The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 14)

[2022] NSWSC 835

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 14) [2022] NSWSC 835

Hearing dates:

16 June 2022

Decision date:

23 June 2022

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Orders made to give effect to primary judgment and as to costs at [140] and [141]

Catchwords:

PRACTICE AND PROCEDURE – orders necessary to give effect to primary judgment – where Share Sale Agreement to be rescinded pursuant to s 237 of the Australian Consumer Law – whether further orders should be made dealing with parties’ rights once rescission takes effect – where parties not agreed as to consequences of rescission

COSTS – where Commercial Proceedings and Defamation Proceedings heard together – what order for costs should be made in each proceeding – where plaintiffs substantially unsuccessful in Commercial Proceedings – where cross-claimants substantially successful in Commercial Proceedings – where plaintiff recovered modest damages in Defamation Proceedings – whether an order for indemnity costs should be made in either proceedings – whether s 40 of Defamation Act 2005 (NSW) enlivened

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Competition and Consumer Act 2010 (Cth) – Schedule 2, Australian Consumer Law

Defamation Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353

Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64

Davis v Nationwide News Pty Ltd [2008] NSWSC 946

Gardner v Dairy Industry Authority of NSW (1977) 52 ALJR 180

Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; [1974] HCA 18

The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd [2020] NSWSC 1238

The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd (No 12) [2022] NSWSC 357

The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 13) [2022] NSWSC 444

Category:

Consequential orders

Parties:

Proceedings 2019/343896:
The Checkout Pty Ltd (First Plaintiff/Third Cross-Defendant)
Giant Dwarf Pty Ltd (Second Plaintiff/First Cross-Defendant)
Julian Francis Xavier Morrow (Third Plaintiff/Second Cross-Defendant)
Cordell Jigsaw Productions Pty Ltd (First Defendant/Cross-Claimant)
Nicholas Harvey Murray (Second Defendant)

Proceedings 2020/264993:
Julian Francis Xavier Morrow (Plaintiff)
Cordell Jigsaw Productions Pty Ltd (First Defendant)
Nicholas Harvey Murray (Second Defendant)

Representation:

Counsel:
C P O’Neill (Plaintiffs)
B F Katekar SC with S Gaussen (Defendants)

Solicitors:
Kay & Hughes (Plaintiffs)
Bird & Bird (Defendants)

File Number(s):

SC 2021/73199

Judgment

1. I delivered my principal judgment in these proceedings on 13 April 2022. [1]

   1. The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 13) [2022] NSWSC 444.

2. These reasons assume familiarity with that judgment and the various persons there referred to. I shall use the same abbreviations here.

3. I have now heard submissions as to the orders that I should make to give effect to the principal judgment and as to costs.

Orders (other than costs) in the Commercial Proceedings

The Claim

4. By their Amended Summons the Joint Venture Company, Giant Dwarf and Mr Morrow sought:

1. a declaration that the Joint Venture Company and Giant Dwarf were entitled to terminate the Share Sale Agreement by reason of Cordell Jigsaw’s failure to execute the Quit Claim. I rejected that claim; [2]

2. damages for Cordell Jigsaw’s alleged breach of the Share Sale Agreement. I found that there was no such breach; [3]

3. damages under s 236 of the Australian Consumer Law [4] based on Mr Murray’s and Cordell Jigsaw’s alleged misleading or deceptive conduct. I rejected that claim; [5]

4. damages and injunctions in relation to alleged injurious falsehoods. I found that some injurious falsehoods had been established[6] but that Mr Morrow and Giant Dwarf had not established they had suffered any loss as a result; [7] and

5. damages for breach of the Mediation Agreement. The fact of the breach was not contested. However, I found that the breach caused no loss. [8]

   2. At [671].

   3. At [670], [1067] and [1068].

   4. Competition and Consumer Act 2010 (Cth), Schedule 2 – Australian Consumer Law.

   5. At [553]-[554].

   6. At [1059].

   7. At [1060].

   8. At [701].

5. Notwithstanding my findings that Mr Morrow and Giant Dwarf suffered no loss by reason of the injurious falsehoods and breach of the Mediation Agreement, Mr O’Neill for Mr Morrow and Giant Dwarf submitted that I should make orders that Mr Murray and Cordell Jigsaw be permanently restrained from further publishing the falsehoods and make a declaration as to the breach of the Mediation Agreement.

