Liu v The Age Company Ltd

[2016] NSWCA 115

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Liu v The Age Company Limited [2016] NSWCA 115
Hearing dates:	4 and 5 February 2016
Date of orders:	20 May 2016
Decision date:	20 May 2016
Before:	Beazley P at [1], McColl JA at [17], Ward JA at [283]
Decision:	(1)   Grant the appellant leave to appeal. (2)   Direct the appellant to file the notice of appeal in the form of the draft in the White Book within fourteen (14) days. (3)   Appeal allowed in part with costs. (4)   Set aside the stay order made on 23 March 2015 and continued on 22 May 2015. (5)   Grant the cross-appellants leave to appeal. (6)   Cross-appellants to file the notice of cross-appeal in the form of the draft in the White Book within fourteen (14) days. (7)   Dismiss the cross-appeal with costs.
Catchwords:	PRACTICE – preliminary discovery – intended defamation proceedings against newspaper defendant and its sources of information – contested hearing of preliminary discovery application – order made compelling identification of newspaper defendants’ sources – where judgment making order subject of unsuccessful appeal and unsuccessful High Court special leave application at newspaper defendant’s behest – where following failed appellate steps newspaper defendant sought stay of preliminary discovery order – newspaper defendant undertook as condition of stay not to rely on defences of qualified privilege – where newspaper defendant conceded undertaking could have been given at first hearing – no explanation for failure to give undertaking either outright or conditionally at that hearing – stay granted following second contested hearing – whether error in granting stay PRACTICE – preliminary discovery – interlocutory orders – application to stay preliminary discovery order following trial, appeal to Court of Appeal and unsuccessful special leave application – stay application led to second contested hearing – whether stay application should have been entertained – Civil Procedure Act 2005 (NSW), ss 56 - 60 DEFAMATION – preliminary discovery – newspaper rule – whether “effective remedy” once newspaper defendant undertook not to rely on defences of qualified privilege – interests of justice COSTS – preliminary discovery – application for preliminary discovery order conducted by newspaper defendant in adversarial manner – whether primary judge’s exercise of costs discretion miscarried – whether exception to costs follow the event rule for newspaper defendant resisting discovery of sources’ identity – Civil Procedure Act 2005 (NSW), s 98 – Uniform Civil Procedure Rules 2005 (NSW), 42.1 COSTS – costs of preliminary discovery hearing – whether primary judge should have awarded applicant costs on indemnity basis – whether newspaper defendant’s conduct “plainly unreasonable” WORDS AND PHRASES – “effective remedy” – “necessary in interests of justice”
Legislation Cited:	Civil Procedure Act 2005 (NSW) Civil Procedure Rules 1998 (UK) Competition and Consumer Act 2010 (Cth), Australian Consumer Law Court Procedure Rules 2006 (ACT) Defamation Act 1974 (NSW) Defamation Act 2005 (NSW) Evidence Act 1995 (NSW) Limitation of Actions Act 1958 (Vic) Motor Accidents Act 1988 (NSW) Supreme Court Act 1970 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Adam v Ward [1917] AC 309 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 Airservices Australia v Transfield Pty Ltd [1999] FCA 886; (1999) 92 FCR 200 Aid/Watch Inc v Federal Commissioner of Taxation [2010] HCA 42; (2010) 241 CLR 539 Airways Corporation of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [2002] NSWSC 521 Amalgamated Television Services v Marsden [1999] NSWCA 313 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Application of Eduardo Murphy Cojuangco (No 2) (Supreme Court (NSW), Hunt J, 6 January 1989, unrep); LexisNexis BC8902633 Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 Bajramovic v Calubaquib [2015] NSWCA 139 Batistatos v Roads and Traffic Authority of New South Wales; Batistatos v Newcastle City Council [2006] HCA 27; (2006) 226 CLR 256 Be Financial Pty Ltd v Das [2012] NSWCA 164 Boland v Dillon; Cush v Dillon [2015] NSWCA 183 Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 British Steel Corporation v Granada Television Ltd [1981] AC 1096 C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246 Chanel Ltd v F W Woolworth & Co Ltd [1981] 1 All ER 745; [1981] 1 WLR 485 Cojuangco v John Fairfax & Sons Ltd (No 2) (1990) A Def R 51-005; (1991) Aust Torts Reports ¶81-068 Cooper v Williams [1963] 2 QB 567 DA Christie Pty Ltd v Baker [1996] 2 VR 582 Dallas Buyers Club LLC v iiNet Limited (No 3) [2015] FCA 422; (2015) 327 ALR 695 Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 Fletcher v Besser [2010] NSWCA 30 Ghosh v NineMSN Pty Ltd [2015] NSWCA 334 Government Insurance Office (NSW) v Glasscock (1991) 13 MVR 521 Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423 Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 Hodder v Queensland Newspapers Pty Ltd [1994] 1 Qd R 49 Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1281 House v R [1936] HCA 40; (1936) 55 CLR 499 Hunter v Commonwealth Trading Bank of Australia (Supreme Court, unreported, 12 June 1988) Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23 John Fairfax & Sons Ltd v Cojuangco (1987) 8 NSWLR 145 John Fairfax & Sons Pty Ltd v Cojuangco [1988] HCA 54; (1988) 165 CLR 346 Lachlan v HP Mercantile Pty Ltd [2015] NSWCA 130; (2015) 89 NSWLR 198 Lange v Australian Broadcasting Corporation [1997] HCA 25; (1997) 189 CLR 520 Levy v Bablis [2012] NSWCA 128 Liu v The Age Company [2010] NSWSC 1176 Liu v The Age Company Ltd [2012] NSWSC 12; (2012) 257 FLR 360 Malouf v Malouf [1999] FCA 284; (1999) 86 FCR 134 McCloy v New South Wales [2015] HCA 34; (2015) 89 ALJR 857 McGuinness v Attorney-General (Vic) [1940] HCA 6; (1940) 63 CLR 73 Mullins v Howell (1879) 11 Ch D 763 Nominal Defendant v Manning [2000] NSWCA 80; (2000) 50 NSWLR 139 Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133 NRMA Ltd v John Fairfax Publications Pty Ltd (Supreme Court (NSW), Master Macready, undated, file number 004454/01, unrep) Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 Plymouth Mutual Co-operative & Industrial Society Ltd v Traders’ Publishing Association Ltd [1906] 1 KB 403 Re Application of Cojuangco (1986) 4 NSWLR 513 Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 Rinehart v Welker [2012] NSWCA 95 Roads & Traffic Authority of NSW v Australian National Car Parks Pty Ltd [2007] NSWCA 114 South Suburban Co-operative Society Limited v Orum [1937] 2 KB 690 State of New South Wales v Plaintiff A [2012] NSWCA 248 Steffen v ANZ Banking Group [2009] NSWSC 883 Stephens v West Australian Newspapers Limited [1994] HCA 45; (1994) 182 CLR 211 Sydney City Council v Geftlick [2006] NSWCA 280 The Age Company Ltd v Liu [2013] NSWCA 26; (2013) 82 NSWLR 268 The Age Company Ltd v Liu [2013] HCATrans 205 The Herald & Weekly Times Ltd v Guide Dog Owners’ & Friends Association [1990] VR 451 Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 89 ALJR 750 Totalise Plc v The Motley Fool Ltd [2001] EWCA Civ 1897; [2002] 1 WLR 1233 Waterhouse v Broadcasting Station 2GB Pty Ltd (1985) 1 NSWLR 58 Wentworth v Rogers (Supreme Court (NSW), Sperling J, 28 April 1995, unrep) West Australian Newspapers Ltd v Bond [2009] WASCA 127; (2009) 40 WAR 164 Wran v Australian Broadcasting Commission [1984] 3 NSWLR 241 Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56
Texts Cited:	Spencer Bower, A Code of the Law of Actionable Defamation, (2nd ed 1923, Butterworth & Co)
Category:	Principal judgment
Parties:	Helen Liu (Appellant) The Age Company Pty Ltd (First Respondent) Richard Baker (Second Respondent) Phillip Dorling (Third Respondent) Nick McKenzie (Fourth Respondent)
Representation:	Counsel: B McClintock SC and G Rubagotti (Appellant) T Blackburn SC and ATS Dawson (Respondents)   Solicitors: Kennedys (Appellant) Minter Ellison (Respondents)
File Number(s):	2015/181753
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: 23 March 2015: [2015] NSWSC 276; 22 May 2015, Supreme Court of NSW, unreported. Before: McCallum J File Number(s): 2010/224488

Decisions under appeal

HEADNOTE

[This headnote is not to be read as part of the Judgment]

On or about 3 February 2010, The Age Company Pty Ltd published a number of articles concerning the appellant, Ms Liu, in The Age, The Sydney Morning Herald and The Canberra Times. The articles were written by Richard Baker, Phillip Dorling and Nick McKenzie. Ms Liu alleged the articles were defamatory of her in substance because they imputed that she had engaged in corrupt conduct, including corrupt dealings with Joel Fitzgibbon, a Federal politician. The articles were said to be based on documents drawn from Ms Liu’s business records, allegedly provided to the journalists by unidentified sources.

Ms Liu wished to commence proceedings seeking damages both against The Age Company Pty Ltd and the authors of material published in The Age newspaper (“Fairfax”) and the sources of its information in respect of the defamatory imputations she contended the articles conveyed about her. She filed statements of claim in 2011 seeking such relief.

Ms Liu sought to identify the sources by an application for preliminary discovery against Fairfax, relying on Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) 5.2(1)(a). After a 10 day hearing the primary judge, McCallum J, upheld that application in Liu v The Age Company Ltd [2012] NSWSC 12 (“Liu (No 1)”). Her Honour determined that the preliminary discovery order was necessary in the interests of justice in order to provide Ms Liu with an effective remedy in respect of the defamation of which she sought to complain.

Fairfax sought leave to appeal and to appeal from Liu (No 1). While leave to appeal was granted, the appeal was dismissed. Fairfax sought special leave to appeal from the Court of Appeal decision. The High Court refused that application on 6 September 2013.

Thereafter Ms Liu had the matter relisted before the primary judge in order to secure compliance with the preliminary discovery order. However, on 19 September 2013 Fairfax filed a notice of motion seeking to have the preliminary discovery order vacated on the basis that it undertook to the Court not to rely on any defence of qualified privilege in respect of Ms Liu’s defamation claim against it (“Fairfax undertaking”). Fairfax conceded that in taking the course it took in the preliminary discovery hearing, its legal advisers were aware that in proceedings involving a Mr Cojuangco, the Supreme Court had set aside a preliminary discovery order once the newspaper respondent abandoned any qualified privilege defence.

In Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276, the primary judge held that in consequence of the Fairfax undertaking, Ms Liu had a remedy in defamation against Fairfax which was “no less effective” than an action against the sources. Accordingly, her Honour granted a stay of the order for preliminary discovery. In a third judgment her Honour ordered Fairfax to pay Ms Liu’s costs of the preliminary discovery hearing as agreed or assessed on the ordinary basis and to pay Ms Liu’s costs of the stay application hearing as agreed or assessed on the indemnity basis: Liu v The Age Company Ltd (No 3) (Supreme Court (NSW), McCallum J, 22 May 2015, unrep).

Ms Liu sought leave to appeal, and to appeal, from the stay order and the costs order, insofar as costs were concerned, on the basis that her Honour should have ordered Fairfax to pay those costs on the indemnity basis. By cross-summons, Fairfax sought leave to cross-appeal from the primary judge’s order that it pay Ms Liu’s costs of the preliminary discovery hearing.

The principal issues on the appeal were whether the primary judge erred:

(i)   in failing to find that the stay application amounted to an abuse of process, in permitting Fairfax to adopt a forensic position which differed from that adopted in the preliminary discovery hearing and in failing to refuse Fairfax’s stay application on discretionary grounds;

(ii)   in failing to apply a preclusive rule that relitigation of an interlocutory application is only permitted where there has been a material change of circumstances or the discovery of new material which could not reasonably have been placed before the Court on the first occasion.

