GRC Project Pty Ltd trading as GRC Property Management v Lai

[2023] NSWDC 63

District Court

New South Wales

Medium Neutral Citation:

GRC Project Pty Ltd trading as GRC Property Management v Lai [2023] NSWDC 63

Hearing dates:

20 March 2023

Date of orders:

23 March 2023

Decision date:

23 March 2023

Jurisdiction:

Civil

Before:

Gibson DCJ

Decision:

(1) Defendant’s application for the serious harm element in the plaintiffs’ defamation claim to be determined before the trial is refused on the basis that the plaintiffs have established special circumstances conformably with s 10A(5) of the Defamation Act 2005 (NSW).

(2)   Defendant pay plaintiffs’ costs, with liberty to apply in relation both to costs and a timetable for the further conduct of these proceedings.

Catchwords:

TORT – defamation – plaintiffs bring proceedings for defamation and misleading or deceptive conduct for seven slanders and an email - defendant seeks early hearing of the serious harm element of the plaintiffs’ defamation claim pursuant to s 10A(5) of the Defamation Act 2005 (NSW) – whether plaintiffs can establish “special circumstances” warranting deferral of serious harm to the trial

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 86

Competition and Consumer Act 2010 (Cth), s 6

Defamation Act 2005 (NSW), ss 10A, 21

Cases Cited:

Ahmed v Nationwide News Pty Ltd [2010] NSWDC 183

Alexander-Theodotu v Kounis [2019] EWHC 956 (QB)

Ames v The Spamhaus Project Ltd [2015] EWHC 127 (QB)

Brown v Bower and another [2017] EWHC 1388 (QB)

Channel Seven Sydney Pty Ltd v Senator Concetta Fierravanti-Wells [2011] NSWCA 246

Cush v Dillon; Boland v Dillon (2011) 243 CLR 298

Edwards v Gillespie [2020] NSWDC 475

Gatto v Australian Broadcasting Corporation [2021] VSC 83

Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170

Harcombe v Associated Newspapers and another; Kendrick v Associated Newspapers and another [2022] EWHC 543 (QB)

High Quality Jewellers Pty Ltd (ACN 119 428 394) & Ors v Ramaihi (Ruling) [2022] VCC 1924

Hossein v Ali (Ruling) [2022] VCC 2195

Jones v Sutton (No 2) [2005] NSWCA 203

Lachaux v Independent Print Ltd [2017] EWCA Civ 1334; [2018] QB 594

Murdoch v Private Media Pty Ltd (No 4) [2023] FCA 114

Newman v Whittington [2022] NSWSC 249

Pastoral Investment Land & Loan Pty Ltd v Central Coast Council [2020] NSWLEC 85

R v Commonwealth Rent Controller (1947) 75 CLR 361

Ryan v Random House Australia Pty Ltd [2015] NSWDC 31

Sarina v O’Shannassy [2019] FCCA 732

Scott v Bodley [2022] NSWDC 459

Scott v Bodley (No 2) [2022] NSWDC 651

Stead v Fairfax Media Publications Pty Ltd [2021] FCA 15

Tedja & Sony [2017] FamCAFC 121

The Sydney Cosmetic Specialist Clinic Pty Ltd(ACN 151 319 032) v Hu [2020] NSWDC 786

The Sydney Cosmetic Specialist Clinic Pty Ltd v Hu [2022] NSWCA 1

Trkulja v Google LLC (2018) 263 CLR 149; [2018] HCA 25

Wilks v Qu (Ruling 2) [2022] VCC 1503

Wilks v Qu (Ruling) [2022] VCC 620

Zimmerman v Perkiss [2022] NSWDC 448

Texts Cited:

“Controlling the Costs of Defamation Cases,” United Kingdom Ministry of Justice, 29 November 2018

Category:

Procedural rulings

Parties:

GRC Project Pty Ltd trading as GRC Property Management (first plaintiff)
Christine Ng (second plaintiff)

Yuen Yee Lai (defendant)

Representation:

Counsel:
Mr D Helvadjian (plaintiffs)
Mr J Mack with Ms H Ryan (defendant)

Solicitors:
Workplace Legal Solutions (plaintiffs)
Yau & Wang Lawyers (defendant)

File Number(s):

2022/00303825

Publication restriction:

Nil

Judgment

The application before the court

1. The defendant brings an application pursuant to s 10A(5) of the Defamation Act 2005 (NSW) (“the Act”) for the serious harm element of the plaintiffs’ claims for defamation, as defined in ss10A(1) and 10A(2), to be determined before trial. The plaintiffs oppose the application.