6. I see no utility in doing either of these things.

7. In relation to the injurious falsehoods, as damage is an element of the cause of action,[9] the result of my findings is that the Joint Venture Company, Giant Dwarf and Mr Morrow have not established that the tort was committed. As I record below, Mr Murray has undertaken to the Court that he and Cordell Jigsaw will not repeat the allegation that Mr Morrow engaged in fraud against Cordell Jigsaw.

   9. See [985].

8. As to the Mediation Agreement, I see no utility in making a declaration that has “no foreseeable consequences for the parties”. [10]

   10. Gardner v Dairy Industry Authority of NSW (1977) 52 ALJR 180 at 189 (Aickin J).

9. The Amended Summons should be dismissed. I will deal with the question of costs below.

The Cross-Claim

10. By its Amended Cross-Summons, Cordell Jigsaw sought:

1. an order that the Share Sale Agreement be rescinded pursuant to s 237 of the Australian Consumer Law; or

2. alternatively damages against Mr Morrow and Giant Dwarf equal to 40% of the PDV Offset paid by the Australian Taxation Office (the “ATO”) to the Joint Venture Company on 25 January 2019 and a declaration that it was “to be paid 40%” of the Joint Venture Company’s “net income from any tax or other income from the exploitation of series 1 to 6 of The Checkout”; and

3. any further or other order as the Court considers appropriate.

11. I upheld each of Cordell Jigsaw’s contentions that:

1. Giant Dwarf breached the Joint Venture Agreement; [11]

2. Mr Morrow breached his duty as a director of the Joint Venture Company; [12]

3. Mr Morrow breached his fiduciary duty to Cordell Jigsaw; [13] and

4. Mr Morrow and Giant Dwarf engaged in misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law. [14]

   11. At [490].

   12. At [502].

   13. At [513].

   14. At [543].

12. In those circumstances, Mr Katekar SC who appeared with Ms Gaussen for Mr Murray and Cordell Jigsaw, sought an order that the Amended Cross-Summons “is upheld”.

13. Although I will make orders giving effect to my findings, I see no utility in making an order that the Cross-Claim be “upheld”.

14. Mr O’Neill accepted that it followed from my reasons that I should order, pursuant to s 237 of the Australian Consumer Law, that the Share Sale Agreement entered into on 8 April 2019 be rescinded.

15. Mr Katekar submitted that I should also order that:

1. Giant Dwarf transfer to Cordell Jigsaw the shares that it transferred to Giant Dwarf under the Share Sale Agreement “such that [Cordell Jigsaw] is to be taken to have held those shares since 8 April 2019”; and

2. Mr Murray “is to be reappointed [as] director of [the Joint Venture Company] forthwith, to be taken to have effect on and from the date of that reappointment”.

16. I think the preferable course is to order that the Joint Venture Company, Mr Morrow and Giant Dwarf do all such things and execute all such documents so as to cause the relevant shares to be transferred from Giant Dwarf to Cordell Jigsaw, with effect from 8 April 2019, and to cause Mr Murray to be reappointed as a director of the Joint Venture Company with effect from the date of my orders.

17. Mr Katekar submitted that, in addition, I should:

1. order that the Joint Venture Company pay Cordell Jigsaw specified amounts [15] being Cordell Jigsaw’s “40% share of the PDV Offset refund” received by the Joint Venture Company from the ATO on 24 February 2020, 28 July 2020 and 13 February 2022 in respect of series two, three and four of The Checkout, together with interest on those amounts;

2. order that Mr Morrow and Giant Dwarf “are liable to pay” Cordell Jigsaw any “shortfall” between those amounts and the amounts that the Joint Venture Company is able to pay; and

3. declare that the Joint Venture Company is liable to pay Cordell Jigsaw 50% of the PDV Offset refund received from the ATO for series one of The Checkout.