(iii)   in finding that Ms Liu had an effective remedy against Fairfax having regard to the Fairfax undertaking;

(iv) in failing to give proper consideration to ss 56 – 60 of the Civil Procedure Act 2005 (NSW) (“CPA”); and

(v)   in failing to award Ms Liu costs of the preliminary discovery hearing on an indemnity basis.

The issues on the cross-appeal were:

(vi)   whether the primary judge erred in failing to apply authorities to the effect that in preliminary discovery applications concerning the media, the plaintiff should pay the media’s costs.

Held, granting leave to appeal and to cross-appeal, allowing the appeal in part, and dismissing the cross-appeal:

As to issue (i), per McColl JA

(1) The primary judge failed to take into account a number of considerations material to the exercise of her discretion to grant a stay, such that her exercise of discretion miscarried: [208] – [216].

per Ward JA (contra), Beazley P not deciding but in obiter observation

(2) Read as a whole, the primary judge’s reasons demonstrated her Honour was cognisant of, and addressed, Ms Liu’s complaints as to abuse of process and non-compliance with case management principles: [9], [302] – [303].

per McColl JA (Beazley P agreeing on the re-exercise of the discretion, Ward JA not deciding)

(3) It was not in the interests of justice for the primary judge to entertain Fairfax’s stay application and permit the relitigation of the preliminary discovery application, albeit with the goal posts moved to suit Fairfax: [11], [14], [223].

As to issue (ii), per Beazley P (Ward JA agreeing)

(4) There is no preclusive rule in relation to the bringing of second interlocutory applications. Rather, the question is always whether it is in the interests of justice that a second application be determined in favour of an applicant who has been unsuccessful either in bringing or defending a prior application and who seeks the re-litigation of the same subject matter that was determined in the prior application: [13], [296].

per McColl JA

(5) The conclusion that it was not in the interests of justice nor consistent with principles of case management to entertain the stay application rendered it unnecessary to adopt a preclusive rule concerning second interlocutory hearings: [223].

As to issue (iii), per McColl JA (Beazley P and Ward JA agreeing)

(6) The question whether Ms Liu had an effective remedy turned not only on the likely recovery of damages, but also on difficulty of proof occasioned by non-disclosure: [209].

(7) Ms Liu did not have an effective remedy as proof of her claim for aggravated damages based on her knowledge of the falsity of the imputations would be impaired if she was unable to confront her accusers, the sources, and have the best opportunity to demonstrate the documents they provided were forgeries: [10], [212], [290] – [294], [305].

As to issue (iv), per McColl JA (Beazley P and Ward JA not deciding)

(8) By failing to give the Fairfax undertaking at the preliminary discovery stage either absolutely or as a fallback, Fairfax failed to discharge its duty to assist the court to further the overriding purpose of the CPA and the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) to facilitate the just, quick and cheap resolution of the real issues in the proceedings: [219].

As to issue (v), per McColl JA, (Beazley P and Ward JA agreeing)

(9) Fairfax was not guilty of such delinquency in relation to the preliminary discovery hearing as would warrant an order for indemnity costs: [1], [16], [283], [306].

As to issue (vi), per McColl JA, (Beazley P and Ward JA agreeing)

(10) There is no special costs rule for media defendants to preliminary discovery applications: [1], [16], [258], [306].

(11) The question of costs of a preliminary discovery application, should be approached by recognising the exceptional nature of the jurisdiction, but nevertheless applying CPA, s 98(1)(b) and UCPR 42.1 in all the circumstances of the case: [1], [16], [259].

**********

Judgment

1. BEAZLEY P: I have had the opportunity of reading in draft the reasons of McColl JA. I agree with her Honour’s proposed orders on the appeal and with her Honour’s reasons and proposed orders on the cross-appeal. My reasons for agreeing with her Honour’s proposed orders on the appeal are as follows.

2. Before the Court will order preliminary discovery, the application must satisfy two threshold requirements of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 5.2(1), namely, that the applicant, having made reasonable inquiries, is unable to ascertain the identity of the intended defendant and that the respondent to the preliminary discovery application may have information that would tend to assist in the identification or ascertainment of the whereabouts of the intended defendant: Roads & Traffic Authority of NSW v Australian National Car Parks Pty Ltd [2007] NSWCA 114 at [14]-[15]. The test is objective: The Age Company Ltd & Ors v Liu [2013] NSWCA 26 at [51] (Liu CA). As this Court determined in Liu CA, the appellant satisfied those requirements.

3. Even if the threshold requirements of the rule are satisfied, the determination whether to order preliminary discovery is discretionary. One discretionary consideration is whether the applicant for preliminary discovery otherwise has an effective remedy. This has been discussed by McColl JA below at [138]ff. However, it is convenient for the purposes of explaining my reasons to refer briefly to the relevant principles.

4. Relevant to the determination whether a person has an effective remedy is the likelihood that a person, whose identity and whereabouts are known, may have a successful defence to any action brought by the applicant for preliminary discovery. Thus, in John Fairfax & Sons Ltd v Cojuangco [1988] HCA 54; 165 CLR 346, the High Court, at 357, stated that where an applicant has an effective remedy, in that case, as here, against a newspaper publishing an allegedly defamatory article or against a journalist, the court will refuse to make an order for preliminary discovery. However, the High Court stated that where it appears that the statutory defence of qualified privilege is likely to succeed:

“… a judge is entitled to exercise [the] judicial discretion in favour of making the order sought if the newspaper and the journalist did not relinquish that defence and the judge considers that the defence might well prevail”.

5. The primary judge, in dealing with the appellant’s application for preliminary discovery: Liu v The Age Company Ltd [2012] NSWSC 12, held, at [156], that on balance, she was satisfied that both the statutory and common law defences of qualified privilege invoked by the respondents to the application for preliminary discovery, might well succeed such that the appellant would not have an effective remedy against them. In reaching that finding, her Honour observed, at [132], that “the [respondents] do not relinquish either defence and staunchly defend their publications”.

5. In Liu CA, this Court, at [104], held that an application for preliminary discovery is interlocutory. In West Australian Newspapers Ltd v Bond [2009] WASCA 127; 40 WAR 164, at [87], Buss JA observed that disclosure of a journalist’s source should not be ordered at an interlocutory stage of pending proceedings unless, relevantly, it is necessary to do so in order to do “justice between the parties”. Buss JA acknowledged that each application will depend upon its own circumstances, but indicated the matters that would ordinarily be relevant. In addition to the matters to which McColl JA refers at [150], Buss JA also referred to the manner in which the information was obtained and the reasonableness or unreasonableness of any denials or non-admissions in the defence.

6. In the present case, there was no suggestion that the information was obtained unlawfully, unlawfulness being a consideration to which Buss JA referred. Nonetheless, the documents in the possession of the respondents, and upon which the defamatory publications were based, are in photocopy form and the respondents have not had access to the originals. The respondents were thus prepared to publish the information contained in the documents without taking steps to verify the genuineness of the documents or at least equipping themselves with the ability to do so.

7. This is relevant, not because the appellant will not be able to properly plead her claim in defamation, but because she will be seriously hampered in the proof of her claim for aggravated damages. In my opinion, the appellant should not be placed in the invidious position of having her case tested on the basis of her own uncorroborated evidence, when the power to provide the corroboration lies entirely within the province of the source, that the respondents seek to protect.

8. Accordingly, I agree with McColl JA’s statement at [225] that there is a risk of the appellant’s case against the respondents failing if she is unable to fully test the issue of the forgery of the documents that form the basis of the matter complained of. To that extent, I consider that the primary judge erred in the exercise of her discretion. It is therefore unnecessary for me to consider the other matters upon which McColl JA relies, at [205]ff, in concluding that the primary judge erred in the exercise of her discretion. However, I consider that the matters to which McColl JA refers were, in substantial part, dealt with by the primary judge in different contexts in her judgment and with varying emphases.

9. I agree with McColl JA that the primary judge erred on the question of effective remedy. As the absence of an effective remedy provided a basis for the making of the order for preliminary discovery, I consider that it also provides a strong basis for the refusal of the stay. There are two other reasons that lead me to that conclusion. First, and contrary to the view of the primary judge, I do not consider that the respondents should be entitled to effectively re-litigate the preliminary discovery application. In this regard, I am of a different view to that of the primary judge, although whether her Honour erred in this respect in her discretionary determination, or whether I merely would have taken a different view, is a matter upon which minds might differ. Indeed, it is for that reason, that that particular consideration does not form part of my consideration on the anterior question of error in the exercise of the discretion.

10. However, on the re-exercise of the discretion, I should express my strong view that it is not in the interests of justice that the respondents should now be entitled to effectively re-litigate the preliminary discovery application. The respondents had originally raised a constitutional issue before her Honour. That was resolved against them, both at first instance and on appeal. However, on the appeal, the respondents also contended that her Honour erred in the exercise of her discretion in ordering preliminary discovery. That issue was also decided against them, independently of the constitutional question. They did so in circumstances where they were fully aware of the High Court’s decision in Cojuango, where they could have conditionally offered to abandon the defence of qualified privilege if unsuccessful on the constitutional issue, and in circumstances where they have offered no evidence as to why they did not do so.

11. I agree with the primary judge that it is unnecessary to determine whether the statutory principles stated in the Civil Procedure Act 2005 (NSW), s 56 as to the just, quick and cheap resolution of the real issues in proceedings apply to an application for a stay, although I consider that the better view is that they do. The principle that proceedings in the court be conducted efficiently and in a timely manner is a long-established principle of the common law: see Mullins v Howell (1879) 11 Ch D 763; Hunter v Commonwealth Trading Bank of Australia (Supreme Court, unreported, 12 June 1988); Government Insurance Office (NSW) v Glasscock (1991) 13 MVR 521 at 529-530. As her Honour observed, these underlying principles are applicable to the re-agitation of a preliminary discovery application by the mechanism of the stay procedure.

12. The authorities concerning the bringing of further interlocutory applications after an unsuccessful initial application are discussed by McColl JA below. For my part, I do not consider there is any preclusive rule in relation to the bringing of second interlocutory applications. Rather, the question is always whether it is in the interests of justice that a second application be determined in favour of an applicant who has been unsuccessful either in bringing or defending a prior application and who seeks the re-litigation of the same subject matter that was determined in the prior application: see Nominal Defendant v Manning [2000] NSWCA 80; 50 NSWLR 139; Bajramovic v Calubaquib [2015] NSWCA 139.

13. In my opinion, the respondents, as they were entitled to do, have made forensic decisions in the conduct of this litigation. However, I do not consider that it is in the interests of justice that they be permitted to re-litigate matters when decisions of the Court are made contrary to those tactical decisions. Bathurst CJ in Liu CA has already commented upon the length of time that this litigation has been in progress. The respondents could have made the concession they now make in relation to the qualified privilege defence as part of their opposition to the original application for preliminary discovery. As already noted, they could have done so conditionally on the first occasion. The concession that they now make is still made conditionally, in that it is proffered as a condition of a stay that they abandon the defence. If the stay were not granted, I do not understand that the respondents would consider themselves to have abandoned the defence.

14. Secondly, since the determination of the matter by McCallum J, the applicants have pleaded an action under the Australian Consumer Law. As McColl JA points out, that claim was not raised before her Honour. However, on the re-exercise of the discretion, it is relevant that the relief available under that Act is different from, and more extensive than, the relief available under the Defamation Act 2005 (NSW). That supports the appellant’s claim in respect of effective remedy, although it may not have been sufficient of itself to establish that she would be deprived of an effective remedy if the preliminary discovery order was stayed.

15. For these reasons, I consider that the appeal should be allowed and I would join in the orders of McColl JA. I also agree that the cross-appeal should be dismissed, and I join in the orders of McColl JA in that regard.

