Blackstone Brief

Indemnity costs awarded due to Network Ten’s “unreasonable [behaviour] from the outset”

Indemnity costs awarded due to Network Ten’s “unreasonable [behaviour] from the outset”

BStone Admin - 15 Jun 2021

Indemnity costs awarded due to Network Ten’s “unreasonable [behaviour] from the outset”

Hafertepen v Network Ten Pty Ltd [2020] FCA 1456

The Applicant, Dylan Hafertepen, brought an interlocutory proceeding against the Respondent, Network Ten, seeking to reinstate the original proceeding and seeking specific performance of the settlement agreement – namely, that the article rectifying a defamatory journalist piece on the show The Project be placed somewhere where viewers would actually see it.

By the way of background, in 2018 the television program The Project broadcasted a segment entitled Justice for Jack. This piece was republished by a number of media organisations around the world and on Youtube.

The following year, Mr Hafertepen launched a proceeding alleging he was defamed in the segment because it implied that he had caused the death of “Jack” in order to inherit his estate which had been signed to him in Jack’s will only three weeks before his death.

The proceeding culminated in a dismissal by consent in accordance with a terms of settlement.

Although the interlocutory application related to specific performance of two clauses within the terms, this article will focus on Katzmann J’s reasons for awarding indemnity costs.

It was Her Honour’s opinion that Network Ten’s behaviour was unreasonable from the outset. Her Honour highlighted the broad discretion courts have as to costs and detailed when and where indemnity costs would be awarded. Importantly, Her Honour clarified that such an order will not be made in this matter in the absence of a “special or unusual feature” which would justify a departure from the ordinary course (standard costs, costs follow the event), and that such an order is intended to be compensatory, not punitive.

Examples provided by Her Honour of such “special or unusual features” justifying an indemnity costs order include:

  • cases where the court wishes to indicate its disapproval of a party’s conduct of the litigation, and
  • when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.

Both these circumstances applied in this matter. In her decision, Her Honour highlighted the work of Mr Hafertepen’s solicitors and the affidavit of Ms Webber, a solicitor in the firm Atkinson Vinden Lawyers, representative for Mr Hafertepen. Ms Webber had renewed her request for specific performance several times before the interlocutory application was filed. On 29 June 2020, a detailed letter was sent to Network Ten foreshadowing the application for indemnity costs. Despite this, Network Ten maintained its, what could be seen to be, nonchalant position.

On 27 August 2020 Macpherson Kelley, acting for Network Ten, made an open offer to settle the application.  Besides the point that no offers were made regarding publishing the clarifying article on another page that was not the present location (at the bottom of the Terms of Use page on the 10play website), they offered that a legal representative of Mr Hafertepen attend their office to inspect letters per Clause 5 of the terms of settlement (Agreement) and that there be no order as to costs.  Clause 5 of the Agreement is reproduced below:

Within 28 days of the date of final execution of this Agreement, Ten shall:

(a) cause the Letters to Media Organisations to be sent to the various media organisations identified in Annexure B; and

(b) cause a letter to be sent to Google, as publisher of YouTube, demanding removal of the Broadcast on the ground of infringement of copyright.

In Her Honour’s opinion, Network Ten’s responses were inconsistent with its obligations under s 37N of the Federal Court of Australia act 1976 (Cth) – the overarching purpose. Her Honour stated at paragraph 121:

“It is bewildering that in 2020, during a global pandemic, Ten would insist that Mr Hafertepen’s lawyer attend the office of Ten’s lawyers to inspect the letters to the media organisations,”

Her Honour had sent the parties to mediation in order to resolve the matter. However, Network Ten continued to insist it was in the right with its actions and gave little regard to the application. No resolution was found at mediation.

The few actions described above, in a long list that Her Honour attends to in her judgment, illustrate how acting in bad faith can lead to consequences – legal costs wise. This should be seriously considered by all parties to a litigation, along with their solicitors, particularly as large profile cases of defamation rise and large publishers are taken to court for their click bait publishing.

In conclusion, Her Honour found in favour of Mr Hafertepen and orders were largely made in accordance with those sought by Mr Hafertepen – including, the awarding of costs to the Mr Hafertepen on an indemnity basis.

Closing remarks

Indemnity costs orders are often awarded when a party beats an offer of compromise or a Calderbank offer. Such orders are also made in special circumstances.

The Full Federal Court in InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 provided a summary (at paragraph 11) of the special circumstances likely to justify departure from the ordinary rule to an order of indemnity costs. These are as follows:

  • The bringing of an application is “high-handed”: Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483, 502;
  • An application has “no chance of success”: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1998) 81 ALR 397, 401;
  • An application is “hopeless”: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) [1993] FCA 70; (1993) 46 IR 301, 303;
  • An application is “unnecessary”: Ragata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993);
  • An application is brought and prosecuted “not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose”: Ragata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993);
  • An application is commenced in wilful disregard of known facts or contrary to well established law: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401;
  • There has been “some relevant delinquency on the part of the unsuccessful party”: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 89;
  • Where the justice of the case warrants such an order: Andrews v Barnes (1887) 39 Ch D 133, 141; and
  • Where there are some special or unusual features in a case to justify the court the exercising its discretion in this way: Preston v Preston [1982] Fam 17, 39.

Hafertepen v Network Ten Pty Ltd is relevant to all solicitors and litigants as it identifies the circumstances where there are some “special or unusual features” justifying a departure from the ordinary course (last dot point).

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