   15. Mr O’Neill did not dispute the calculation of these amounts.

18. The current position in relation to the PDV Offsets is as follows:

1. the Joint Venture Company received the PDV Offset for series five and six of The Checkout and 40% of that receipt was distributed to Cordell Jigsaw on settlement of the Share Sale Agreement in April 2019;

2. the Joint Venture Company received the PDV Offset for series four of The Checkout on 24 February 2020; Cordell Jigsaw claims that its 40% share of that amount is $110,535.20 (plus interest); [16]

3. the Joint Venture Company received the PDV Offset for series three of The Checkout on 28 July 2020; Cordell Jigsaw claims that its 40% share of that amount is $147,286.66 (plus interest);

4. the Joint Venture Company received the PDV Offset for series two of The Checkout on 13 February 2022; Cordell Jigsaw claims that its 40% share of that amount is $230,304.37 (plus interest); and

5. the Joint Venture Company has not yet received the PDV Offset for series one of The Checkout but anticipates receiving it shortly; there is a controversy as to whether Cordell Jigsaw is entitled to 50% or 40% of that amount, once received.

   16. As I have said, Mr O’Neill did not dispute this and the subsequent calculations.

19. In its Amended Cross-Summons, Cordell Jigsaw sought relief in respect of the PDV Offsets as an alternative to rescission of the Share Sale Agreement. However, as I have set out above, Cordell Jigsaw also sought “any further or other order the Court considers appropriate”.

20. As I propose to order that the Share Sale Agreement be rescinded, it is necessary to make such orders as will restore Mr Murray and Cordell Jigsaw to the position they would have been in had the Share Sale Agreement not been executed. [17] Mr Katekar submitted that it was also necessary to make such orders that would place Cordell Jigsaw in the same position it would have been in but for Mr Morrow’s and Giant Dwarf’s misleading or deceptive conduct that had led me to order rescission of the Share Sale Agreement.

    17. Alati v Kruger (1955) 94 CLR 216 at 223-224; [1955] HCA 64 (Dixon CJ, Webb, Kitto and Taylor JJ); and Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 367 (Mason P with whom Priestley JA agreed).

21. Mr Morrow’s and Giant Dwarf’s misleading or deceptive conduct caused Cordell Jigsaw to sell to Giant Dwarf its shares in the Joint Venture Company.

22. That conduct also had the result of placing Mr Morrow in a position where he could make unilateral decisions as to how the Joint Venture Company dealt with the PDV Offsets.

23. Mr Murray’s apprehension is that Mr Morrow has, by decisions he has caused the Joint Venture Company to make, jeopardised Cordell Jigsaw’s ability to recover its share of the PDV Offsets, once it is reinstated as a 50% shareholder of the Joint Venture Company.

24. In oral submissions on 16 June 2022, Mr O’Neill said that “at the moment” Mr Morrow did not dispute Cordell Jigsaw’s “entitlement” to 40% of the PDV Offset received by the Joint Venture Company for series two, three and four, nor its entitlement to 40% or 50% (whichever figure is correct) of the PDV Offset which the Joint Venture Company expects to receive for series one; [18] but that “he doesn’t know what he doesn’t know”. Thus, Mr Morrow has not given an unqualified assurance that he and Giant Dwarf do not dispute Cordell Jigsaw’s entitlement.

    18. As I have said, Cordell Jigsaw received its 40% share of the PDV Offset for series five and six on the settlement of the Share Sale Agreement on 8 April 2019.

25. Mr Katekar drew my attention to the observations of Barwick CJ and Jacobs J in Neeta (Epping) Pty Ltd v Phillips [19] that:

“Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that a court should so declare without any orders for consequential relief. … If such an order is not or cannot be made nor an inquiry into damages ordered then a declaration that on a certain day the contract has not been validly rescinded serves no purpose in the litigation.”[20]

19. (1974) 131 CLR 286; [1974] HCA 18.

20. At [46].

26. As there is no unequivocal agreement by Mr Morrow as to the consequences, so far as they concern the PDV Offset, of rescission of the Share Sale Agreement, I am persuaded that I should make the orders referred to at [17(a)] above; namely, that the Joint Venture Company pay Cordell Jigsaw entitlements for the PDV Offset received in respect of series two, three and four of The Checkout, together with interest.

27. Mr Murray is concerned that the Joint Venture Company will not have sufficient funds to pay Cordell Jigsaw its proper entitlements and thus seeks an order to the effect set out at [17(b)] above.