16. McCOLL JA: The applicant, Ms Liu, seeks leave to appeal from an order made by McCallum J to stay an order for preliminary discovery and, too, from her Honour’s order that the respondents, The Age Company Pty Ltd and the authors of material published in The Age newspaper (“Fairfax”), pay the applicant’s costs of the preliminary discovery hearing as agreed or assessed on the ordinary, rather than the indemnity basis. [1] By cross-summons, Fairfax seeks leave to cross-appeal from the primary judge’s order that it pay Ms Liu’s costs of the preliminary discovery hearing.

    1. Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276 (“Liu (No 2)”); Liu v The Age Company Ltd (No 3) (Supreme Court (NSW), McCallum J, 22 May 2015, unrep) (“Liu (No 3)”). For convenience I will refer to the applicant as Ms Liu and to the respondents collectively as “Fairfax” save where the context otherwise requires.

17. The applications for leave to appeal and to cross-appeal were heard concurrently with the appeal so that, if either leave application was successful, no further argument was necessary.

18. I am of the view that leave to appeal and to cross-appeal should be granted. The case raises important questions concerning preliminary discovery applications, both in relation to their conduct where the media are involved and as to the costs of such applications.

19. For the reasons that follow, I am of the view that the appeal should be allowed in part, but the cross-appeal should be dismissed.

Background

21. The leave applications arise out of proceedings which were a sequel to this Court upholding a preliminary discovery order made by the primary judge. That order required Fairfax to give discovery of documents which related to the identity or whereabouts of the sources of information referred to in articles published by Fairfax, in respect of which Ms Liu proposed to commence proceedings for defamation. [2]

    2. The Age Company Ltd v Liu [2013] NSWCA 26; (2013) 82 NSWLR 268 (“Liu CA (No 1)”) on appeal from Liu v The Age Company Ltd [2012] NSWSC 12; (2012) 257 FLR 360 (“Liu (No 1)”).

22. On or about 3 February 2010, Fairfax published a number of articles concerning Ms Liu in The Age, The Sydney Morning Herald and The Canberra Times in both hard copy and on the respective newspapers’ websites. The articles were written by Richard Baker, Phillip Dorling and Nick McKenzie. Ms Liu alleged the articles were defamatory of her in substance because they imputed that she had engaged in corrupt conduct, including corrupt dealings with Joel Fitzgibbon, a federal politician. The articles were said to be based on documents drawn from Ms Liu’s business records, allegedly provided to Fairfax by unidentified sources. Ms Liu alleged the sources authorised Fairfax to republish the documents.

23. Ms Liu wished to commence proceedings seeking damages both against Fairfax and the sources of its information in respect of the defamatory imputations she contended the articles conveyed about her. She filed statements of claim in 2011 seeking such relief. Insofar as the sources are concerned, the statement of claim names the defendants as “John Doe 1, 2, 3” etc. An amended statement of claim was filed in December 2015 in the proposed proceedings against the sources, adding a claim for misleading or deceptive conduct under the Australian Consumer Law. [3]

    3. Competition and Consumer Act 2010 (Cth), Schedule 2 (“Australian Consumer Law”).

24. As the primary judge said, the proceedings have had a “tortured” history. [4]

    4. Liu (No 3) (at [2]).

25. The statement of claim against Fairfax has not been served upon it. Nor, for obvious reasons, has any originating process been served on the sources. The Court was informed that the time for service of both sets of originating process has been extended by the Court from time to time. [5]

    5. Cf Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) 6.2(4).

26. Ms Liu sought to identify the sources by an application for preliminary discovery against Fairfax relying on UCPR 5.2(1)(a). On 5 July 2010, she filed a summons seeking preliminary discovery. Each of the Fairfax respondents was named as a defendant in the summons. After a 10 day hearing which commenced in October 2010 and concluded in February 2011, the primary judge upheld that application in Liu (No 1).

27. The primary judge described the respective parties’ cases as follows:

“[168]   In my assessment, the present case sits poised uncomfortably on the fault-line of strong, competing public interests. The position is complicated by the fact that, to a significant extent, the respective positions of the plaintiff and the defendants rest on conflicting factual contentions which cannot satisfactorily be resolved in the present proceedings.

[169]   The defendants' case is that, following lengthy and careful negotiation, they obtained documents which reveal the making of corrupt payments by the plaintiff to a Federal Member of Parliament. They contend that the documents were obtained from sources who entertain real and substantial fear of reprisal in the event that their identities are revealed, contrary to undertakings given to them by the defendants. Accepting those contentions without qualification, there would be a strong case for refusing the discretionary relief sought by the plaintiff.

[170]   Conversely, the plaintiff's case is that a person or persons conducting a vendetta against her have provided documents to journalists which have been deliberately forged or falsely attributed to her. Accepting those contentions without qualification, to refuse the relief sought would perpetuate the fraud. That would plainly be a strong reason for exercising the Court's discretion in favour of the plaintiff.” [6]

6. Liu (No 1) (at [168] ‑ [170]).

28. The primary judge determined that the preliminary discovery order was necessary in the interests of justice in order to provide Ms Liu with an effective remedy in respect of the defamation of which she sought to complain. This was because it would be open to Fairfax to plead the statutory defence of qualified privilege pursuant to s 30 of the Defamation Act 2005 (NSW) (“2005 Act”) and common law qualified privilege in respect of political discussion as recognised in Lange v Australian Broadcasting Corporation. [7] Her Honour also concluded that those defences “might well succeed”. [8] Her Honour considered an important factor weighing in favour of granting the preliminary discovery order was that at the time the preliminary discovery application was heard, Fairfax did not relinquish either possible qualified privilege defence. [9]

    7. [1997] HCA 25; (1997) 189 CLR 520 (“Lange”); see Liu (No 1) (at [130], [154]).

    8. Liu (No 1) (at [143], [156]).

    9. Ibid (at [132]).

29. Insofar as the sources were concerned, on the scarce information available at the time of hearing concerning them and their knowledge of any fraud associated with the documents they supplied to Fairfax, her Honour was unable to form a conclusion that qualified privilege defences were open to be pleaded by them and might well succeed. [10] In her Honour’s view, the effect of the potentially different defences open to each putative defendant was such that Ms Liu may be left without an effective remedy if confined to an action against Fairfax. [11]

    10. Ibid (at [158]).

    11. Ibid (at [161]).

30. Her Honour also held that “a significant consideration” in determining the issue of effective remedy and as warranting her exercising her discretion in favour of Ms Liu, was that “[i]f the plaintiff is unable to identify the sources, she will in effect be left without the opportunity to pursue a remedy that would see the issue of the alleged forgery fully litigated and determined.” [12]

    12. Ibid (at [160]).

31. In this respect the primary judge concluded that some of the handwritten documents upon which the matters complained of were based, which Fairfax obtained from the sources, “may well have been falsely attributed to the plaintiff.” [13] Insofar as Fairfax relied upon two letters purporting to be signed by Ms Liu in which she effectively admitted bribing Mr Fitzgibbon, [14] the primary judge held that “the plaintiff's evidence, the appearance of the second letter and the absence of any original documents point to the conclusion that” “someone deliberately appended her signature to a document that was not hers.” [15]

    13. Ibid (at [188]).

    14. See Liu (No 1) (at [145], [147], [169]).

    15. Ibid (at [189]).

32. Accordingly, her Honour ordered that “[Fairfax] give discovery to the plaintiff of all documents that are or have been in their possession which relate to the identity or whereabouts of the sources.” [16] The primary judge did not deal with the costs of the preliminary discovery application at this stage, presumably intending that should be the subject of submissions. That issue had not been dealt with by the time the appeal process referred to below was launched. It was dealt with in Liu (No 3) after the hearing of the stay application.

    16. Ibid (at [216]).

33. Fairfax sought leave to appeal and to appeal from Liu (No 1). The principal issues on appeal were first, whether Ms Liu had established that she had made reasonable inquiries to seek to identify the sources’ identity for the purposes of UCPR 5.2(1)(a) and, secondly, whether UCPR 5.2 was constitutionally valid. Fairfax did not challenge the primary judge’s finding that absent identification of the sources, Ms Liu lacked an effective remedy, nor her Honour’s ultimate exercise of discretion to make the preliminary discovery order. While leave to appeal was granted, the appeal was dismissed. Fairfax sought special leave to appeal from the Court of Appeal decision. The High Court refused that application on 6 September 2013. [17] During the special leave application, counsel for Fairfax expressly eschewed any complaint about the way in which the UCPR 5.2 power was exercised by the primary judge. [18]

    17. The Age Company Ltd v Liu [2013] HCATrans 205.

    18. Ibid.

34. Thereafter Ms Liu had the matter relisted before the primary judge in order to secure compliance with the preliminary discovery order, that order having been stayed by consent pending Fairfax’s appeal to the Court of Appeal and, I assume, its special leave application. [19] However, on 19 September 2013 Fairfax filed a notice of motion seeking to have the preliminary discovery order vacated on the basis that it undertook to the Court not to rely on any defence of qualified privilege in respect of Ms Liu’s defamation claim against it (“Fairfax undertaking”).

    19. In fact, at the time the preliminary discovery order was made, some documents falling within the terms of the order were produced to the Court in redacted form in response to a notice to produce. However, Ms Liu did not seek access to those documents at that time, accepting that any such application should abide the determination of the proceedings: Liu (No 2) (at [4]).

35. After Ms Liu contested the proposition whether the Court had power to vacate the preliminary discovery order, the parties agreed that, at least, the Court had power to stay its execution. [20] An amended notice of motion was filed on 20 December 2013, seeking either the vacation of the preliminary discovery order or that it be stayed. In that document, Fairfax undertook to the Court as a condition of a grant of a stay of the preliminary discovery order not to rely upon any defence of qualified privilege in “case number 2010/224488”. [21]

    20. Ibid (at [17]).

    21. Case number 2010/224488 is the file number of the preliminary discovery proceedings. The file number of the proceedings Ms Liu has commenced against Fairfax is “2011/36003”. The primary judge corrected this slip in her order: Liu (No 2) (at [82]).

36. The primary judge was minded to accede to Fairfax’s application subject to determining the question of costs, which in her Honour’s view was “potentially a relevant consideration”. [22] In Liu (No 2), her Honour proposed the following order:

“(1)   that, upon the giving by each defendant of an undertaking to the Court not to rely upon any defence of qualified privilege in proceedings 2011/36003, the order for preliminary discovery made 1 February 2012 and entered 2 February 2012 be stayed pending the determination of the plaintiff’s application for costs.” [23]

22. Liu (No 2) (at [81]).

23. Ibid (at [82]).

37. After hearing the parties on the question of costs, the primary judge ordered Fairfax to pay Ms Liu’s costs of the preliminary discovery hearing as agreed or assessed on the ordinary basis and to pay Ms Liu’s costs of the stay application hearing as agreed or assessed on the indemnity basis. Her Honour continued the stay she had granted of the preliminary discovery order. [24]

    24. Liu (No 3) (at [57]).

The stay application judgment

38. Fairfax’s motion seeking to vacate or stay the preliminary discovery order was supported by an affidavit sworn by its solicitor, Mr Bartlett, in which he stated (on information and belief) that each of the journalist defendants continued to consider himself obliged not to disclose the identity of the sources. He also deposed that the journalists were concerned that if they revealed their sources it would compromise their ability to obtain information from other potential sources in the future in matters of public interest. [25] As the primary judge recorded, “[t]hat evidence (as far as it went) was not challenged and there is no reason not to accept it.” [26]

    25. Liu (No 2) (at [15]).

    26. Ibid (at [16]).

39. Mr Bartlett was not cross-examined. Counsel for Ms Liu contended that his affidavit did not offer any explanation for “the decision to proffer the undertakings only now, after the application has been fully litigated (and taken along all avenues of appeal) on a different premise.” [27] He also contended there was no need to cross-examine Mr Bartlett, as Fairfax conceded that in taking the course it had on the preliminary discovery application, its legal advisers were aware of the course of the Cojuangco proceedings. [28] In those proceedings the Court set aside a preliminary discovery order once John Fairfax abandoned any qualified privilege defence (“Fairfax concession”). [29]

    27. Ibid (at [52]).

    28. Re Application of Cojuangco (1986) 4 NSWLR 513 (“Cojuangco (No 1)”); Application of Eduardo Murphy Cojuangco (No 2) (Supreme Court (NSW), Hunt J, 6 January 1989, unrep); LexisNexis BC8902633 (“Cojuangco (No 2)”); Cojuangco v John Fairfax & Sons Ltd (No 2) (1990) A Def R 51-005; (1991) Aust Torts Reports ¶81-068 (“Cojuangco CA (No 2)”); see [129] – [144] below.

    29. Liu (No 2) (at [53]).

40. Fairfax contended that as a result of the Fairfax undertaking, Ms Liu had an effective remedy against it warranting the grant of a stay of the preliminary discovery order. [30] Ms Liu contested those propositions. She argued that the stay application constituted either an abuse of process or should be rejected on the basis of overwhelming discretionary considerations. She also contested the proposition that the Fairfax undertaking left her with an effective remedy. [31]

    30. Ibid (at [19]).

    31. Ibid (at [20] – [21]).

41. The primary judge referred to the fact that in Liu (No 1), she had considered Ms Liu’s entitlement to have “the opportunity to pursue a remedy that would see the issue of the alleged forgery fully litigated and determined” relevant to the issue of effective remedy. [32] Her Honour remarked that there was implicit in those remarks a degree of speculation as to the nature of that opportunity. Accordingly, although it was a consideration which fortified her conclusion, her Honour was of the opinion that it was not necessary in the original application to assess it “standing alone”. She did not think it was truly an independent reason sustaining her conclusion on the issue of an effective remedy. Rather, her Honour said that, had Fairfax abandoned the qualified privilege defences from the outset, she was in little doubt that the outcome would have been different. [33]

    32. Ibid (at [49]).

    33. Ibid.

42. The primary judge held that in consequence of the Fairfax undertaking, Ms Liu had a remedy in defamation against Fairfax which was “no less effective” than an action against the sources. This was because the consequence of the Fairfax undertaking was that Ms Liu “[would] not be faced with any defence in addition to those that would also be available to the sources if they were sued.” Although her Honour recognised that Ms Liu would not “have the opportunity to confront her accusers”, in her view, that did not deprive Ms Liu of an effective remedy. Rather, her Honour held “the absence of the sources from the litigation is a factor that is likely to preclude the newspaper from succeeding in any truth defence.” [34]

    34. Ibid (at [50]).

43. Ms Liu’s abuse of process submission rested on the proposition that by reason of the Cojuangco proceedings, Fairfax must be taken to have known that the making of the preliminary discovery order could have been obviated by giving undertakings not to pursue the qualified privilege defences. Accordingly, Ms Liu argued that Fairfax’s failure to abandon the defences before the hearing of the original preliminary discovery application must be seen as a deliberate forensic decision such that it was an abuse of process to invoke the benefit of that approach at a later stage. [35]

    35. Ibid (at [42]).

44. The primary judge accepted, having regard to the Fairfax concession, that there was “no dispute as to the defendants’ awareness, from the outset, of the potential benefit of abandoning the qualified privilege defences.” However, her Honour did not accept Ms Liu’s submission that it followed inexorably that Fairfax’s approach to the preliminary discovery application was a “cynical abuse of … process”, although her Honour did think Fairfax’s approach was relevant to costs. [36]

    36. Ibid (at [54]).

45. In her Honour’s view, Ms Liu’s submission overlooked the importance of the substantive right Fairfax had had to abandon, those qualified privilege defences playing “an important part” in balancing the interests of the right to reputation and freedom of speech. [37] Her Honour also accepted Fairfax believed it could successfully resist the preliminary discovery application on the basis of issues which went beyond those determined in the Cojuangco proceedings. [38] Accordingly, the primary judge was not persuaded that the stay application constituted an abuse of process. [39]

    37. Ibid (at [55] – [56], [59]).

    38. Ibid (at [59]).

    39. Ibid (at [61]).

46. Ms Liu submitted that to permit the re-litigation of the preliminary discovery order would be unjust and contrary to modern principle. She invoked McLelland J’s statement in Brimaud v Honeysett Instant Print Pty Ltd, [40] concerning the “great injustice and enormous waste of judicial time and resources” which would arise if there were no limit on the entitlement of a party to relitigate interlocutory orders at will. [41]

    40. (1988) 217 ALR 44 (at 46) (“Brimaud”).

    41. Liu (No 2) (at [63]).

47. The primary judge recognised in this context that it was “clear enough” that, knowing of the Cojuangco litigation, Fairfax could have given the Fairfax undertaking at the hearing of the original application. However, her Honour accepted Fairfax’s submission that there was a “real question” as to whether the undertaking ought “reasonably” to have been put before the Court at that time, since it involved the abandonment of what appeared to be “a perfectly good defence”. Her Honour also took into consideration the fact Fairfax thought it could successfully oppose the preliminary discovery application without “having to give up” the qualified privilege defences and that the issues on which the application was contested went beyond the issues determined in Cojuangco. [42]

    42. Ibid (at [64]).

48. Accordingly, her Honour did not accept that the principle in Brimaud mandated rejection of the stay application. [43]

    43. Ibid (at [64] – [65]).

49. Ms Liu also submitted that the stay application should be refused on the basis of what the primary judge described as “modern litigation principles” as expressed in Part 6 of the Civil Procedure Act 2005 (NSW) (“CPA”) and discussed in Aon Risk Services Australia Limited v Australian National University [44] and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd. [45]

    44. [2009] HCA 27; (2009) 239 CLR 175 (“Aon Risk”).

    45. [2013] HCA 46; (2013) 250 CLR 303 (“Expense Reduction”).

50. The primary judge noted that Ms Liu’s submissions assumed that Part 6, CPA applied to the stay application. Her Honour was prepared to accept that assumption, albeit without deciding the question. In any event, her Honour accepted that modern litigation principles were “plainly relevant”. [46]

    46. Liu (No 2) (at [72]); Fairfax did not challenge the proposition that Part 6 applied to the stay application, an implied concession which is plainly correct in my view.

51. In considering the Part 6 submissions, the primary judge emphasised again that she placed “a high value on the gravity of the [Fairfax] decision to abandon an apparently good defence.” In her Honour’s view, that was “a unique circumstance” which distinguished the case from other cases applying Aon Risk upon which Ms Liu relied. [47]

    47. Ibid (at [73]).

52. In addition, her Honour said that she placed a high value on the gravity of compelling a journalist to reveal the identity of a source. Her Honour referred to the fact that in Liu (No 1) she had considered the weight of that consideration was lessened by the circumstances as they then stood. [48] This appears to have been a reference to the fact that the contact through whom Fairfax was communicating with the sources had advised Mr Baker that the sources had mistakenly disclosed some handwritten materials and had asked Fairfax not to publish them. Fairfax had published the materials notwithstanding that request, taking the position that “the public interest in the dishonesty being exposed [was] paramount.” [49]

    48. Ibid (at [74]), referring to Liu (No 1) (at [203] – [204]).

    49. Liu (No 1) (at [196] – [201]).

53. The primary judge concluded in Liu (No 1) that Fairfax’s decision to publish despite the sources’ request “had the tendency … to undermine the very protection sought to be achieved by the practice of not requiring journalists to disclose their sources unless such disclosure is necessary in the interests of justice.” [50] This was because Fairfax’s unilateral determination “that the interests of the sources must yield to what [Fairfax] claimed was a paramount public interest … exposed the sources to the risk of disclosure of their identity.” In the light of that determination, her Honour held Fairfax could “hardly maintain that interests competing with the public interest in protecting confidentiality of journalists’ sources must be set to one side in the determination of the present application.” [51] In Liu (No 2), her Honour held that Fairfax’s abandonment of its qualified privilege defences was “a substantial concession” to the concern she had expressed in Liu (No 1). [52]

    50. Ibid (at [201]).

    51. Ibid (at [204]).

    52. Liu (No 2) (at [75]).

54. The primary judge recognised that the overriding purpose of the CPA called attention to a synthesis of factors and that Aon Risk “acknowledges that the achievement of a timely and cost-effective resolution of a dispute is an aspect of justice but it is not to come at the price of justice.” [53]

    53. Ibid (at [76]).

55. The primary judge identified two “principal concerns” arising from her consideration of CPA, ss 56–58. The first, having regard to CPA, s 57(1)(d), was achieving the timely disposal of the proceedings at an affordable cost in circumstances where Fairfax did not concede any obligation to meet the costs of the “lengthy original hearing” and where, if the stay application was successful, Ms Liu’s costs of the preliminary discovery hearing “[would] have been wasted”. [54] The second was, having regard to CPA, s 58(2)(b)(v), the fact that Fairfax had made no concession as to the qualified privilege defences, even conditionally, at the preliminary discovery hearing. [55]

    54. Ibid (at [77]).

    55. Ibid (at [78]); cf CPA, s 58.

56. Nevertheless, the primary judge was influenced by the fact that Fairfax’s ultimate concession to abandon the qualified privilege defences meant the voluntary abandonment of a substantive right. [56] Accordingly, as I have said, subject to satisfactory resolution as to her concern about Ms Liu’s wasted costs, the primary judge stayed the preliminary discovery order. [57]

    56. Ibid (at [79]).

    57. Ibid (at [80] – [82]).

The costs judgment

57. In the costs judgment, the primary judge determined what order should be made as to the costs of the preliminary discovery application hearing, what order should be made as to the costs of the stay application hearing, whether the stay of the preliminary discovery order should be continued and whether any costs awarded in favour of Ms Liu should be assessed on an indemnity basis. [58]

    58. Liu (No 3) (at [7]).

58. The primary judge rejected Fairfax’s submission that UCPR 5.8 was the starting point to determining costs. Her Honour observed that that rule provided no guidance. She accepted Ms Liu’s submission that UCPR 5.8 was “primarily directed to identifying the range of parties against whom a costs order can be made on a preliminary discovery application”, but said nothing which displaced UCPR 42.1, nor said anything which confirmed “the applicability of that rule in any particular circumstance”. [59] Her Honour held that the power to award costs was “one of broad discretion to be exercised with reference to both rules and according to the dictates of justice as they appear in the particular case, subject to the guidance of any relevant authority.” [60]

    59. Ibid (at [13]).

    60. Ibid (at [14]).

59. Insofar as the preliminary discovery hearing was concerned, the primary judge applied Airways Corporation of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [61] and Steffen v ANZ Banking Group [62] to hold that where an application for preliminary discovery is contested in an adversarial fashion, costs should follow the event unless good reason is shown as to why they should not. [63]

    61. [2002] NSWSC 521 (Simpson J) (“Airways Corp”).

    62. [2009] NSWSC 883 (McDougall J) (“Steffen”).

    63. Liu (No 3) (at [17] – [19], [29]).

60. Fairfax did not dispute that the preliminary discovery hearing was conducted in an adversarial manner. [64] The primary judge considered whether that, and the fact that Ms Liu had been wholly successful in that hearing, was sufficient reason to order Fairfax to pay her costs. In this respect her Honour had regard to the exceptional nature of the preliminary discovery jurisdiction and, too, that “the defence of a confidentiality undertaking given to a source is a respectable and proper basis for opposing a preliminary discovery order.” [65] Nevertheless her Honour was persuaded that, applying the costs follow the event approach, “on that basis alone”, Fairfax should be ordered to pay Ms Liu’s costs of the preliminary discovery hearing. [66]

    64. Ibid (at [28]).

    65. Ibid.

    66. Ibid (at [29]).

61. The primary judge then addressed a second submission Ms Liu made to the effect that the costs of the first hearing could have been substantially avoided had the Fairfax undertaking been offered at that stage of the proceedings. In this respect Ms Liu relied upon what had occurred in the Cojuangco proceedings. [67] After repeating the account of those proceedings her Honour had set out in Liu (No 2),[68] the primary judge observed:

“The critical consideration is that the defendants in the present litigation were aware of the course of the Cojuangco litigation. In my view, there is a powerful case for ordering the defendants to pay the costs that would have been avoided had they proffered the undertakings in a timely way. The premise of my decision in Liu (No 2) was that the defendants’ conduct fell short of the impropriety required to establish an abuse of process. It does not follow, however, that their forensic choice made with the knowledge of the Cojuangco experience has no consequence as to costs, still less that the costs orders made in that litigation are those that should be made here.” [69]

67. Ibid (at [30]).

68. Ibid (at [31] – [46]), referring to Liu (No 2) (at [24] – [39]); see also [129] – [147] below.

69. Ibid (at [47]).

62. The primary judge rejected Fairfax’s submission that her Honour could not order them to pay Ms Liu’s costs on the “Cojuangco basis” unless she adduced evidence that the costs of the first hearing would have been different had the Fairfax undertaking been offered at or before that hearing. In her Honour’s view, “by their forensic choice, [Fairfax] allowed the hearing of [Ms Liu’s] application to proceed on an entirely different premise from that on which it was ultimately determined. As events have transpired, the change of tack was ultimately determinative.” [70]

    70. Ibid (at [48]).

63. The primary judge also noted Ms Liu’s submissions on the stay application hearing that, if that application was successful, she “should be compensated for every cent of legal costs incurred at the first hearing”. [71] At the costs hearing, while not abandoning that submission, different counsel also argued Ms Liu’s costs of the first hearing could have been “substantially avoided” if the Fairfax undertaking had been offered earlier.

    71. Ibid (at [49].

64. The primary judge accepted Ms Liu had been put to great expense and delay for a cause she ultimately lost “where, by reason of [Fairfax’s] forensic choice, she was never afforded the opportunity to consider her position properly informed as to the likelihood of the outcome that has ultimately been achieved”. However, her Honour also made some allowances for the fact that the preliminary discovery application may have been fought and lost by Ms Liu even if the Fairfax undertaking had been offered at the first hearing. [72]

    72. Ibid (at [50] – [51]).

65. Her Honour concluded that Ms Liu’s alternative argument was “an equal and separate basis” for an order that Fairfax pay Ms Liu’s costs of the first hearing as agreed or assessed on the ordinary basis. [73]

    73. Ibid (at [52]).

66. Fairfax accepted that it should pay the costs of the stay application, save as to those of and incidental to the hearing of the question of power to vacate the preliminary discovery order. [74] However, it resisted Ms Liu’s application for the whole of those costs on an indemnity basis, contending that application overlooked her lack of success on the power point. The primary judge concluded that that issue was not a basis for carving out the costs of those arguments. Accordingly, her Honour ordered Fairfax to pay the costs of the stay application hearing as agreed or assessed on the indemnity basis. [75]

    74. Ibid (at [15], [53]).

    75. Ibid (at [55]).

67. Having concluded that Ms Liu should be awarded her costs of both hearings, the primary judge was satisfied that it was appropriate to continue the stay of the preliminary discovery order her Honour had provisionally ordered in the stay application hearing. [76] Although expressed as a continuance of the earlier stay, the removal of the condition concerning the determination of costs effectively means that her Honour permanently stayed the preliminary discovery order made in February 2012.

APPEAL

76. Ibid (at [56]).

Issues on appeal

68. Ms Liu’s notice of appeal complains that the primary judge erred in failing to find that the stay application amounted to an abuse of process, in permitting Fairfax to adopt a forensic position which differed from that adopted in the preliminary discovery hearing and in failing to refuse Fairfax’s stay application on discretionary grounds. She also complains that the primary judge erred in finding that she had an effective remedy against Fairfax, having regard to the Fairfax undertaking. Next, she complains that the primary judge erred in failing to give proper consideration to the “overriding significance” of the relevant provisions of the CPA. Finally, she complains that the primary judge erred in failing to award her the costs of the preliminary discovery hearing on an indemnity basis.

68. Fairfax’s notice of cross-appeal complains that the primary judge applied a wrong principle in ordering it to pay Ms Liu’s costs of the preliminary discovery application on the ordinary basis. In addition, Fairfax complains that the primary judge’s exercise of her discretion was vitiated by an erroneous finding of fact that the costs of the preliminary discovery hearing would have been avoided had Fairfax proffered the undertaking ultimately given in the stay application at or before the preliminary discovery application hearing.

Ms Liu’s submissions: exercise of discretion

70. Underpinning Ms Liu’s appeal are the following propositions with which she submits the primary judge failed to deal satisfactorily, so that her Honour’s exercise of her discretion to grant the stay application miscarried in a manner attracting appellate review.

71. First, Ms Liu submitted that it is an abuse of process to take later a forensic step that was open to a party to take at an earlier stage. Accordingly, the stay application was an abuse of process because it was based solely on matter that was known and available to Fairfax at the preliminary discovery hearing (abandonment of the qualified privilege defence) and which it knowingly refrained from raising. [77] She submitted that Fairfax’s failure to give the Fairfax undertaking at the preliminary discovery hearing was not a case of an inadvertent slip or omission, but one of a deliberate failure to raise a matter with the Court. The effect of the failure to give the undertaking at the earliest opportunity had led to significant waste of judicial time and resources, loss to Ms Liu of irrecoverable costs and to her being subjected to “five years of agonising and distressing litigation”. Secondly, she contended that the stay application was an impermissible attempt to relitigate an interlocutory matter which had already been determined. She argued such relitigation is only permitted where there has been a material change of circumstances or the discovery of new material which could not reasonably have been placed before the Court on the first occasion. Thirdly, Ms Liu submitted the course that Fairfax took was contrary to the case management principles expressed in CPA, ss 56 – 60.

    77. A submission that Fairfax’s conduct in resisting the application for preliminary discovery was an abuse of process because Fairfax deliberately refrained from disclaiming the qualified privilege defences, intending to do so if it failed in its opposition to the application, was abandoned in the course of argument in the Court of Appeal. It had not been made before the primary judge and Ms Liu accepted that, absent a factual finding in her favour to that effect, she could not make good that submission.

72. Ms Liu’s abuse of process and relitigation argument proceeded as follows. Fairfax made a deliberate choice at the preliminary discovery hearing to maintain the qualified privilege defences, despite knowing of what occurred in Cojuangco. Fairfax knew that taking the course ultimately taken in that case would, or could, make a difference to the outcome. Accordingly, it had made a forensic decision not to take that step at that stage. It was an abuse of process to seek to take it at the later stage.

73. As further developed, the argument proceeded as follows. In Liu (No 1) the primary judge noted that Fairfax did not “relinquish” either the statutory or common law defences of qualified privilege and “staunchly [defended its] publications.” [78] In Liu (No 2) the primary judge noted that there was “no dispute as to [Fairfax’s] awareness, from the outset, of the potential benefit of abandoning the qualified privilege defences.” [79] Senior counsel for Fairfax made the Fairfax concession during the hearing of the stay application. To do so was a breach of the obligation on the part of every litigant to bring forward their entire case at the first opportunity.

    78. Liu (No 1) (at [132]).

    79. Liu (No 2) (at [54]).

74. Ms Liu submitted that Fairfax was subject to that obligation as a respondent to the preliminary discovery application and had an obligation to disclaim the qualified privilege defences either absolutely or conditionally at the first hearing. To do so would have obviated the necessity for a further hearing based on the Fairfax undertaking in which essentially the same issues as were litigated at the first hearing had to be litigated in light of that new position.

75. Accordingly, Ms Liu submitted, it was either an abuse of process, or objectionable in the Brimaud sense, for Fairfax effectively to relitigate, via the vehicle of the stay application, the issue whether Ms Liu should obtain preliminary discovery where there had been no change in circumstances nor had any new material been uncovered which was not reasonably available at the time of the first hearing. She submitted that, having regard to Fairfax’s knowledge that it could have given its undertaking at the first hearing, giving it in order to secure a stay of the preliminary discovery order did not constitute a change in circumstances nor the discovery of any “new material” in the sense in which those expressions were used when courts consider whether to entertain a second interlocutory hearing.

76. By entertaining the stay application, the primary judge obliged Ms Liu to relitigate issues which had been determined in her favour at the preliminary discovery hearing and not challenged in the Court of Appeal. The primary judge ought to have held the stay application was an abuse of process, or otherwise impermissible on the Brimaud line of authority, or should have been dismissed as vexatious, because Fairfax had failed in its obligation to put every argument at the preliminary discovery hearing. She submitted that the quality of the right Fairfax abandoned was irrelevant to the question whether the stay application was an abuse of process. Rather, resolution of that issue turned on Fairfax’s decision and state of mind at the time of the preliminary discovery hearing.

77. Secondly, Ms Liu submitted that the purpose of the case management principles was to compel change in the way litigants and their legal representatives conducted litigation by bringing to their attention aspects of the proper conduct of litigation, requiring them to conduct their cases in that manner and enabling the Court to take account of any failure to do so in exercising its various discretions. As a general proposition, Ms Liu argued it was contrary to the case management principles for a litigant to alter their position after judgment to mitigate the result of a fully contested hearing. She submitted the law should not permit a litigant to revisit their position after judgment has been delivered when the litigant was conscious of choices which could have been made before judgment.

78. On this basis, Ms Liu argued that Fairfax breached CPA, s 56(3) in failing to raise at least the possibility of disclaiming any qualified privilege defence at the preliminary discovery application hearing and thus hindered the just, quick and cheap resolution of the real issues in the proceedings. She contended that Fairfax’s lawyers were responsible for that failure. [80] She also argued that the chronology clearly demonstrated how CPA, s 57(1)(d) (timely disposal of proceedings at a cost affordable by the parties) had been flouted.

    80. Cf CPA, s 56(4).

79. Thirdly, Ms Liu submitted Fairfax breached CPA, s 58(2)(a),(b)(ii),(iv) and (v) in that it had both the duty and opportunity to raise the abandonment of the qualified privilege defences at the preliminary discovery hearing and failed to do so. In consequence, Ms Liu contended, she had suffered a serious injustice. [81] Finally, Ms Liu submitted, referring to CPA, s 60, that had Fairfax raised the issue of abandoning the qualified privilege defences at the preliminary discovery hearing, that hearing might have concluded in a day, not the 10 days it took.

    81. Cf CPA, s 58(2)(b)(vi).

80. Ms Liu also submitted in this context that the primary judge’s reasons did not provide any support for her Honour refusing to apply the principles stated by McLelland J (as his Honour then was) in Brimaud to the effect that, save in exceptional circumstances, parties should not be permitted to relitigate the very same question. Ms Liu contended the primary judge ought to have held the stay application was “vexatious” for the same reasons McLelland J dismissed an application to set aside an order appointing a provisional liquidator made by the losing parties to the appointment proceedings, who sought to rely upon matters they might have raised on the hearing of the original application.

81. Fourthly, Ms Liu submitted the primary judge’s reasons did not provide any satisfactory basis for staying the preliminary discovery orders. She contended that her Honour’s conclusion appeared to be based on the fact that Fairfax was abandoning “an apparently good defence”, making “a substantial concession” and abandoning “a substantial right”. [82] Ms Liu argued that the value of the right forgone could not provide a justification for delaying its abandonment, particularly when Fairfax knew that course was open, but delayed taking it because it thought it would defeat the preliminary discovery application on other grounds. Rather, the inquiry had to be directed to the way Fairfax had resisted the preliminary discovery application, then fundamentally sought to change its position when it lost and had exhausted all avenues of appeal.

    82. See Liu (No 2) (at [73], [75] and [79] respectively).

82. In any event, Ms Liu submitted that, properly examined, it could not be said Fairfax had a good qualified privilege defence because it could not be said to have acted reasonably. [83] The source documents described Mr Fitzgibbon wrongly, an error Fairfax sought to disguise in the matters complained of, Fairfax never saw the original documents and never communicated with the sources personally.

    83. Cf 2005 Act, s 30(1)(c); Lange (at 574).

83. Insofar as her second proposition was concerned, Ms Liu urged the Court to apply Hayne JA’s reasoning in DA Christie Pty Ltd v Baker,[84] and Mason P’s adoption of that reasoning in Nominal Defendant v Manning, [85] to hold that a litigant is not permitted to relitigate a matter unless there has been some change in circumstances or some new material not available at the first hearing. She argued that, if Manning was thought to stand in the way of her submission concerning second consideration of an interlocutory issue, the Court should reconsider it and adopt the position taken in Christie by Hayne JA. Alternatively she submitted that, in any event, the course Fairfax took constituted an abuse of process within the principles identified in both Christie and Manning.

    84. [1996] 2 VR 582 (“Christie”).

    85. [2000] NSWCA 80; (2000) 50 NSWLR 139 (“Manning”).

84. Ms Liu also submitted that what happened in Cojuangco CA (No 2) following the High Court decision did not have any bearing on the outcome of her case when Mr Cojuangco had not objected to the course John Fairfax took for any of the reasons she advanced, and neither Brimaud nor case management principles were referred to. Alternatively, she contended that if anything in Cojuangco CA (No 2) was thought to sanction Fairfax’s approach and the primary judge’s disposition of its application, that decision was wrong to that extent and should no longer be followed.

85. Finally, Ms Liu submitted that the primary judge’s reasons did not provide a satisfactory basis for the stay order. She contended that the value of a right forgone could not justify delaying its abandonment, with full knowledge abandonment was an available option.

Ms Liu’s submissions: effective remedy

86. Next, Ms Liu submitted that in staying the preliminary discovery order, the primary judge erred in concluding she had an effective remedy against Fairfax. [86]

    86. Liu (No 2) (at [50]).

87. At the heart of this submission was Ms Liu’s contention that without the documents the sources supplied, there could have been no article. Reproductions of the documents illustrate the article. They are extensively quoted and, she submitted, provided the sole basis for the allegation that she bribed Mr Fitzgibbon.

88. Ms Liu argued that the sources deliberately forged the letters Fairfax relied upon, which purported to be on her company’s letterhead and to have been signed by her in which she admitted bribing Mr Fitzgibbon. She contended the sources then attempted to sell those letters to The Age for $200,000. The forged documents were sent to Fairfax as PDF attachments to emails and, as a result, it never saw, nor had possession of, the original documents before publishing the matters complained of. [87] She contends that all the matters complained of were based on the allegedly forged documents, extensive quotes from and pictures of which were at their core. The primary judge had found the allegation of forgery had substance. [88]

    87. See Liu (No 1) (at [144] – [152]).

    88. Liu (No 1) (at [188] – [189]).

89. Ms Liu argued that the effect of the stay was that if she was unable to pursue defamation (and other) proceedings against the sources she would be unable to vindicate her reputation fully, that is to say, to “nail the lie”. [89] She emphasised that in Liu (No 1), the primary judge accepted that a significant consideration was that if Ms Liu was unable to identify the sources, she would “in effect be left without the opportunity to pursue a remedy that would see the issue of the alleged forgery fully litigated and determined.” [90]

    89. Cf John Fairfax & Sons Ltd v Cojuangco (1987) 8 NSWLR 145 (at 151) per Mahoney JA (“Cojuangco CA (No 1)”); Cojuangco CA (No 2) (at 41,529 – 41,530) per Kirby P.

    90. Liu (No 1) (at [160]).

90. Ms Liu submitted, without contradiction by Fairfax, that handwriting experts could not determine the authenticity of the copy documents Fairfax had received from its sources. Rather, such experts had to have access to the originals. She argued that the effect of the stay order was that she would not be able to seek discovery of the original documents from the sources.

91. Alternatively, Ms Liu submitted that even if the sources did not have the original documents, knowledge of their identities would go a long way to resolving the question whether the documents were false. For example, if the sources were revealed to be people who had an animus against her, that would enhance her prospects of proving that the documents were not genuine.

92. Ms Liu also submitted that in the event Fairfax pleaded truth to an imputation that she had bribed Mr Fitzgibbon, without access to the original documents to test their authenticity, she would be disadvantaged if Fairfax was permitted to tender the allegedly forged documents as business records under s 69 of the Evidence Act 1995 (NSW). [91] She argued it was not a sufficient answer to this submission to say she could give evidence that the documents were forgeries as a jury may not accept that bare assertion.

    91. (“Evidence Act”); The suggestion that the sources’ documents could be tendered as business records was one which Hunt J also made in Cojuangco (No 2) (at 20).

93. Ms Liu also submitted that she needed to be able to demonstrate the forgery of the documents in order to make good her claim for aggravated damages based upon her knowledge of the falsity of the imputations. [92] The stay order deprived her of a valid forensic tool capable of being used to advance her case on that basis.

    92. Waterhouse v Broadcasting Station 2GB Pty Ltd (1985) 1 NSWLR 58 (at 75) per Hunt J.

94. Next, Ms Liu submitted that the primary judge erred in apprehending that the only claim available to her against the sources was one in defamation. Rather, she argued she also had a claim against the sources pursuant to s 18 of the Australian Consumer Law. This was because numerous representations she contended were conveyed by the forged documents (which included the imputations relied upon in the defamation causes of action) were made in trade or commerce by the sale of the documents to Fairfax. [93] Further, Ms Liu submitted that while she had a claim against the sources for misleading and deceptive conduct in selling the documents, she had no such claim against Fairfax because of the information providers’ exemption. [94]

    93. Amended Statement of Claim, para [21].

    94. Australian Consumer Law, s 19.

95. Further, Ms Liu submitted that if her case that the documents Fairfax referred to in the matters complained of were forgeries was correct, she had been the victim of a criminal conspiracy to obtain money by deception. She contended that there was a public interest in determination of that issue, which could only be achieved if the identities of the sources were revealed.

96. Finally, Ms Liu submitted that the primary judge erred in not recognising that the question whether it was in the interests of justice that she be able to identify the sources did not turn only on the question of effective remedy. Rather, Ms Liu contended that the weight of authority in this Court was to the effect that she was entitled to use defamation litigation as a means of vindicating her reputation and as a means of mitigating the sting of the wrong done to her by judgments against her chosen defendant. She submitted that this should properly be taken into account. [95]

    95. Cojuangco CA (No 1) (at 151) per Mahoney JA; Cojuangco CA (No 2) (at 41,529 – 41,531) per Kirby P.

Ms Liu’s submissions: costs of the preliminary discovery hearing

97. Finally, Ms Liu submitted that the primary judge should have awarded her indemnity costs for the entirety of the proceedings, not merely the stay application.

98. She argued that Fairfax’s conduct was inimical to the interests of justice and that the prejudice she suffered could not be cured by a costs order, [96] still less a costs order on the ordinary party-party basis. Such an order did not fairly or sufficiently recognise her rights. By reason of the failure to give the Fairfax undertaking in a timely manner, she had been put to considerable unnecessary expense which could only be adequately compensated by an award of indemnity costs. She also submitted that such an order was warranted having regard to Fairfax’s conduct and the unnecessarily prolonged nature of the litigation.

    96. Cf Liu (No 2) (at [80] – [81]).

Fairfax’s submissions: exercise of discretion

99. Fairfax submitted Ms Liu had failed to demonstrate any error on the part of the primary judge which would warrant appellate intervention. It argued that Ms Liu’s submissions failed to take account of the important public policy considerations weighing against the making of the preliminary discovery order which, together with the Fairfax undertaking, shifted the balance in favour of granting the stay application.

100. In this respect, Fairfax relied upon the public interest in the free flow of information in the community about government and political matters, arguing it was an indispensable incident of Australia’s constitutional system and of vital importance to electors. Fairfax also relied upon the concomitant public interest in maintaining the confidentiality of sources who provide such information to the press, and the “chilling effect” on the flow of information caused by disclosure of their identities. [97]

     97. See Stephens v West Australian Newspapers Limited [1994] HCA 45; (1994) 182 CLR 211 (at 264); Aid/Watch Inc v Federal Commissioner of Taxation [2010] HCA 42; (2010) 241 CLR 539 (at [44]); McGuinness v Attorney-General (Vic) [1940] HCA 6; (1940) 63 CLR 73 (at 104) per Dixon J (“McGuinness”); John Fairfax & Sons Pty Ltd v Cojuangco [1988] HCA 54; (1988) 165 CLR 346 (at 354) (“Cojuangco HC”). Fairfax also submitted that these important matters of public interest were recognised by the enactment of s 126K of the Evidence Act (“Journalist privilege relating to identity of informant”) but accepted, having regard to the fact that that provision came into force on 21 June 2011, that it did not apply to the preliminary discovery application.

247. Hunt J considered that the respondents in Cojuangco (No 1) were, like the Commissioners, “something more than mere witnesses or bystanders”. [269] SCA, s 76(1)(b) gave the Court full power to determine by whom and to what extent costs were to be paid. [270] However, his Honour was of the view that SCR Pt 52, r 21, which provided, in substance, that “the successful applicant for preliminary discovery may recover his costs of that application as part of the costs awarded in his favour if he succeeds in the action which he subsequently brings”, [271] suggested that the s 76(1)(b) costs discretion should not normally be exercised in favour of an applicant for preliminary discovery. Rather, the conduct of a respondent to such an application, particularly where that person was “a mere witness or bystander”, “would have to be exceptional in order to justify the making of such an order against him.” [272] His Honour held that the respondents acted reasonably in opposing the order sought because of the nature of the issues which arose, and were entitled to have them determined by the Court at the expense of the applicant. [273]

     269. Cojuangco (No 1) (at 533).

     270. Cf CPA, s 98(1)(b).

     271. Cojuangco (No 1) (at 533).

     272. Ibid (at 534).

     273. Ibid.

248. It is notable that in Cojuangco (No 2), Hunt J set aside all the orders made in Cojuangco (No 1), including those in respect to costs. His Honour ordered each party to pay its own costs of the preliminary discovery application hearing, and that John Fairfax pay Mr Cojuangco’s costs of the stay application hearing. [274] His Honour set aside the costs order he had made in Cojuangco (No 1) on the basis that if John Fairfax had given the undertaking in the preliminary discovery hearing which was subsequently proffered, Mr Cojuangco’s application for preliminary discovery would have been refused. Although John Fairfax was fully entitled to test the Court’s rulings, Hunt J considered that it could not “have it both ways”. Having exhausted all avenues of appeal, John Fairfax’s application to have the preliminary discovery order reconsidered “upon the basis of additional material which could (and should) have been produced at the original hearing [was] heard as a matter of indulgence.” Hunt J considered that John Fairfax must pay for that indulgence, even though it had succeeded in having the preliminary discovery order set aside. [275]

     274. Cojuangco (No 2) (at 34).

     275. Ibid (at 33).

249. In Totalise, the Court of Appeal held that Norwich Pharmacal applications were “not really inter partes disputes” to which Civil Procedure Rules 1998 (UK) (“CPR”) r 44.3, providing that as a general rule the “unsuccessful party” should pay the costs of the “successful” party, applied. Aldous LJ, who delivered the judgment of the Court of Appeal, observed that Interactive, one of the respondents to Totalise’s Norwich Pharmacal application, did not resist the Court making the order and therefore could not properly be called an “unsuccessful party”. Rather, a closer analogy was with applications for pre-action discovery, to which CPR r 48.1 applied. [276]

     276. Totalise (at [18]).

250. CPR r 48.1(2) provided that in actions for pre-commencement disclosure and orders for disclosure against a person who was not a party, the general rule was that the court would award the person against whom the order was sought the costs of the application and of complying with any order made on the application. CPR r 48.1(3) empowered the court to make a different order, having regard to all the circumstances, including the extent to which it was reasonable for the person against whom the order was sought to oppose the application. [277]

     277. CPR r 48.1(3)(a).

251. While the Court accepted that a court deciding a Norwich Pharmacal application had a discretion as to the order for costs, their Lordships observed that “such applications are not truly ordinary adversarial proceedings” because the defendant “does not normally resist the order being made” and has “become mixed up in tortious acts and [is] only concerned that duties and rights, such as duties of confidence and legitimate interests of privacy, are considered by the court.” [278] Accordingly, “[i]n general, the costs incurred should be recovered from the wrongdoer rather than from an innocent party” and each case will depend on its facts. [279] However, the Court added that its conclusion that in a “normal” successful Norwich Pharmacal application the applicant should be ordered to pay the costs of the party making the disclosure, including the costs of making the disclosure, did not mean that a party who supports or is implicated in a crime or tort or seeks to obstruct justice being done should believe that the Court would do other than require that party to bear its costs and, if appropriate, pay the other party’s costs. [280]

     278. Totalise (at [22]; see also [29]); in the latter paragraph the Court referred to CPR r 48.3 as governing the costs of proceedings for pre-action disclosure. This was clearly a mistake; the correct rule was CPR r 48.1, referred to in Totalise (at [18]).

     279. Ibid (at [29]).

     280. Ibid (at [30] – [31]).

252. Simpson J (as her Honour then was) declined to follow the Totalise approach in Airways Corp in relation to an order for preliminary discovery. Her Honour described Totalise as standing for the propositions “that, in general, costs incurred should be recovered from the wrongdoer rather than from an innocent party” and that “a costs order would not ordinarily be made where ‘the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it’”. [281]

     281. Airways Corp (at [8], [10]).

253. While her Honour accepted that a defendant to such an application was “ordinarily”, in effect, a bystander, that did not reflect the facts of Airways Corp. Rather, the defendants “had persistently refused to cooperate” and had defended the application on two bases which were not sustained. [282] In her Honour’s opinion, the litigation as it proceeded was adversarial in nature, or at least akin to adversarial litigation. Accordingly, she concluded that the price of the defendants’ unsuccessful resistance should be the same as that for any other unsuccessful litigant. [283]

     282. Ibid (at [10]).

     283. Ibid (at [11]).

254. In Steffen, another successful application for preliminary discovery, McDougall J doubted the merit of an approach to the costs of the application which made them depend on the initiation and outcome of litigation following preliminary discovery. [284] Rather, his Honour said, following C7 Pty Ltd v Foxtel Management Pty Ltd,[285] that ordinarily an application for preliminary discovery should be regarded as a discrete application, and the costs incurred in it should not “await some indefinite future event.” [286]

     284. C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 (at [50]) per Gyles J.

     285. Steffen (at [31], [33]).

     286. Ibid.

255. Secondly, his Honour accepted that UCPR 42.1 had as its sphere of operation proceedings of an adversarial nature, while proceedings for preliminary discovery were not always truly adversarial in nature. However, his Honour followed Simpson J in Airways Corp to hold that where such proceedings are conducted in an adversarial fashion, UCPR 42.1 dictated the general approach to be taken to the question of costs. [287]

     287. Ibid (at [29]).

256. Neither Simpson J nor McDougall J referred to Cojuangco (No 1). Their Honours also did not refer explicitly to Norwich Pharamacal, although the latter case was, of course, applied in Totalise.

257. Master Macready referred to Cojuangco (No 1) and Airways Corp in NRMA Ltd v John Fairfax Publications Pty Ltd. [288] His Honour distinguished Airways Corp on the basis that in that case, involving an employee who had used the defendants’ computer equipment to publish defamatory material, Simpson J had “not unnaturally regarded the [defendants’] resistance to the application as more akin to adversarial litigation.” [289] His Honour also noted that Simpson J had not been referred to Cojuangco (No 1). [290] For reasons which do not, with respect, appear from the judgment, he said he regarded the Totalise principles as appropriate to guide him in determining costs. Accordingly, his Honour had regard to all the circumstances of the case. [291]

     288. (Supreme Court (NSW), Master Macready, undated, file number 004454/01, unrep).

     289. Ibid (at 4).

     290. Ibid (at 3).

     291. See Totalise (at [28] – [31]).

258. Fairfax also relied on Hornsby Shire Council v Valuer General of NSW, an application for discovery of documents from a prospective defendant pursuant to UCPR 5.3. [292] In dealing with costs, Adams J distinguished Cojuancgo (No 1) on the basis that it concerned disclosure of the sources of a journalist’s report, which his Honour considered was “a special circumstance involving consideration of the so-called ‘newspaper rule’ and a consideration of the special circumstances that apply in light of the policy of the law protective of the public interest in the free flow of information to the media.” [293] His Honour applied Simpson J’s reasoning in Airways Corp, which he described as “plainly correct” and advantageous in its “simplicity and consistency with the general principles attaching to costs orders.” [294]

     292. [2008] NSWSC 1281 (“Hornsby Shire Council”).

     293. Ibid (at [7]).

     294. Ibid (at [8]).

Cross-appeal: conclusion

264. The starting point in considering the appropriate costs order is to have regard to CPA, s 98(1)(a) by virtue of which, relevantly, subject to rules of court and to the CPA, costs are in the discretion of the court. The power conferred by s 98(1)(a) is subject to UCPR 42.1, which prescribes that costs should follow the event, unless it appears to the court that some other order should be made as to the whole or any part of the costs. While it might be accepted that courts develop practices or guidelines in administering the discretion conferred by provisions such as s 98(1), [295] the width of a statutory discretion cannot be narrowed by a legal rule devised by the court to control its exercise. [296]

     295. Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (at [35]) per Gaudron and Gummow JJ (“Oshlack”).

     296. Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 (at 537) per Brennan J (as his Honour then was), referred to with approval in Oshlack (at [35]); see also Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 (at [16]) per Bathurst CJ, Beazley P and Meagher JA.

265. It may be, as the primary judge held, that UCPR 5.8 is also of some relevance in making it clear that any person against whom a preliminary discovery order is made may be the subject of a costs order, even though not a party. However, UCPR 5.8 also contemplates that in some instances, of which the present is an example, that, in addition to the applicant, there will be persons properly described as a “party” to the application. Otherwise, it does not appear to throw any light on how the costs of such an application are to be determined.

266. The cases upon which Fairfax relies do not demonstrate that the court has developed a practice or guideline which informs the exercise of the s 98 discretion to a prima facie position that in preliminary discovery actions involving the media a successful applicant pays the media respondent’s costs.

267. In Cojuangco (No 1) Hunt J followed Norwich Pharmacal, a non-media case, drawing an analogy between the position of John Fairfax and the Commissioners in terms of each entertaining doubts as to whether discovery should be given and John Fairfax acted reasonably in opposing the order sought. His Honour’s decision also turned on SCR Pt 52 r 21, which is not replicated in terms in the UCPR. Further, it is notable that neither the High Court nor the Court of Appeal on the two occasions Mr Cojuangco’s case came before them, suggested the issue of costs was governed by a special rule relating to media respondents to preliminary discovery applications. In all appeals, costs followed the event.

268. Although there is undoubtedly an important public interest in the protection of the confidentiality of journalists’ sources, Fairfax failed to demonstrate why the existence of that public interest justifies the creation of an exception or a special rule so as to enable media respondents to preliminary discovery proceedings to contest such proceedings in an adversarial manner and avoid a costs order by doing so. Rather, in my view, Fairfax’s submissions fail to acknowledge that the media has no public interest immunity from being required to disclose their sources of information when such disclosure is necessary in the interests of justice.

269. I do not accordingly, with respect, agree with Adams J’s statement in Hornsby Shire Council concerning Cojuangco (No 1) to the extent that it may be interpreted as suggesting there is a special costs rule for preliminary discovery applications involving media defendants. [297]

     297. See also Liu (No 3) (at [24] – [25]).

270. In my view the court should approach the question of costs of a preliminary discovery application, recognising the exceptional nature of the jurisdiction, but nevertheless applying s 98(1)(b) and UCPR 42.1. That leaves it open to the court in each case to consider whether, in all the circumstances of the case, to exercise the court’s discretion to make some other order as to the whole or any part of the costs.

271. As Airways Corp and Steffen indicate, it will clearly be relevant to have regard to the manner in which the preliminary discovery application was defended, if at all. As the primary judge recognised, what was particularly relevant in this case was the adversarial approach Fairfax took to the application. In this respect, it might be noted that in Liu CA (No 1), Bathurst CJ was critical of Fairfax’s approach to the preliminary discovery application. While accepting that the existence of a prima facie case was relevant to the exercise of the UCPR 5.2 discretion, his Honour pointed out that this did not mean the application should be treated “as a dress rehearsal for the proceedings.” [298]

     298. Liu CA (No 1) (at [102]).

272. It is also relevant, in my view, that Fairfax cannot be considered to be merely something more than a mere witness or bystander. [299] Rather it is, prima facie, a joint tortfeasor with the sources. It and its journalists who wrote the matters complained of are named as defendants in Ms Liu’s statement of claim. It is, accordingly, not merely in effect in the role of an interpleader uncertain as to whether or not it can disclose a prospective defendant’s identity or whereabouts pursuant to UCPR 5.2, or give discovery to the applicant of documents that relate to the question of whether or not the applicant is entitled to make a claim for relief pursuant to UCPR 5.3.

     299. Cf Cojuangco (No 1) (at 533).

273. Rather, it is Fairfax which asserts it has given an undertaking of confidentiality to the sources, the publication of whose information it must have realised was highly defamatory. By publishing such material it must also have realised there was a real risk of a person claiming to have been defamed by the matters complained of seeking to ascertain the identity of the sources as well as the information they provided It took the risk of being exposed to just such proceedings as have eventuated.

274. Further, Fairfax’s protestation that it should be accorded a special position, as it had resisted the preliminary discovery application because it had given the sources a confidentiality undertaking, rings hollow once it is recognised that it felt free to ignore that undertaking when it suited. [300]

     300. See Liu (No 1) (at [203] – [204]).

275. In my view, Fairfax has not demonstrated that the primary judge erred in ordering Fairfax, as the unsuccessful party in the preliminary discovery hearing resisted on an adversarial basis, to pay Ms Liu’s costs.

276. In light of the above, it is not necessary to determine whether the primary judge erred in finding on an alternative basis that the costs of the preliminary discovery proceedings could have been substantially avoided if the Fairfax undertaking had been offered at an earlier stage.

Appeal: costs issues

277. I have rejected Fairfax’s submission that it should not have been ordered to pay Ms Liu’s costs of the preliminary discovery hearing. That leaves outstanding Ms Liu’s ground of appeal that her Honour should have ordered Fairfax to pay those costs on an indemnity basis.

278. The general rule is that costs payable to a person under an order of the court or the rules are to be assessed on the “ordinary basis”. [301] Costs may be ordered on an indemnity basis where there is relevant delinquency on the part of the unsuccessful party, with the result of more fully or adequately compensating the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part. [302] A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is “plainly unreasonable”. [303]

     301. UCPR 42.2.

     302. Oshlack (at [44]) per Gaudron and Gummow JJ.

     303. Sydney City Council v Geftlick [2006] NSWCA 280 (at [90]) per Tobias JA, Mason P and Hodgson JA agreeing.

279. The primary judge considered Ms Liu’s indemnity costs application on the premise that the Fairfax undertaking had been given at the time of the first hearing. My conclusion is that Fairfax should have done so either unconditionally or as a fallback position. On either premise, therefore, the question is whether Fairfax’s failure in fact to give the undertaking on either basis demonstrated such delinquency as to warrant an indemnity costs order. Having regard to Ms Liu’s concession that, absent a finding Fairfax deliberately refrained from giving the Fairfax undertaking at that stage, she could not argue that its conduct in resisting the application for preliminary discovery was an abuse of process, [304] it cannot, in my view, be concluded that Fairfax was guilty of conduct in relation to the preliminary discovery hearing of such delinquency as would warrant an order for indemnity costs.

     304. See [71] above.

280. I would also reject Ms Liu’s submission that the primary judge ought to have awarded her indemnity costs of the first hearing on the basis Fairfax’s conduct unnecessarily prolonged the preliminary discovery hearing. It was open to her Honour to conclude that Ms Liu may have persisted with the application even if the Fairfax undertaking had been proffered at that stage. [305] Ms Liu has not demonstrated her Honour’s finding of fact in this respect was erroneous.

     305. Liu (No 3) (at [51]).

281. Accordingly I would uphold Ms Liu’s appeal save as to her claim for the costs of the preliminary discovery hearing on an indemnity basis.

Orders

282. I propose the following orders:

1. Grant the appellant leave to appeal.

2. Direct the appellant to file the notice of appeal in the form of the draft in the White Book within fourteen (14) days.

3. Appeal allowed in part with costs.

4. Set aside the stay order made on 23 March 2015 and continued on 22 May 2015.

5. Grant the cross-appellants leave to appeal.

6. Cross-appellants to file the notice of cross-appeal in the form of the draft in the White Book within fourteen (14) days.

7. Dismiss the cross-appeal with costs.

283. WARD JA: I have had the advantage of reading in draft the reasons of each of Beazley P and McColl JA. I agree with the orders proposed by McColl JA for the following reasons.

284. The background to the present proceedings has been canvassed by McColl JA and need not here be repeated. Both the decision to grant a permanent stay of the preliminary discovery orders (Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276) (the second judgment) and the costs orders made in respect of the application for preliminary discovery (Liu v The Age Company Pty Ltd (No 3) (Supreme Court (NSW), McCallum J, 22 May 2015, unrep)) (the third judgment), the subject of the present applications, were discretionary decisions made by the primary judge. For appellate intervention, error in the House v The King sense must be shown (House v The King [1936] HCA 40; (1936) 55 CLR 499). For leave to appeal/cross-appeal to be granted in respect of an interlocutory decision of this kind, something more must be shown than that the decision was arguably wrong (Be FinancialPty Ltd v Das [2012] NSWCA 164 at [32], citing Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56 at [22]).

283. I agree with the conclusions of Beazley P (at [10]) and McColl JA (at [220]) that the primary judge erred in determining, as an objective matter, that Ms Liu had an effective remedy once the undertaking not to rely on a qualified privilege defence was given by the newspaper (albeit given conditionally on the stay being granted).

284. In considering whether Ms Liu’s claim against the newspaper is an effective remedy for the alleged defamation, it is relevant not only to consider the abandonment of the defence of qualified privilege in relation to her ability to claim damages from the newspaper (if her claim succeeds) but also her ability to “nail the lie”. As Mahoney JA observed in John Fairfax & Sons Ltd v Cojuangco (1987) 8 NSWLR 145 (at 151) in this Court, the fact that there is another remedy against a person other than the plaintiff’s chosen defendant will not be conclusive against a plaintiff seeking to obtain preliminary discovery to bring proceedings against his or her chosen defendant as a means both of vindication of his or her reputation and mitigation of the “sting”.

285. As McColl JA has pointed out (at [223]) the truth as to the issue of forgery is more likely to be revealed if the identity of the sources is known. For example, the compulsory processes of the court in relation to the production of documents should then be able to be invoked. (Whether or not they would prove to be useful might be another issue.) At least while the identity of the sources is unknown those processes would be of limited, if any, use in the present case since the newspaper did not receive any original documents from the sources; rather, the documents that Ms Liu claims were forged were forwarded in PDF format to the newspaper.

286. The fact that Ms Liu may have other recourse by way of the referral of the matter to the relevant authorities for investigation as to a potential crime is not a sufficient answer to the question whether she has an effective remedy for the alleged defamation in the absence of identification of the newspaper’s sources. Ms Liu has claimed aggravated damages. That claim is based, as I understand it, on the asserted unreasonableness of the newspaper publishing the allegedly defamatory material without sighting the original documents that Ms Liu says were forgeries. The newspaper argues that the reasonableness of its conduct must take into account other matters. Be that as it may, I agree that there is a risk that Ms Liu’s ability to prove that the relevant documents were forged, and hence her claim against the newspaper for aggravated damages, will be seriously hampered if the identity of the sources is not disclosed.

287. Hence I agree that the primary judge’s discretion miscarried and that the stay of the preliminary discovery orders should be set aside.

288. As to the proposed Australian Consumer Law claim, the primary judge can hardly be criticised for determining the effectiveness of a remedy against the newspaper without reference to such a claim in circumstances where none was foreshadowed at the time. It is, to say the least, rather ironic that the party vehemently complaining of an abuse of process arising out of the newspaper’s change of position in relation to the proffering of the undertaking (Ms Liu) has herself apparently failed to bring forward at the earliest possible time the alternative cause of action on which she now relies for the proposition that, without disclosure of the newspaper’s sources, she will be left without an effective remedy. I agree with McColl JA that it is preferable that the current proceedings be disposed of without reliance on the proposed amended claim.

289. For completeness, I should add two observations.

290. First, I agree with McColl JA (at [199]) that the overriding principle governing the approach of the court to interlocutory applications is to do what the interests of justice require in the particular circumstances of the case (as was recognised by Emmett JA in Bajramovic v Calubaquib [2015] NSWCA 139 at [40]-[41]). For that reason, had it been necessary to revisit the approach of the majority in Nominal Defendant v Manning [2000] NSWCA 80; (2000) 50 NSWLR 139, I would have concluded that it was correct; and that the question whether there was an abuse of process by the newspaper in the present case in seeking a stay of the preliminary discovery orders was to be determined having regard to all the circumstances of the case, as well as to the case management principles mandated by ss 56-60 of the Civil Procedure Act 2005 (NSW) and the public interest in the finality of litigation.

291. I do not see the present case as one readily falling within the admonition in Manning by Heydon JA, as his Honour then was, (at [72]) to the effect that a party should bring its best case forward at the earliest opportunity. As McColl JA notes, this was not a case where a second interlocutory application was brought in order to repair a deficiency on the first occasion. Nor, as Ms Liu ultimately conceded, could it be said that there was an abuse of process in the conduct of the newspaper in resisting the initial application for preliminary discovery arising from the fact that the undertaking was not offered on the first available occasion. The newspaper was not at any stage obliged to proffer the undertaking that it ultimately conditionally did. Not only was there no evidence to support the assertion maintained by Ms Liu in her written submissions (but abandoned in oral submissions) to the effect that the newspaper had always intended to offer the undertaking at a later stage if it were unsuccessful in its appellate challenges to the making of the preliminary discovery orders, but also I have difficulty with the proposition that its later decision to do so was at best an afterthought. Rather, there seems to me to be no reason not to proceed on the basis that, knowing of the possibility that an undertaking might strengthen its ability to resist the preliminary discovery application, the newspaper made a forensic decision in the first place not to offer one and then, having failed to resist Ms Liu’s application and having failed in its subsequent appellate challenges thereto, it made the opposite forensic decision in the context of its application for a stay of those orders. I see no impropriety in the newspaper taking into account its own interests, as well as the public interest in preserving the anonymity of its sources, in so doing.

292. As to whether, having made the initial forensic decision, the newspaper should in effect be held to it, I see a distinction between the situation where a party seeks for the second time the same interlocutory relief in circumstances where nothing has relevantly changed and no new evidence has emerged that was not reasonably available at the time of the initial application (which is in effect the situation considered in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44) and the position where a party (here, the newspaper), which has unsuccessfully resisted an application for interlocutory relief, later seeks a stay of the interlocutory orders on the basis of an undertaking that it could have (but was not obliged to have) offered at first instance. At least where there has been what Senior Counsel for the newspaper referred to as a change in the legal landscape (that being the fate of its unsuccessful constitutional challenge), there is a real question to my mind as to whether there was any abuse of process involved in the making of the stay application (and the primary judge’s view that there was not was, in my respectful opinion, one that was certainly open to her though I accept it was one on which reasonable minds might differ).

293. The position of the newspaper as the respondent to the initial application must also be taken into account. It was, on one view at least, Ms Liu who sought to re-litigate the question as to the existence of an effective remedy; the newspaper’s position on the stay application being accepting of the ruling of the primary judge in that regard.

294. It is not, however, necessary to form a concluded view on the abuse of process issue given my conclusion as to the error in finding that there was an effective remedy once the undertaking had been given.

295. Second, I am not persuaded that the primary judge’s discretion miscarried as a result of a failure to take into account the matters enumerated by McColl JA (at [205]-[212]), though I accept that the primary judge did not address all of those matters in the terms there set out. In particular, I note that the primary judge took into account that Ms Liu would not have the opportunity, if a stay were to be granted, to confront her accusers (at [50] of the second judgment) and noted (at [55]) the purpose of the law of defamation as being to strike a balance between the right to reputation and the freedom of speech. The primary judge also extracted (at [44] of the second judgment), when recounting submissions made by Senior Counsel for Ms Liu, part of her reasons in the first judgment (Liu v The Age Company Ltd [2012] NSWSC 12 at [159]-[160]) in which her Honour had set out the passage from Cojuangco (at 151D) to which I have earlier referred. In that context, the primary judge appears to have been cognisant of the interest of Ms Liu in vindicating her reputation. The primary judge was also cognisant of the fact that protection of a journalist’s sources is not a right or an end in itself but, rather, a consideration to be weighed in balancing the public interests that the law of defamation seeks to achieve (see [57]; [74] of the second judgment).

296. The primary judge noted (at [7] of the second judgment) that the issue that had been determined in the principal judgment was whether the order sought was necessary in the interests of justice; and (at [8]) that, though important, the newspaper rule was not a rule of practice and has been held not capable of applying directly to proceedings for preliminary discovery. Her Honour also noted (at [78] of the second judgment) that there was considerable force to the complaint that no concession, even conditionally, had been made as to the qualified privilege defence at the original hearing.

297. True it is that the primary judge did not expressly refer to the strain the preliminary discovery litigation must have imposed on Ms Liu, although her Honour was clearly conscious of it – the course of that litigation being a factor expressly relied upon in the costs judgment that followed the determination of the stay application (see [50]; [68] of the third judgment). Finally, as to the relevance or otherwise of what could have happened at the first hearing had the undertaking been offered at that stage, the primary judge no doubt took that into consideration because she had been urged so to do by Senior Counsel for Ms Liu. I consider that the primary judge’s reasons as a whole reveal that her Honour was clearly cognisant of, and addressed, the complaints by Ms Liu as to abuse of process and non-compliance with case management principles.

298. That said, I agree that the primary judge’s discretion miscarried by reference to the error in determining that, once the undertaking had been proffered, Ms Liu had an effective remedy such that it would be appropriate to grant the stay sought by the newspaper.

299. Finally as to the question of costs, I agree with McColl JA that no error in the exercise of the primary judge’s discretion as to costs has been established.

300. I therefore agree with the orders that McColl JA has proposed.

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Endnotes

Amendments

07 April 2017 - 7 April 2017

[55] CPA s 58(2)(v) amended to CPA s 58(2)(b)(v).

[61] Amendment to footnote reference 68.

[81] Typographical error corrected.

[85] Typographical error corrected.

[118] Amendment to footnote reference 104.

[129] Amendment to defined term.

[137] Typographical error corrected.

[162] Amendment to footnote reference 170.

[224] Amendment to footnote reference 256.

[236] Evidence Act s 126D amended to Evidence Act s 126B.

[269] Amendment to case reference.

Decision last updated: 07 April 2017