The parties, the publications and the particularisation of damages and serious harm

2. The first plaintiff is an excluded corporation (s 9 of the Act) and the second plaintiff is its sole director. Both plaintiffs carry on business as property and strata management services. The defendant is a property owner who once had a business relationship with the plaintiffs.

3. The plaintiffs bring proceedings for damages for defamation and, pursuant to s 18 of the Australian Consumer Law (“ACL”), misleading or deceptive conduct, for eight publications made between 8 December 2021 and 16 May 2022. Seven of the publications are oral publications (although one appears to involve a subsequent series of text messages); the remaining publication is an email. Three of the publications were made in English and the remainder in Cantonese. The text of these publications is set out in English (and, where applicable, in Cantonese) in the statement of claim, together with the imputations pleaded to arise and relevant particulars concerning publication and identification. All were made within the jurisdiction of New South Wales.

4. A concerns notice was served on 20 June 2022 and proceedings commenced on 12 October 2022. The particulars of serious harm set out in the concerns notice were expanded in the statement of claim to the following:

1. Loss of revenue totalling $2,256,374.76 for the first plaintiff after Ms Han, a customer, pulled out of ongoing discussions, recorded in an agreement signed by her, for a significant work project to be carried out by the first plaintiff.

2. Loss of custom generally for the first plaintiff, by reason of these allegations spreading in the tight-knit local Chinese community.

3. For both plaintiffs, damage caused by the number, extent and “concentration” of the publications in this community.

5. The particulars of aggravated damages set out a claim that the matters complained of form part of a “vindictive campaign of denigration” (paragraph 57), with the latest publication having been made on 3 October 2022, a week before the statement of claim was filed. The first plaintiff also brings a claim for special damages in the form of lost revenue in the sum of $2,256,374.76.

The relevant principles of law

6. Proof of serious harm is necessary as it is an element in the cause of action in defamation in New South Wales as a result of amendments taking effect on 1 July 2021. The question of serious harm must be determined early in the litigation unless there are “special circumstances” (s 10A(5)). The nature of “special circumstances” is set out in Wilks v Qu (Ruling) [2022] VCC 620 at [40]-[46] and (Wilks v Qu (Ruling 2) [2022] VCC 1503 at [6]-[11]).

7. The purpose of s 10A is to discourage the bringing of cases likely to result in modest awards where the costs are out of proportion to the damages: Newman v Whittington [2022] NSWSC 249 at [30]-[46]. It was a response to public concern over nominal damages awards for publications to one or a handful of persons (such as the $5,000 awards in Cush v Dillon; Boland v Dillon (2011) 243 CLR 298 and Jones v Sutton (No 2) [2005] NSWCA 203; Jones was the catalyst for the introduction of special costs provisions now in s 40 of the Act). It was not, however, intended to become a routine step in defamation actions, as has been observed by judges determining serious harm in the English courts.

8. English decisions should be referred to with some care. First, as Clayton J stated in Wilks v Qu (Ruling) at [23], there is no English equivalent to s 10A(5), so English decisions on the grant or refusal of a serious harm hearing do not refer to this important timing issue. Second, the reforms in the United Kingdom were accompanied by costs case management reforms (see, for example, “Controlling the Costs of Defamation Cases,” United Kingdom Ministry of Justice, 29 November 2018) which are at the centre of the determination of serious harm under English law: Alexander-Theodotu v Kounis [2019] EWHC 956 (QB) at [35], and for which there is no Australian equivalent. Third, there are different case management rules, such as a requirement that a defence must be filed before the issue of serious harm can be determined (Brown v Bower at [53] – [55] per Warby J; I note, however, that his Honour did in fact determine the application without a defence being filed).

9. Notwithstanding these differences of legislation and procedural rules, these judgments still provide considerable guidance. The judges who have handed them down were specialists in their field before appointment and their decisions form part of a specialist list conducted to ensure conformity as well as being the product of their many years of experience. They are also of practical use, as they deal with issues that have yet to be considered in Australia. One such example is Ames v The Spamhaus Project Ltd [2015] EWHC 127 (QB) where Warby J determined (at [101]) that the proceedings were “not ripe” for a preliminary hearing, as the facts deserved further examination, a decision of some relevance here. Until such time as courts of record have considered these issues in Australia, the English judgments contain solutions and examples from which our courts can benefit.

10. The burden of satisfying the court that there are special circumstances justifying the postponement of the determination to a later stage in the proceedings lies on the plaintiff: Hossein v Ali (Ruling) [2022] VCC 2195 at [45]. Factors which the court can take into account are set out in s 10A(6):

“The matters a judicial officer may take into account in deciding whether there are special circumstances for the purposes of subsection (5) include (but are not limited to) the following—

(a) the cost implications for the parties,

(b) the resources available to the court at the time,

(c) the extent to which establishing the serious harm element is linked to other issues for determination during the trial for the proceedings.”

11. As a result, there will be many defamation trials which proceed without orders being made for a serious harm trial beforehand, generally where serious harm cannot be severed from the issues of the trial, or because the imputations are self-evidently such that serious harm is obvious (Wilks v Qu (Ruling 2)). For this reason, as is noted in Alexander-Theodotu v Kounis, orders for separate early hearings of serious harm are “rather less common” (per Warby J at [35]) than would otherwise be expected to be the case.

The relevant principles of case management

12. As a preliminary serious harm hearing is a case management tool, the English authorities state that the court may have input into why, as well as how, an order for such a hearing to take place is made: Harcombe v Associated Newspapers and another; Kendrick v Associated Newspapers and another [2022] EWHC 543 (QB) at [4]; Brown v Bower and another [2017] EWHC 1388 (QB) at [5].

13. However, the judicial officer’s role goes much further in Australia under s 10A. This is the result of the inclusion of the words “or on the judicial officer’s own motion” in s 10A(4) and “any orders the judicial officer considers appropriate” in s 10A(4)(b). As noted by Clayton J in High Quality Jewellers Pty Ltd (ACN 119 428 394) & Ors v Ramaihi (Ruling) [2022] VCC 1924 at [1], a judge may even, of his or her own motion, override the parties and order that a serious harm hearing should (or should not) take place. In High Quality Jewellers Pty Ltd (ACN 119 428 394) & Ors v Ramaihi (Ruling), her Honour made the order for such a hearing on her own initiative, although neither party had asked for it.

14. To what extent may a judicial officer play a role in the determination of when serious harm should be considered, and what sort of information should be considered?

Courts exercising jurisdiction of their own motion

15. Legislation may confer on a court power which is exercisable either on application or of the court’s own motion. This may relate to matters concerning a court’s practice or procedure (see, for example, s 86(3) of the Civil Procedure Act 2005 (NSW)) or, as is the case here, to the determination of a jurisdictional or other substantive issue, such as serious harm.

16. The phrase “own motion,” when used in connection with the conferral of a power, is intended to enable the repository of the power to exercise the power on their own initiative. It has been said the very meaning of acting on one’s own motion is to act without an application: R v Commonwealth Rent Controller (1947) 75 CLR 361 at 370 (per Latham CJ and Dixon J). For this reason, the phrase is sometimes used interchangeably with the legal Latinism sua sponte (Tedja & Sony [2017] FamCAFC 121 at [15] (per Strickland J)).

17. A court given a power exercisable of its own motion must, however, ensure that it accords procedural fairness to the parties to the proceedings: Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6] (per Basten JA). In Pastoral Investment Land & Loan Pty Ltd v Central Coast Council [2020] NSWLEC 85 at [84] and [85], Preston CJ of LEC held, in connection with a power to dismiss proceedings for failure of a plaintiff to prosecute proceedings with due despatch:

“What is required in order to accord procedural fairness depends on the power to be exercised, the circumstances in which the power is to be exercised and the consequences for each party if the power is or is not exercised. At a minimum, the Court needs to identify the power that is proposed to be exercised and the factual matters that not only enliven the exercise of the power but also make the exercise of the power just in the circumstances. The Court needs to give the plaintiff a fair opportunity to be heard on the Court’s potential exercise of that power having regard to those matters in those circumstances.”

18. Applying these principles to s10A of the Act, a court seeking of its own motion to exercise the powers conferred by that subsection would need to accord each party to the proceedings an opportunity to make submissions about whether the powers ought or ought not to be exercised. This is particularly the case where an exercise of the powers may ultimately result in proceedings being dismissed for want of serious harm. Importantly, s10A(5) requires a judicial officer to determine the issue as soon as practicable before the trial commences unless satisfied there are special circumstances justifying the postponement of the determination to a later stage of the proceedings (including during the trial). While this duty is enlivened “[if] a party applies for the serious harm element to be determined before the trial for the proceedings commences,” the impetus for determining this issue is placed on the judicial officer which, in addition to s 10A(4), means that the judge has duties to assist both the parties and the court. Whether a court acting of its own motion is required to accord a party an opportunity to make submissions and defer the determination for that purpose is an unattractive prospect, given the emphasis on early determination; the safest course is for the court to raise court management issues with the parties during the hearing of the application.

19. This kind of active role for the judge is an important change to the law. Prior to the enactment of s 10A, the concept of the court taking such a step in defamation proceedings was only attempted (unsuccessfully) on one occasion, in Channel Seven Sydney Pty Ltd v Senator Concetta Fierravanti-Wells [2011] NSWCA 246. The first instance judge issued notices to the parties in defamation proceedings in the District Court to file and serve submissions as to why, pursuant to s 21(3) of the Act, an order should not be made that the trial of the action proceed without a jury. The stated basis was that the jury would have to read a long government report. However, notices had been sent out by the court in all jury matters (Ahmed v Nationwide News Pty Ltd [2010] NSWDC 183 at [5] and [52]-[54]) and the underlying case management concern was that the problem with defamation law was, not technological change, but the retention of the jury system (an opinion which, I note in passing, has long dogged law reform initiatives in New South Wales, such as the s 49 Review which led to the serious harm amendments).

20. The Court of Appeal set aside the ruling and held that the first instance judge had no power to dispense with the jury of his own motion, either under s 21 of the Act and/or under the Civil Procedure Act 2005. Any provision in the Civil Procedure Rules (and, presumably, the Civil Procedure Act itself) inconsistent with the entitlement to a jury under s 21 was thus ultra vires.

21. The specific inclusion of the power in the legislation is clearly intended to grant the judge hearing the application the power to raise this issue sua sponte. The legislation anticipates that the judges case-managing defamation actions will actively guide and assist the parties in terms of the objects of the legislation in relation to claims where serious harm is an issue, and use their knowledge of defamation law to assist the parties conduct their cases efficiently, as opposed to rubber-stamping the immediate allocation of serious harm hearings and/or hearing dates.

22. As to the information that a judge may act upon, this may include not only a consideration of facts in the case but also case management factors, such as court resources. In the present case, I am content to leave the factual issues to the parties’ submissions and have instead raised with them case management problems arising out of court hearing availability, time issues arising from the manner in which the parties indicate evidence would be led on serious harm and other case management issues such as the welfare of witnesses.

Case management factors

23. The case management features relevant to serious harm applications have been set out by Warby J in Alexander-Theodotu v Kounis at [35], referring in turn to Lachaux v Independent Print Ltd [2017] EWCA Civ 1334; [2018] QB 594:

“35. First, although Orders for the trial of meaning as a preliminary issue are common nowadays, and becoming the norm, the trial of serious harm as a preliminary issue is rather less common. In November 2017, well before the Order in this case, the Court of Appeal warned against the risks of undue procedural complexity and cost that can be involved in trials of the issue of serious harm. In Lachaux v Independent Print Ltd [2017] EWCA Civ 1334; [2018] QB 594, Davis LJ summed up the position:

“(3) If there is an issue as to meaning (or any related issue as to reference) that can be resolved at a meaning hearing, applying the usual objective approach in the usual way. If there is a further issue as to serious harm, then there may be cases where such issue can also appropriately be dealt with at the meaning hearing. If the meaning so assessed is evaluated as seriously defamatory it will ordinarily then be proper to draw an inference of serious reputational harm. Once that threshold is reached further evidence will then be likely to be more relevant to quantum and any continuing dispute should ordinarily be left to trial.

(4) Courts should ordinarily be slow to direct a preliminary issue, involving substantial evidence, on a dispute as to whether serious reputational harm has been caused or is likely to be caused by the published statement.

(5) A defendant disputing the existence of serious harm may in an appropriate case, if the circumstances so warrant, issue a Part 24 summary judgment application or issue a Jameel application: the Jameel jurisdiction continuing to be available after the 2013 Act as before (albeit in reality likely only relatively rarely to be appropriately used).

(6) All interlocutory process in such cases should be sought to be managed in a way that is proportionate and cost-effective and actively promotes the overriding objective.””

24. The courts in Australia do not, regrettably, oversee costs in the same way as the English courts, but otherwise these principles are of assistance.

How do the parties propose to run the case?

25. The following problems fall for consideration:

1. How will evidence of the slander and the imputations arguments proceed, how long will this take, and will this evidence have to be heard again at the trial, in relation to either (or both) of the defamation and ACL claims?

1. The defendant proposes to cross-examine the publishees about damage to reputation. How long will it take and how much crossover will there be with the damages evidence at the trial?

2. The extent to which interpreters will be required, and the time impact this will have on the trial.

3. The nature and extent of the first plaintiff’s serious financial harm, and how much crossover there will be with the damages evidence at the trial.

4. The state of the pleadings.

5. Court trial time availability.

26. I will deal with each of these in turn.

Imputations

27. Unlike Zimmerman v Perkiss [2022] NSWDC 448 and Scott v Bodley [2022] NSWDC 459, where both parties agreed that the imputations pleaded were “trial-strength” imputations which were not challenged, Mr Mack has told me that he does not have instructions to agree that the imputations pleaded are the ones that should go to trial. His client reserves her right to challenge those imputations. Any ruling on imputations (which is not sought) should be done, he submits, on the “threshold” basis, leaving his client the right to challenge the imputations as well as what was said at the trial. Mr Mack said that this was how the issue had been dealt with in Scott v Bodley (No 2) [2022] NSWDC 651.

28. That is not correct. All I did in Scott v Bodley was to note that, as there was agreement that the imputations were conveyed, the problem of their correct determination in serious harm trials (see High Quality Jewellers Pty Ltd & Ors v Ramaihi (Ruling) [2022] VCC 2240 at [10]-[13] per Clayton J, referring to Zimmerman v Perkiss at [9]-[11], where I had also made this point) did not need to be considered.

29. There are two aspects to the role of imputations in this context. The first is that the imputations for the serious harm have to be the same as the trial, and the second is whether, if they must be considered early, plaintiffs should be permitted to continue to dictate what those imputations are, or whether the court should play a greater role, as is case in England (Ryan v Random House Australia Pty Ltd [2015] NSWDC 31 at [7]-[10]). There is some sign of judicial movement on this second issue: Stead v Fairfax Media Publications Pty Ltd [2021] FCA 15 at [14]-[15], citing Trkulja v Google LLC (2018) 263 CLR 149; [2018] HCA 25 at 627 [31]-[32] (“mean or midpoint”; “decide the most damaging”); Gatto v Australian Broadcasting Corporation [2021] VSC 83 at [19]-[48]; leave to appeal dismissed: [2022] HCATrans 197.

30. For present purposes, however, I need only look at the first of these two issues, namely whether the imputations need to be determined to trial level for the serious harm preliminary hearing.

31. There would be no point to a serious harm ruling if the imputations at the hearing were different. They must be determined, therefore, as part of the serious harm preliminary hearing. This was an easy matter in Zimmerman v Perkiss and Scott v Bodley (No 2), as the publications were simply tendered. The problem in this case is that there are seven slanders, five of them in Cantonese. The witnesses to whom the seven slanders were published would have to be called and cross-examined, not only in the trial, but also in the serious harm hearing. The overlap with trial evidence would be significant.

Cross-examination of the publishees

32. Mr Mack intends to put it to each of the publishees not only that the matters were not published, but that they did not think less of the plaintiffs. Again, that kind of cross-examination overlaps with issues at the trial, including the ACL claim.

Interpreters

33. The plaintiffs will have to provide interpreters for the hearing as the witnesses will have to say what was said in Cantonese so that it can be translated by an accredited interpreter. The defendant may wish to have her own interpreter. Some of the witnesses may wish to give evidence in Cantonese. This is a minor matter, but likely to add several hours to the trial.

Expert evidence on serious financial loss

34. The plaintiffs intend to call expert evidence. The existence of the loss is hotly contested and I anticipate it is likely that the expert will be cross-examined. There may also be expert evidence in reply and a conclave report. This evidence will overlap with damages evidence at the trial.

The pleadings

35. Mr Mack was critical of the statement of claim, and in particular of the claim for misleading or deceptive conduct.

36. The ACL claim has defects:

1. There is a claim made by the second plaintiff in her personal capacity under the ACL which requires repleading, probably under other legislation. In limited circumstances, such as where the publication is made by phone or email, certain provisions of the ACL may apply to individuals (see s 6(3) of the Competition and Consumer Act 2010 (Cth)), jurisdiction enlivened by s 51(v) of the Constitution. The eighth publication, an email, may be actionable for this reason, but the slanders may not. There is some discussion of these issues in Sarina v O’Shannassy [2019] FCCA 732, but it would appear that the court did not take into account that the publication sued on, an email, was still actionable because of this exception (this issue was similarly overlooked on appeal).

2. The first plaintiff’s $2.2 million claim for loss of revenue is misconceived and requires repleading.

37. Mr Mack submitted that these issues could be resolved by giving an early hearing date to the serious harm claim, where these issues could be “thrashed out” and disposed of, which was quicker and easier than a series of amendments from plaintiffs who had already amended their pleading once.

38. I do not agree. The dangers of giving an early hearing date in any complex litigation, let alone defamation, are readily illustrated by Murdoch v Private Media Pty Ltd (No 4) [2023] FCA 114, where “mistakes” (at [31] and [53]) required the vacating of a hearing that had been allocated on the first return date, and required the joinder of two new defendants. The plaintiffs should not be forced on with pleadings they want to amend.

39. The defendant has elected to bring this application without filing a defence, but has indicated that the defences will include challenges to all issues including publication, identification and defamatory meaning as well as defences of justification and opinion. The first three all overlap with the serious harm preliminary hearing, It is impossible to know what the position is with the substantive defences but it seems likely there will be overlap there too. While I have taken the view (contrary to the English authorities, and by reason of s 10A(4) and (5)) that a defendant should not be obliged to filed a defence for the purpose of determining whether to make an order for a preliminary hearing, a defendant who does not do so runs the risks of findings of the kind set out in Brown v Bower.

Court availability

40. Calling upon prior experience in conducting the Defamation List, I consider a serious harm hearing which also requires resolution of these issues, including oral evidence, both lay and expert, could take up to four days, including submissions. A hearing of this length cannot be accommodated in this court during 2023. The rest of the claim would be in limbo until after the serious harm ruling is handed down and would be heard at the earliest late in 2024 or, more likely, 2025.

The parties’ submissions

41. Although the application is brought by the defendant, I invited counsel for the plaintiffs to address first, as his clients have the burden of establishing that special circumstances exist.

The plaintiffs’ submissions

42. Mr Helvadjian submits that the factors referred to in s 10A(6) are not exhaustive, and that “special” does not mean “exceptional’ circumstances (Hossain v Ali (Ruling) at [53]). The barrier must not be set too high. He pointed to the following:

1. As the case management issues set out above demonstrated, no time will be saved; the length and complexity of the hearing will be added to.

2. The plaintiffs also bring an ACL claim, in which many of these issues will need to be re-canvassed. Factual findings in the serious harm trial may have to be agreed to be relied upon for the ACL claim as well as for publication and identification issues in the defamation claim. However, the power in s10A(5) only relates to defamation actions, and not to causes of action falling outside the ambit of the Act.

3. Special circumstances may exist where serious harm is so likely to be established that having a preliminary hearing will waste costs: Wilks v Qu (Ruling) at [44]; Hossein v Ali (Ruling) at [54]. There was a written contract between the plaintiffs and Ms Han, as is set out in the statement of claim. That transaction did not go ahead as planned and the plaintiffs submit that this materially strengthens the position as to establishing not only serious harm but also special circumstances. It is submitted that the facts of this case show that serious harm is self-evident, given the very substantial special damages claim. The problem I have with this submission is that the serious financial loss claim, in its current state, is not sufficiently clearly pleaded to determine this. What is clear, however, is that the first plaintiff lost a customer so, even if this is not serious financial loss conformably with s 10A(2), it is certainly capable of being the subject of an ACL claim, in which case there is always going to be a trial at the end of these proceedings.

4. The defendant’s approach to the nature of the serious harm preliminary hearing is misconceived, in that the hope appears to be that the defendant can “knock out” some of the less serious publications on the basis that serious harm must be established for each publication, rather like a committal hearing. The better view is that, where a plaintiff sues for multiple publications, there is no requirement for each publication to be shown to have separately caused serious harm: Hossain v Ali at [82].

5. The “mental health” (submissions, paragraph 18) of the witnesses, who could all be called on to give evidence twice, needs to be considered. It is all very well for a plaintiff to be called more than once; he or she has the benefit of the claim at the end. Witnesses’ welfare is a different consideration.

6. The plaintiffs rely upon the list of grounds of challenge set out in Scott v Bodley at [18] which viewed s10A in the context of general reluctance for separate trials of this kind. This reluctance is well recognised, not only in the many judgments in Australia referred to in Scott v Bodley at [18], but also in English serious harm rulings. In Brown v Bower, Warby J warned (at [29]) about the “siren song” of agreeing or ordering preliminary issues which “should normally be resisted” where “attempts at shortcuts may lead to additional complexity, delay and cost.” Whatever the general situation, the issues for a serious harm hearing in this case would, having regard to the case management issues, need to be identified with precision.

The defendant’s submissions

43. In general terms, the defendant submits that there are no special circumstances in this case, the parameters and context of which fall comfortably within the parameters of a “backyarder”, in that they are made to a very small number of persons, are similar in nature, and consist of brief comments made, in the most part, in a conversation.

44. The defendant’s submissions paint a picture of this claim as a “backyarder” as follows:

1. The first plaintiff is a “small” company for which the second plaintiff is the “alter ego” (submissions, paragraph 5).

2. All of the publications have a high degree of overlap in terms of publication. For example, three of the matters complained of were made to Mr Daryl Li and the fourth was made to him and his wife (among others). Six of the eight publications were made to an audience of only one person: three to Mr Li, two to Ms Jiao and one to Ms Han; the remaining two publications were made to a handful of persons at best.

3. The matters complained of are all similar in nature, in that the imputations pleaded are that the plaintiffs misappropriate or steal money, that they abuse their legal authority and that the second plaintiff is a thief.

4. All of the matters claim to identify both plaintiffs except for the fourth matter complained of, which is pleaded as referring to the second plaintiff only.

5. In other words, although there are eight publications, there is a high degree of overlap in terms of the evidence to be considered in relation to serious harm. In those circumstances, it is submitted that, with one exception, the claim falls within the parameters of a typical publication to a very small audience which contains no features amounting to “special circumstances”.

45. The one exception is that the defendant acknowledges that the claim made for the first plaintiff has a slightly different complexion, namely loss of a large contract. The defendant challenges not only the adequacy of the pleading, but also the bona fides of the claim in its entirety, for the following reasons:

1. The jurisdiction of the District Court is well below the sum claimed ($2.2 million), the inference being that this cannot be a serious claim, or it would have been brought in another court. In those circumstances, the first plaintiff cannot make out “special circumstances.”

2. The claim is a misconceived claim for lost revenue and not for loss of profit, which was not a serious claim to make.

46. The defendant makes the following further submissions about the costs and case management savings if there were early determination of the serious harm issue.

1. If one or both plaintiffs fail to establish serious harm, the defamation case would be dismissed. In addition, if there is a strikeout of the defamation claim, the plaintiffs may reconsider the ACL claim. The court as well as the parties would benefit if this poorly drafted claim could be pushed into a hearing quickly.

2. Even if the plaintiffs were able to establish serious harm, the findings may reduce the scope of the issues at the hearing. What those findings would be was unclear. Mr Mack did not suggest that the trial judge would not need to hear the slanders or rule on the imputations.

47. The defendant submits that the mere fact of the pleading of a claim under the ACL does not constitute special circumstances, as it is common for defamation actions to be pleaded with other causes of action: Wilks v Qu at [45]. Major overlap in issues is not enough, by itself, to constitute special circumstances: High Quality Jewellers Proprietary Limited v Ramaihi [2022] VCC 1924 at [26]. While the serious harm element is related to defamation only, there is no presumption that this requirement only applies if defamation is the sole cause of action pleaded. Additionally, misleading or deceptive conduct is a different cause of action to defamation, with a different set of elements and potential defences.

Conclusion: special circumstances have been made out

48. Each of the parties has made persuasive arguments in relation to some of the issues. The problem is that the defendant really does not have an answer for the following problems:

1. Seven of the eight publications are slanders, five of them in Cantonese. The trial judge would need to hear what was said and the manner in which it was said, just as much as the judge hearing the serious harm application, so that evidence is likely to have to be given twice. The defendant’s submissions do not offer any concessions as to content of the slanders, identification or defamatory meaning, so the judge hearing the serious harm issues would need to hear this evidence as well as serious harm, and make appropriate rulings.

2. The length and complexity of the hearing could in fact be increased by this duplication of evidence. The issue of what was said is but one of a series of issues where the serious harm element cannot be disentangled from the trial issues, such as the first plaintiff’s financial loss (whether serious or simply claimable under the ACL) and the grapevine effect.

3. As a result of (a) and (b), the serious harm determination could take up to four days and will also require many if not most of the witnesses to give evidence twice. This is a costs burden on the parties, an emotional burden on the witnesses and a time burden on the court, in circumstances where even if the serious harm element could not be established by both plaintiffs, little time would be saved at the trial as the ACL claim remains.

4. I agree that the ACL and serious financial loss claims, in their present form, have defects, but the reality is that the plaintiffs lost a good customer. The fact that the plaintiffs have to tidy up their case is an argument against making orders for a preliminary hearing, for the reasons set out in Ames v The Spamhaus Project Ltd. Nor should the bringing of a claim for $2.2 million in this court be regarded as proof of abuse of process warranting the disregarding of this claim as frivolous. The referral of cases between the District and Supreme Court to resolve issues of this kind is well known: see The Sydney Cosmetic Specialist Clinic Pty Ltd v Hu [2022] NSWCA 1 at [6] and The Sydney Cosmetic Specialist Clinic Pty Ltd(ACN 151 319 032) v Hu [2020] NSWDC 786 at [27] – [29] (claim in excess of $750,000) and Edwards v Gillespie [2020] NSWDC 475 (value of cavoodle in excess of District Court equitable jurisdiction).

5. Although the defendant submits that the ACL claim may be abandoned if the plaintiffs fail to establish serious harm, this is at best hypothetical (although difficulties with the second plaintiff’s entitlement to bring an ACL claim for slander are acknowledged and will be repleaded under NSW legislation). There has been a loss of a customer about which there will be a trial of ACL issues, and that is relevant to the “special circumstances” relied upon by the plaintiffs to oppose the allocation of an early hearing date.

49. As I have refused the defendant’s application, the parties should prepare Short Minutes of Order for a timetable for the completion of interlocutory steps, conformably with my orders below.

Orders and costs

50. Costs should follow the event. I have, however, granted liberty to apply.

Order:

1. Defendant’s application for the serious harm element in the plaintiffs’ defamation claim to be determined before the trial is refused on the basis that the plaintiffs have established special circumstances conformably with s 10A(5) of the Defamation Act 2005 (NSW).

2. Defendant pay plaintiffs’ costs, with liberty to apply in relation both to costs and a timetable for the further conduct of these proceedings.

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Decision last updated: 23 March 2023