28. I do not propose to make any such order at the moment, as it is not yet known whether the Joint Venture Company will be able to pay Cordell Jigsaw the amount due. However, I will grant Cordell Jigsaw liberty to apply for orders to this effect if any controversy arises once the PDV Offset for series one is to hand.

29. In the meantime, Cordell Jigsaw is protected by the undertaking given to Henry J in September 2020,[21] as now amended, and to which I referred in my judgment refusing to grant a freezing order against the Joint Venture Company pending delivery of the principal judgment. [22]

    21. The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd [2020] NSWSC 1238 at [80].

    22. The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd (No 12) [2022] NSWSC 357 at [11]-[14].

30. I will also deal in these reasons with the question of Cordell Jigsaw’s percentage entitlement to the PDV Offset for series one of The Checkout.

Cordell Jigsaw’s entitlement concerning series one

31. At [72] of my principal judgment, I referred to a “1 pager” sent by Ms Shortland from Cordell Jigsaw, to Mr Morrow [23] on 24 January 2014 attaching a draft shareholders agreement.

    23. The principal judgment wrongly recorded that it was sent to Mr Murray. That error has been corrected.

32. Ms Shortland’s “1 pager” was expressed to “cover off the 20% corridor for series two and beyond of the Check Out” and provided that the parties acknowledged that:

“In consideration of the advanced state of the TV series ‘The Check Out’ (the ‘Series’) [Giant Dwarf] will be entitled to a creator’s royalty of 20% from 1^st dollar of net receipts from the exploitation and the budgeted production company fee of the second and subsequent series of the Series. The remaining 80% of net receipts shall then be split according to the shareholding as outlined in the Shareholders Agreement at Schedule 1. For avoidance of doubt, net receipts is the revenue that [the Joint Venture Company] is entitled to retain from the Series as producer after 3^rd party costs relating to exploitation of Series such as residuals, repayments to investors, network share, distribution costs and music clearance costs etc.” (Emphasis added.)

33. Mr Morrow ultimately agreed to these arrangements. [24]

    24. At [72].

34. It was thus agreed that “for second and subsequent series” of The Checkout Giant Dwarf would be paid a 20% “creator’s royalty” with the remaining 80% of net receipts “then be[ing] split according to the shareholding as outlined in the Shareholders Agreement”; that is, equally between Giant Dwarf and Cordell Jigsaw.

35. This was the provenance of the agreement between Giant Dwarf and Cordell Jigsaw that, for series two to series six of The Checkout, profits would be shared between Giant Dwarf and Cordell Jigsaw on a 60/40 basis rather than on a 50/50 basis. [25]

    25. Giant Dwarf receives 20% + (50% x 80% = 40%) = 60%; Cordell Jigsaw receives 50% x 80% = 40%; see fn 10 of the principal judgment.

36. This agreement was prospective and applied only to net receipts for series two and following of The Checkout. It was not intended to apply to series one, which had by then concluded.

37. It must follow, now that the Share Sale Agreement is to be rescinded, that Cordell Jigsaw’s share of such “net receipts” as comprise the PDV Offset for series one is 50% rather than the 40% to which it is entitled for the later five series.

38. It is true that in the Cross-Claim, Cordell Jigsaw sought, in the alternative to rescission of the Share Sale Agreement, a declaration that it:

“… be paid 40% of [the Joint Venture Company’s] net income from any tax or other income from the exploitation of series 1 to 6 of The Checkout.” (Emphasis in original.)

39. However, in his affidavit of 17 May 2021, Mr Simon Fraser, in the course of calculating Cordell Jigsaw’s loss from having sold its shares in the Joint Venture Company to Giant Dwarf, said:

“Jigsaw Dwarf would have distributed each of the PDV Offset Amounts in proportions of 60/40 in accordance with the ‘Production Company Overhead’ fee following series 1. I have made that assumption on the basis of the practice described at [18] of my First Affidavit, of the parties distributing the net earnings of the [J]oint [V]enture [C]ompany as production fees. From series 2 onwards, Cordell Jigsaw and Giant Dwarf invoiced for production fees in proportions of a 40/60 split.” (Emphasis added.)

40. It thus appears that Cordell Jigsaw understood that the “60/40” split for the PDV Offset was only in respect of the series following series one, and that for series one the split was to be “50/50”.

41. In those circumstances I propose to make a declaration to the effect set out at [17(c)] above.

Costs

42. I will deal with the costs of these proceedings below.

Orders (other than costs) in the Defamation Proceedings

43. To reflect my findings at [979] of the principal judgment, it is agreed that I should order that Mr Murray and Cordell Jigsaw pay Mr Morrow general damages of $30,000 and aggravated damages of $5,000.

44. It is also agreed that Mr Murray and Cordell Jigsaw pay interest on those sums from the date of publication.

45. Mr Katekar and Mr O’Neill agreed that the appropriate rate was in the order of 3.5%. [26]

    26. See, for example, Davis v Nationwide News Pty Ltd [2008] NSWSC 946 at [20] (McClellan CJ at CL).

46. Interest should run from 5 July 2019, the date of Mr Murray’s email to Ms Carnabuci, being approximately the temporal mid-point of Mr Murray’s allegedly defamatory emails and the first in which he alleged fraud.

47. Mr Morrow also seeks a permanent injunction restraining Mr Murray or Cordell Jigsaw from publishing any imputation to the effect that Mr Morrow “engaged in fraud”.

48. I have found that Mr Murray’s email to Ms Carnabuci of 5 July 2019 and to Ms Gilchrist of 12 August 2019 would convey to a reasonable reader that Mr Morrow had engaged in knowingly dishonest conduct and fraud and that Mr Murray and Cordell Jigsaw had failed to justify those statements. [27]

    27. At [835]-[867].

49. During argument on 16 June 2022 Mr Katekar informed me that Mr Murray had instructed him to offer an undertaking to the Court, on his own behalf, and on behalf of Cordell Jigsaw, that he would not publish any statement to the effect “that Julian Morrow engaged in fraud against Cordell Jigsaw Productions Pty Ltd”.

50. In light of that undertaking, I do not see any reason to grant the injunction sought by Mr Morrow.

A stay?

51. During argument on 16 June 2022, I was informed that both parties have, notwithstanding the fact that no orders have yet been made in the proceedings, filed Notices of Intention to Appeal. [28] Evidently, no decisions have yet been made to pursue an appeal, although appeals seem probable, bearing in mind the complexity of the matter and the implications of my findings, particularly for Mr Morrow.

    28. Perhaps to avoid any suggestion of being out of time, the principal judgment having been published on 13 April 2022.

52. Mr O’Neill submitted that, once an order is made rescinding the Share Sale Agreement, and orders made causing Mr Murray to be reinstated as a director of the Joint Venture Company, that company, as a party that may wish to appeal from aspects of my decision, will likely be deadlocked, and unable to get advice about an appeal or decide whether to appeal.

53. On the other hand, Mr Katekar submitted that Mr Morrow and Giant Dwarf could decide whether to appeal and could join the Joint Venture Company as a respondent to the appeal. That is no doubt true. However, it is not clear to me what the implications would be, so far as concerns the Joint Venture Company, for it to be joined as a respondent, rather than itself being an active appellant, in any appeal that may ensue.

54. I am persuaded that I should stay the orders I propose to make in the Commercial Proceedings for 35 days, subject to two matters.

55. The first is that I will not stay the orders I propose to make that the Joint Venture Company pay Cordell Jigsaw its share of the PDV Offsets for series two, three and four of The Checkout. Mr O’Neill accepted, properly in my view, that a condition of a stay could be that the Joint Venture Company pay Cordell Jigsaw’s share of the PDV Offsets into Court, or into Cordell Jigsaw’s solicitor’s account or even (Mr O’Neill was less enthusiastic about this prospect) to Cordell Jigsaw itself. In those circumstances, I do not propose to stay those orders.

56. The second is that the stay will be subject to receiving, within seven days, an undertaking from Mr Morrow that he will forthwith execute all such documents and do all such things so as to cause the Joint Venture Company to pay to Cordell Jigsaw 50% of any PDV Offset received by the Joint Venture Company for series one of The Checkout during the pendency of the stay. If I do not receive that undertaking within seven days, the stay will lapse.

