedings.

9. [15]

   In effect, the 2020 offer was an offer the acceptance of which required Mr Morrow to capitulate entirely, neither on the basis that the matters complained of were not defamatory, nor that they were communicated on an occasion of qualified privilege, but rather, that Mr Morrow’s loss of reputation within the ABC had been brought about by his own conduct and not by the publication of the matters complained of.

10. [16]

    A “walk-away” offer may, in some circumstances, amount to a genuine compromise (Leichhardt Municipal Council v Green [2004] NSWCA 341). However, in circumstances where Mr Murray had not retained solicitors in respect of the Defamation proceedings, he was, in effect, giving up nothing, whereas if Mr Morrow accepted the offer, he would lose the chance of recouping the costs he had already incurred in commencing proceedings as well as of vindicating his potential rights and being awarded damages. There was, in these circumstances, little for Mr Morrow to gain by accepting the offer, as adjudged from his point of view at the time it was made.

11. [17]

    In these circumstances, I am not persuaded that Mr Morrow unreasonably failed to accept the 2020 offer. Thus, Mr Murray and CJZ are not entitled to indemnity costs on the basis of the 2020 offer. It is, accordingly, not necessary to address the further submissions made on behalf of Mr Morrow, including as to the alleged disentitling conduct by Mr Murray and CJZ; that the period for which the 2020 offer was open was insufficient; or that Mr Morrow was entitled to vindication in respect of the imputations of fraud.

12. [18]

    The 2023 offer was made on 6 April 2023 in the following terms:

13. [19]

    In order to understand the offer, it is necessary to set out the orders made by Stevenson J (the primary judge) on 23 June 2022 in the Defamation proceedings, which were relevantly as follows:

14. [20]

    The offer met the requirements of UCPR, r 20.26. Had the offer been accepted, the orders proposed in the offer, when made, would have deprived Mr Morrow of the judgment and the order for costs in the Defamation proceedings but protected him from the possibility that this Court would allow the appeal in the Defamation proceedings and make a costs order against him for the costs of the appeal and/or the costs of the hearing before the primary judge. The orders made by this Court in the principal judgment with respect to the Defamation proceedings set aside the judgment in his favour and the order for costs and ordered him to pay the costs of the hearing before the primary judge and of the appeal. This is a considerably worse result for Mr Morrow than had he accepted the offer (the costs can be assumed to be substantial as the hearing before the primary judge, including the costs argument, lasted for 11 days and the hearing in this Court lasted for three days).

15. [21]

    It was submitted on behalf of Mr Morrow that the 2023 offer amounted to a request for “total capitulation”, particularly as it would have left the appeal and cross-appeal in the Commercial proceedings (which were heard together with the appeal in the Defamation proceedings) on foot. Thus, it was submitted, any savings in costs were likely to be trivial. Further, it was put on behalf of Mr Morrow that he had an interest in defending the undertakings which had been made to Stevenson J (from which Mr Murray was released by this Court on 20 June 2023). Mr Morrow also submitted that settling the Defamation proceedings on the basis proposed in the 2023 offer would leave him open to imputations which conveyed that he was fraudulent from which he was protected by the undertakings noted by the primary judge in the orders made on 23 June 2022.

16. [22]

    While the time allocated to the appeal and cross-appeal in the Commercial proceedings and the appeal in the Defamation proceedings was allocated on the basis of all of the matters in issue, the appeal from the orders in the Defamation proceedings comprised a substantial area of dispute which took considerable time to argue before this Court. Had the Defamation proceedings been resolved, there would have been a material saving in cost and time, for both parties and for the Court.

17. [23]

    Had Mr Morrow accepted the 2023 offer, he would have been in a considerably better position than he is in now as a result of prosecuting the appeal because he would have avoided being liable to pay the applicants’ costs of the Defamation proceedings at first instance and on appeal. Further, he would have had the benefit of the undertakings noted by the primary judge (in (3) of the orders made on 23 June 2022) from which the applicants did not seek to be released in the 2023 offer. Accordingly, unless this Court otherwise orders, the applicants are entitled to their costs of the appeal in the Defamation proceedings on an indemnity basis from the day following the date of the offer (7 April 2023): UCPR, r 42.15.

18. [24]

    The 2023 offer was open for acceptance for 21 days (from 6 April 2023 until 27 April 2023). When the offer was made, all the parties’ written submissions on the appeal had been filed (CJZ’s reply submissions having been filed on 20 February 2023). The day on which the offer expired, 27 April 2023, was 25 days before the appeal was listed to commence. This period was significant since the appeal was listed for 2-3 days. Had the offer been accepted, the costs of the preparation for the oral hearing of the appeal would have been considerably reduced.

19. [25]

    It is also of some significance that Mr Morrow himself offered (by Offer of Compromise dated 28 February 2023) to settle the Defamation proceedings on an identical basis to that offered by the applicants on 6 April 2023. His offer, however, was tied to acceptance of a related offer (which was not acceptable to the applicants) which would have resolved the Commercial proceedings. The existence and terms of Mr Morrow’s offer provides support for the submission that the 2023 offer amounted to a genuine compromise of the Defamation proceedings. The applicants, in these circumstances, were entitled to expect that, if the 2023 offer was not accepted and they achieved a better result in the appeal, there would be no reason to displace the consequences for which the UCPR provided.

20. [26]

    In these circumstances, the 2023 offer ought be seen as offering a substantial benefit to Mr Morrow and, therefore, constituted a genuine offer of compromise. Mr Morrow’s non-acceptance of that offer was unreasonable.

21. [27]

    The applicants relied in support of their application for this order on unchallenged evidence which established the following. On 24 April 2023, the applicants paid to Mr Morrow, in compliance with orders (1) and (2) made by Stevenson J on 23 June 2022, the sum of $39,638.22 (the judgment sum) by electronic bank transfer. Receipt of this sum was acknowledged by Mr Morrow’s solicitor.

22. [28]

    On 26 June 2023, following publication of this Court’s decision on the appeal on 20 June 2023, the applicants’ solicitors sent a letter of demand to Mr Morrow’s solicitor, asking that the judgment sum be repaid. Further demands have been made for repayment of that amount. No response to these demands has been received.

23. [29]

    The applicants are plainly entitled to the return of the amount paid pursuant to a judgment which has been set aside. Having regard to the delay on the part of Mr Morrow in returning the sum to the applicants, I am satisfied that it is appropriate that the Court order him to repay the judgment sum. It is appropriate, in the circumstances, that this order be expressed as a judgment rather than an order to pay to aid enforcement, if this be necessary.

The costs of the appeal and cross-appeal in the Commercial proceedings

1. [30]

   This Court’s orders to dispose of the appeal and the cross-appeal in the Commercial proceedings included the following order:

2. [31]

   The applicants seek that this order be varied in two respects: first, that the costs of the cross-appeal be included in the order; and, secondly, that the liability for the costs be borne by the first respondent/second cross-appellant (Giant Dwarf) and the second respondent/third cross-appellant (Mr Morrow) and not by the third respondent/first cross-appellant (The Checkout Pty Ltd). The reasons for this is that CJZ is, as a result of this Court’s order rescinding the Share Sale Agreement, a 50% shareholder of The Checkout Pty Ltd. To make CJZ, in effect, bear half the liability of complying with a costs order in its favour was not the intention of the Court’s orders and would enable Giant Dwarf to profit from its own breach. In these circumstances, I am persuaded that the order sought by the applicants ought be made.

Proposed orders

1. [32]

   For the reasons given above, I propose the following orders: