Liu v The Age Company

[2010] NSWSC 1176

CITATION:	Liu v The Age Company & Ors [2010] NSWSC 1176
HEARING DATE(S):	11 October 2010 to 12 October 2010
JUDGMENT DATE :	14 October 2010
JUDGMENT OF:	McCallum J
DECISION:	Publication of reasons for granting adjournment and evidentiary rulings
CATCHWORDS:	PRACTICE AND PROCEDURE - application for preliminary discovery seeking identification of journalists' sources - whether an interlocutory proceeding - where defendants sought to rely on evidence on information and belief from the very sources the identification of whom is sought in the proceeding without identifying those sources - whether such evidence admissible under the exception to the hearsay rule in s75 of the Evidence Act - reasons for granting adjournment enabling both parties to address by direct evidence matters previously sought to be proved only by evidence on information and belief
LEGISLATION CITED:	Uniform Civil Procedure Rules Civil Procedure Act 2005 Limitation Act 1969 Evidence Act 1995
CATEGORY:	Principal judgment
CASES CITED:	Levis v McDonald (1997) 75 FCR 36 Hall v Nominal Defendant (1966) 117 CLR 423 Ex Parte Britt (1987) 1 Qd R 221 Herald & Weekly Times Ltd v Guide Dog Owners & Friends Assoc [1990] VR 451 Brouwer v Titan Corp Ltd (1997) 73 FCR 241 London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 156 Bray v F Hoffman-La Roche Limited [2002] FCA 243 Wily v Terra Cresta Business Solutions Pty Ltd [2006] NSWSC 949 New South Crime Commission v Vu [2009] NSWCA 349 John Fairfax and Sons Limited v Cojuangco (1988) 165 CLR 346
PARTIES:	Helen Liu The Age Company Ltd Richard Baker Phillip Dorling Nick McKenzie
FILE NUMBER(S):	SC 2010/224488
COUNSEL:	B. McClintock and G. R. Rubagotti (Plaintiff) T. D. Blackburn SC and A.T.S. Dawson (Defendants) M. Sexton and S. Free (Attorney-General (NSW))
SOLICITORS:	Kennedys Lawyers (Plaintiff) Minter Ellison (Defendants) Crown Solicitor (Attorney-General (NSW))

- 16 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

McCALLUM J

14 OCTOBER 2010

10/224488 Helen Liu v The Age Company Limited & Ors

JUDGMENT

1 HER HONOUR: Ms Helen Liu is a businesswoman. On 3 February 2010, an article was published in The Age newspaper alleging that she had paid $150,000 to Mr Joel Fitzgibbon, a member of Federal Parliament, in circumstances suggesting corruption. The article reported that The Age had obtained Ms Liu’s “private records” and cited some of those records to support the allegations it published against Ms Liu.

2 Ms Liu contends that at least two of the documents obtained by The Age and expressly referred to in the article were forged or falsified by a person whose identity is not known to her. The present proceeding is an application brought by summons under Part 5.2 of the Uniform Civil Procedure Rules seeking orders directed to enabling Ms Liu to identify the person or persons who provided those and other documents to The Age. The effect of the orders sought is to compel the three journalists who wrote the article to disclose their sources.

3 The proceedings are brought against the proprietor of The Age and the three journalists under whose by-line the article was published. It is convenient to refer to the defendants collectively as the newspaper.

4 The hearing of the application commenced last Monday, 11 October 2010. On the second day of the hearing, I acceded to an application by the newspaper to have the proceedings adjourned part heard. The application was prompted by a ruling foreshadowed on the first day of the hearing to admit an affidavit sworn by Ms Liu, notwithstanding the fact that the affidavit had not been served in these proceedings in advance of the hearing.

5 These are my reasons for admitting the affidavit and for granting the adjournment. This judgment also addresses two other evidentiary matters that arose during the hearing.

The evidence of the plaintiff

6 It is necessary to explain the circumstances in which the issue of the admissibility of Ms Liu’s affidavit arose. The evidence served on behalf of both Ms Liu and the newspaper in advance of the hearing included hearsay evidence. In particular, the evidence on behalf of Ms Liu that the two documents cited in the article are forgeries was given by Ms Liu’s solicitor in the form commonly referred to as evidence “on information and belief”. In her affidavit sworn 2 July 2010, the solicitor, Ms Elaine Quinn, said at paragraph 4:

“I am informed by the plaintiff and believe that the following documents referred to in the Article published by the defendants in annexure “A” are forgeries or falsified (“the Documents”) by a person whose identity is not known to the plaintiff.
(a) List purporting to be in the plaintiff’s handwriting of 22 names made in 1997-1998.
(b) Letter purporting to be from the plaintiff to Senior Bank of China Executive Wang Hang Bang.”

7 The evidence in reply served on behalf of the newspaper similarly included evidence from its solicitor sworn on information and belief. That evidence related to the journalists’ sources.

8 The parties anticipated, correctly, that the admissibility of such evidence would turn, in part, on whether the present proceeding is interlocutory. Regrettably, however, the jurisprudence informing that question is mixed. In those circumstances, it appears that there were discussions between the parties as a result of which senior counsel for the newspaper, Mr Blackburn, had reason to expect when he came to Court that the hearsay evidence served on behalf of his clients would not be the subject of any objection on that ground.

9 With great respect to the legal practitioners involved, all of whom are both able and experienced, any agreement as to objections to hearsay evidence in the present case was bound to come unravelled. In saying so, I do not mean to discourage practitioners from engaging in discussions of that kind. On the contrary, s 56 of the Civil Procedure Act 2005 mandates attention to such issues. In the present case, however, the agreement allegedly reached between the practitioners could only complicate the Court’s task of assessing the cogency of a number of important contentions.

10 As it happened, when Mr Blackburn launched into battle on Monday morning, the sand quickly shifted beneath his feet. At the outset of the hearing, I asked whether it was a final hearing of the plaintiff’s summons, noting that her central contention (that the documents are forgeries) was put before me only on information and belief. In response to that question, senior counsel for the plaintiff, Mr McClintock, foreshadowed reading an affidavit sworn by Ms Liu in separate proceedings commenced by her against the proprietor of The Age earlier this year. The affidavit, sworn on 22 February 2010, had been served, but never read, in those proceedings. Although the defendant to those proceedings is the first defendant to the present proceedings, the newspaper had not before that moment been put on notice that Ms Liu would be a witness in the present case.

11 When in due course Ms Liu’s affidavit was read, it was objected to on that basis. I formed the view, however, that in so far as the affidavit stated directly that which had previously been stated only on information and belief, it should be admitted.

12 The forgery allegation is critical to the present application. The power to make orders under Part 5.2 of the UCPR is discretionary. It is well recognised that, although the common law does not protect the public interest in the free flow of information to the extent of conferring an immunity on journalists from disclosure of their sources, the recognition of that public interest is a relevant factor in the exercise of such a discretion. The weight to be given to that factor would plainly be substantially undermined in the case of a source that had used a journalist as an unwitting agent of fraud.

13 So far as the material before me discloses, there is nothing to suggest that either the decision to serve the hearsay evidence of Ms Quinn or the subsequent decision to read the affidavit of Ms Liu was made other than in good faith.

14 In those circumstances, I concluded that Ms Liu must be given the opportunity to prove the forgery allegation directly (rather than by evidence sworn on information and belief). The paragraphs of Ms Liu’s affidavit sworn 22 February 2010 admitted in accordance with that determination are paragraphs 1 to 4 and 7(b). The affidavit went further, and indeed a second affidavit was sworn by Ms Liu on Monday, but I indicated that I would not be inclined to admit her further evidence in the circumstances.

15 My determination to admit those parts of the evidence deposing directly to the matters previously stated by the solicitor on information and belief was reached having mandatory regard to the overriding purpose stated in s 56(1) of the Civil Procedure Act. In particular, I took into account the fact that, if the evidence were rejected and the application ultimately refused on the basis that the solicitor’s affidavit was either inadmissible or of insufficient weight to sustain the forgery allegation, Ms Liu would be entitled to bring a further application supported by an affidavit sworn by her. The bringing of such a further application would be likely, in my view, to cause delay and to result in duplication or waste of legal costs and Court time.

16 In that context, I also had regard to the date of publication of the article complained of by Ms Liu, which was 3 February 2010. Any proceedings for defamation in respect of that article must be commenced on or before 3 February 2011 unless the limitation period is extended by order of the Court: see Limitation Act 1969, sections 14B and 56A. Plainly, it would be preferable to have the issues raised by present application finally resolved well before that date.

The application for an adjournment

17 Until my ruling as to Ms Liu’s affidavit was foreshadowed, the legal representatives for the newspaper had no occasion to prepare to cross-examine Ms Liu. The application for an adjournment to enable that to occur was supported by an affidavit sworn by the newspaper’s solicitor, Mr Peter Bartlett, setting out the further inquiries open to the defendants. Whether or not the inquiries identified by Mr Bartlett are in fact ultimately productive, they are plainly appropriate to be undertaken in preparation for the task of instructing counsel in respect of the cross-examination. In addition, Mr Bartlett expressed the desire, properly in my view, to have time to consider what matters may appropriately be put to Ms Liu. In the present case, that is a task to be undertaken with particular care and due reflection.

18 It was submitted on behalf of Ms Liu that inquiries as to the authenticity of the two impugned documents ought to have been undertaken by the newspaper when the allegation of forgery was first made. It is to be hoped that such inquiries were indeed undertaken but even if they were, prejudice to the newspaper would remain if I had forced the hearing on. It is one thing for Mr Bartlett to have made inquiries as to the provenance of the documents in question for the purpose of taking instructions as to the present application and as to the defences that might be available to any proceedings for defamation commenced against the newspaper. The proper preparation for a cross-examination of Ms Liu is a different task altogether.

19 Once it had been determined that Ms Liu should have an opportunity to prove the forgery allegation by direct evidence, it was necessary to give the newspaper a fair opportunity to test the cogency of that evidence. In the circumstances, it followed inexorably that the adjournment should be granted. For those reasons, I granted the adjournment.

Hearsay evidence relied upon by the newspaper

20 Separately, Mr McClintock objected to the evidence of Mr Bartlett sworn on information and belief as to matters relating to the journalists’ sources. Mr Blackburn complained that the objection was not in accordance with his understanding of the agreement reached between the parties last week. However, in light of the newspaper’s successful adjournment application, it was not necessary to explore that issue further.

21 The evidence of Mr Bartlett objected to on behalf of Ms Liu (parts of paragraph 35 of his affidavit) is set out below:

”I am informed by the second defendant, and verily believe, that:

….

(b) the first defendant received an email from one of the sources (the Contact) on 31 March 2009, following publication of [the article]. In that email the Contact extended an offer on behalf of all three sources to provide information concerning the plaintiff's association with Joel and Eric Fitzgibbon;

(c) the first defendant received a further email from the Contact on 31 March 2009 stressing that the information that the sources wished to discuss was very sensitive and requiring confidentiality;

(d) the second defendant subsequently responded to the Contact's two emails and between June 2009 and February 2010 engaged in a series of communications with the Contact regarding the sources' offer to provide information and documents and the terms on which such information might be provided;

….
(f) in the course of this correspondence and as a consequence of independent investigations conducted by the second and third defendants, the defendants were able to verify the identity of the Contact and form a view as to the sources' credibility. The defendants achieved this by testing the accuracy of certain preliminary pieces of information provided by the sources concerning the plaintiff during this initial correspondence. The defendants were able to verify this information by cross-referencing it to information obtained from other sources and channels, as well as publicly available information such as corporate records, Chinese news websites and specific editions of Chinese newspapers. In every such instance, the information provided by the sources was able to be verified. The defendants thus satisfied themselves that the sources were credible and could be trusted to provide accurate and truthful information concerning the plaintiff;

(g) also, in the course of this initial correspondence, the sources required on a number of occasions that their identities be kept confidential as a condition of providing any information or documents, and the second defendant gave (on behalf of the first defendant) confidentiality undertakings not to reveal the sources' identities. In particular:

(i) on 27 September 2009, the second defendant received an email from the Contact in which the Contact expressed the concern that one of the sources would lose their job should their identity be disclosed to the plaintiff or publicly;

(ii) on 28 September 2009, the second defendant sent an email to the Contact in which he stressed that the first defendant would keep its dealings with the sources completely confidential and that their identities would be protected in all cases;

(iii) on 14 October 2009, the second defendant received an email from the Contact in which the Contact reiterated the sources' requirement that their identities not be disclosed to any person in any situation;

(iv) on 30 November 2009, the second defendant sent an email to the Contact in which he stressed that the first defendant would take every step possible to protect the identities of the sources;

(v) on 29 January 2010, the second defendant sent an email to the Contact in which he asked whether publication by the first defendant might expose one of the sources to any danger, and re-confirmed that the first defendant would not disclose the identity of the sources;

(vi) on 1 February 2010, the second defendant received an email from the Contact in which the Contact expressed the concern that publication of any document with the plaintiff's handwriting on it might identify the sources and lead to one of their families being hurt; and

(vii) on 3 February 2010, the second defendant received an email from the Contact in which the Contact expressed the concern that disclosure of the identity of the sources might cause a tragedy to one of their families;

(h) the sources are deeply concerned that their identities remain confidential and are fearful of reprisals should their identities be revealed;
(i) the sources fear that disclosure of any particulars relating to them may be sufficient to reveal their identities, and they have told the second defendant that only a small number of people had access to the Documents;
…”

22 Mr Blackburn accepted that much of that evidence is hearsay and, indeed, double hearsay. He submitted, however, that the present proceeding is interlocutory and that the evidence is accordingly admissible under s 75 of the Evidence Act 1995.

23 The first question is whether the proceeding is interlocutory. Uninformed by authority, I would have been confident that it is not. The test as to what is an interlocutory proceeding is easily stated but notoriously elusive in its application. The test is whether the proceeding will finally determine the rights of the parties in respect of the dispute. Its elusive quality lies in the scope for disagreement as to the juridical parameters of the relevant dispute.

24 The present proceedings were commenced by summons. Mr Blackburn submitted that the application should more properly have been brought by notice of motion in the earlier proceedings brought against the proprietor of The Age, but that is by no means clear. The last orders made in those proceedings included orders that the summons be dismissed but also that the plaintiff have leave to file a statement of claim. Ms Liu has not filed a statement of claim in accordance with the leave ostensibly granted. It is not clear to me whether those proceedings should be regarded as remaining on foot in the circumstances.

25 In Levis v McDonald (1997) 75 FCR 36, Lindgren J expressed the view that an application for preliminary discovery under the equivalent provision of the Federal Court Rules:

“is not an interlocutory proceeding, since the relief provided for finally determines the rights of the parties in relation to the particular issue tendered for decision, that is to say, the issue whether the person concerned is to be ordered to do the things provided for in the rule.”

26 I would respectfully agree with that analysis. There is, however, a body of authority to different effect. The authorities relied upon by Mr Blackburn on this question included Hall v Nominal Defendant (1966) 117 CLR 423; Ex Parte Britt(1987) 1 Qd R 221; Herald & Weekly Times Ltd v Guide Dog Owners & Friends Assoc [1990] VR 451; Brouwer v Titan Corp Ltd (1997) 73 FCR 241; London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 and Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 1560; 163 FCR 554.

27 Whilst I do not think those other authorities compel the conclusion that the hearing of the summons in the present matter is an interlocutory proceeding, I respectfully accept that the weight of authority appears to be against my view.

28 The decision of the High Court in Hall provides useful guidance as to the test as to what is a final order, but that was a case involving an application for extension of time against the proposed defendant to the barred proceedings. I note that Windeyer J posed the question in these terms: “Does [the order] put an end to an existing dispute or existing action?” I think that approach is consistent with my analysis in the present case.

29 The decision of McPherson J in Britt was also concerned with an application for an extension of the time within which to give notice of a motor accident claim to the nominal defendant.

30 Herald & Weekly Times v Guide Dog Owners was an application of the same kind as is brought in the present proceeding. It appears, however, that the application was brought in existing defamation proceedings against the media defendants. The Victorian Court of Appeal held that the proceeding was interlocutory because the order merely set in motion an investigation by examination of documents and persons and did not fully exercise the rights of the plaintiff to the discovery sought: at 455.45 per O’Bryan J; at 461.45 per Marks J; Murphy J agreeing.

31 In Brouwer, the Full Court of the Federal Court held that an order for the production of documents by a non-party to proceedings is interlocutory in nature for the purposes of determining whether leave to appeal should be granted. The basis for that decision was that the word “interlocutory”, in that particular context, was to be understood as bearing a meaning by reference to the meaning of the word “final”. The Court noted that the final orders to be made in the proceedings would be the orders that finally determined the rights of the parties to those proceedings. The significant factor was that the party against whom the production order had been made was a stranger to the proceedings.

32 In London Economics, Finkelstein J expressly disagreed with the decision of Lindgren J in Levis and ventured the view (at [21]) that his Honour would have reached a different conclusion had he been referred to a number of decisions to the opposite effect, including Herald & Weekly Times v Guide Dog Owners.

33 In Optiver, Tamberlin J, noting (at [10]) that the test is whether the determination of the application finally disposes of the rights of the parties, stated that the question arose in that case whether the rights referred to were the substantive rights on the final hearing of the prospective action which may be instituted or the rights affected by an order under the relevant rule to produce documents. It is not clear to me whether, in Optiver, the respondent to the application for preliminary discovery was the prospective respondent to the claim in aid of which the application was brought.

34 The position in the present case is that the application is brought in aid of a potential claim against third parties. I accept that the defendants to the present application are among the potential defendants to any claim in defamation brought by Ms Liu in respect of the article. However, it is no part of the present application to ascertain whether Ms Liu has a potential cause of action against the present defendants. That she does is plain.

35 The purpose of the present application is discrete. It is to enable Ms Liu to identify persons other than the present defendants who may separately be liable to her, either as publishers of the proposed matter complained of or on some other basis arising out of the alleged forgeries. In my view, the proper analysis is that the rights of the parties raised by the present application are, on the one hand, Ms Liu’s right to invoke the Court’s discretionary power under Part 5.2 to compel disclosure of the identity of the sources of the documents and, on the other hand, the newspaper’s right to oppose the exercise of that discretion. The determination of the present application will finally dispose of those rights.

36 However, in light of the contrary view taken in the cases relied upon by Mr Blackburn, it is prudent to consider Mr McClintock’s objection on the premise (with which I do not agree) that the present proceeding is interlocutory.

37 The second question is whether, assuming the proceeding is interlocutory, the evidence is admissible under s 75 of the Evidence Act. That section provides:

“In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.”

38 As I have already noted, Mr Bartlett’s evidence is, in large measure, double hearsay. Such evidence is not in itself necessarily inadmissible in an interlocutory proceeding: see Bray v F Hoffman-La Roche Limited [2002] FCA 243; 118 FCR 1 at [117].

39 In my view, however, s 75 applies in that circumstance to both levels of hearsay. The section creates an exception to the hearsay rule subject to a condition, namely, that the party adducing the evidence also adduces evidence of its source. Mr Bartlett has identified the source of his information (the second defendant) but the second defendant has not, in turn, identified the source or sources of his.

40 Mr Blackburn submitted that, in the context of the present application, where the right to seek disclosure of that information is the very cause of action against his clients, it would operate unfairly on the newspaper to construe s 75 so as to require the newspaper to adduce evidence identifying the sources of the hearsay evidence. He submitted that that construction would have the result of precluding a defendant to an application of the present kind from ever using information provided by the relevant source to resist the application.

41 An answer to that submission, although it is perhaps not an entirely satisfactory answer, is that it appears to be what is required by s 75. In any event, in my view, there is good reason for imposing such a requirement. It is plainly calculated to mitigate the risks inherent in hearsay evidence.

42 In Wily v Terra Cresta Business Solutions Pty Ltd [2006] NSWSC 949, Palmer J held that the requirement of s 75 to adduce evidence of the source of the hearsay evidence was not fulfilled in that case by references in correspondence to “our client”. His Honour noted that the purpose of s 75 is to facilitate the conduct of interlocutory proceedings in circumstances where it is difficult at short notice to adduce evidence in direct and admissible form. His Honour observed, however:

“without any indication of the source of the evidence proffered on information and belief, the Court is unable to assess its weight, nor can the opponent test the evidence or make any sensible submission as to its weight”.

43 Those remarks were cited with approval in New South Crime Commission v Vu [2009] NSWCA 349 at [45] per Spigelman CJ; Allsop P and Hodgson JA agreeing at [55] and [59] respectively. In that case, the Chief Justice observed that nothing in s 75 suggests that it is necessary to provide evidence of the ultimate source of the information contained in the hearsay statement. However, his Honour implicitly endorsed (at [46]) the proposition that the task of assessing the weight of the evidence in question requires identification of a person reasonably likely to have knowledge of the relevant fact.

44 The failure to adduce evidence of the source of the hearsay evidence was not due to any exigencies of time in the present case. It was deliberate, for the perfectly acceptable reason that to identify the source would defeat any resistance to Ms Liu’s application. Nonetheless, I think the simple result is that the evidence is inadmissible.

45 I note that it would have been open to the defendants to seek to adduce the evidence in admissible form by tendering the relevant correspondence with the sources, masking the names of the sources and any other identifying information. I do not mean to rule pre-emptively that the evidence would be admissible in that form, but it is a course that could have been pursued.

46 In any event, I am satisfied that the evidence of Mr Bartlett objected to by Mr McClintock does not fall within the exception under s 75 and, accordingly, that the evidence must be rejected.

47 In case my analysis of s 75 is wrong, I should add that, even if the evidence were capable of falling within the exception to the hearsay rule under that section, I would exercise my discretion under s 135 of the Act to refuse to admit the evidence on the basis that its probative value is substantially outweighed by the danger that it might be unfairly prejudicial to the plaintiff. The prejudice of being unable to test the evidence or make any meaningful submission as to its weight is manifest. The probative value of the evidence in its current form is extremely low.

48 For those reasons, paragraphs 35(b), (c), (d), (g), (h) and (i) of Mr Bartlett’s first affidavit are rejected.

49 Paragraph 35(f) was the subject of an objection as to form. I indicated separately at the hearing that I would reject that paragraph.

Affidavit of Chris Masters sworn 7 October 2010

50 The final task in this judgment is to publish my reasons for rejecting the evidence of Chris Masters sought to be relied upon by the newspaper. Mr Masters is a well-known Australian journalist. He swore an affidavit setting out his experience over many years of obtaining information from sources who have demanded confidentiality. He gave a series of examples of significant stories published by him based on information provided to him by such sources.

51 The affidavit provided a welcome distraction from the tedium of evaluating contested evidence. It was an interesting, if incomplete, review of important achievements in Australian journalism and made compelling reading. In my view, however, its probative value was very slight, for the simple reason that the matters it established are entirely unexceptionable and in accordance with human experience and common sense.

52 Mr Blackburn relied on the affidavit as support for the inference that the protection of the identity of journalists’ sources is valuable and desirable because it tends to expose corruption and malpractice by bringing it to light in the independent press; that such protection is an effective and important means of promoting accountability and the public interest; that it is “a healthy thing” that people expose corruption and that such exposure is more likely to be made in circumstances where the informant is protected; and that Part 5.2 is likely to inhibit political communications made to journalists because a requirement to divulge sources would make it less likely that such information would be divulged.

53 Similar propositions as to the public interest in the free flow of information, and the undesirability in that context of compelling journalists to disclose their sources, were readily accepted by the High Court in John Fairfax and Sons Limited v Cojuangco (1988) 165 CLR 346 without proof of the experience of esteemed journalists.

54 Mr McClintock indicated that, if the affidavit were admitted, he would wish to cross-examine Mr Masters as to the equally unexceptionable proposition that the publication of false information can do great harm to individual reputation. In light of the obviousness of that proposition, I formed the view that such cross-examination would result in undue waste of Court time. Accordingly, I excluded the affidavit in exercise of my discretion under s 135 of the Evidence Act.

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