57. Mr Katekar submitted that it should be a condition of a stay that Mr Morrow and Giant Dwarf indemnify the Joint Venture Company for any costs it incurs if an appeal is not brought or in relation to any costs liability it incurs if an appeal is brought and is unsuccessful. As I only propose to order a stay for 35 days, I do not see it necessary to impose any such condition.

Costs in the Commercial Proceedings

58. In the final paragraph of the principal judgment, I suggested that it may be appropriate that there be no order as to the costs of either the Commercial or the Defamation Proceedings with the intent that each party pay his or its own costs.

59. Although Mr Morrow and Giant Dwarf were prepared to agree to orders to that effect, having considered the parties’ submissions in relation to costs, I am persuaded that I should not make such an order but, rather, should make separate orders in each of the Commercial and Defamation Proceedings.

The Claim

60. As I have set out above, the Joint Venture Company, Giant Dwarf and Mr Morrow were largely unsuccessful in the claims made by their Amended Summons in the Commercial Proceedings.

61. It follows that they should pay Cordell Jigsaw’s and Mr Murray’s costs of that aspect of the Commercial Proceedings.

62. Mr Katekar submitted that those costs should be paid on an indemnity basis because the claim that Giant Dwarf was entitled to terminate the Share Sale Agreement was “hopelessly flawed”.

63. Mr Katekar drew attention to the letter that Mr Murray’s solicitor, Mr Fraser, wrote to Mr Morrow’s solicitor, Mr Kay, on 19 June 2019. [29]

    29. See [623]-[637].

64. In that letter, under the heading “Scope of Quit Claim Deed”, Mr Fraser contended that the terms of the Share Sale Agreement did not compel Cordell Jigsaw to execute the Quit Claim. As Mr Katekar pointed out, the conclusions I came to [30] were to the same effect as Mr Fraser’s contentions.

    30. At [658]-[668].

65. Mr Katekar submitted:

“79. These proceedings should never have been brought on the basis (as they were) of the argument that [Cordell Jigsaw] breached the [Share Sale Agreement] by its refusal to sign the Quit Claim. That claim was hopeless, as Mr Fraser explained in his 19 June 2019 letter. Properly advised, Mr Morrow should have known that it had no prospects of success.

80. This raises a presumption that Mr Morrow brought the proceedings for an ulterior motive. That ulterior motive would seem fairly plain: these proceedings were part of Mr Morrow’s contingency plan, and the exertion of commercial pressure on the ABC by the pursuit of litigation against [Cordell Jigsaw] and into which the ABC would inevitably be drawn one way or another, in the context of his attempt to persuade the ABC to accede to his demands in relation to The Help Desk.” (Citations omitted.)

66. I do not accept that submission.

67. Although I did not accept Mr Morrow’s contentions as to whether Cordell Jigsaw was obliged by the terms of the Share Sale Agreement to execute the Quit Claim, I am not able to conclude that those contentions were “hopeless”.

68. I am certainly not prepared to conclude that Mr Morrow’s pursuit of that claim bespoke him having the ulterior motive asserted by Mr Katekar. Mr Katekar did not put this proposition to Mr Morrow in cross-examination and withdrew it during the costs argument.

69. I am not prepared to order indemnity costs in the Commercial Proceedings.

The Cross-Claim

70. As I have set out above, Cordell Jigsaw was successful in relation to its Cross-Claim, save for its claim for damages for breach of the Joint Venture Agreement. [31]

    31. See [1074]-[1078].

71. It should therefore have its costs of the Cross-Claim.

The Calderbank offers

72. Mr Katekar submitted Cordell Jigsaw should have its costs of the Cross-Claim on an indemnity basis by reason of three Calderbank offers.

19 June 2019 offer

73. The first offer was made on 19 June 2019, some five months before Mr Morrow commenced the Commercial Proceedings.

74. This offer was to the effect that:

1. Giant Dwarf transfer back to Cordell Jigsaw its 50% shareholding in the Joint Venture Company;

2. Cordell Jigsaw nominate as a non-executive director of the Joint Venture Company someone other than Mr Murray;

3. Cordell Jigsaw execute the Quit Claim as proposed by the ABC;

4. Cordell Jigsaw release Mr Morrow and Giant Dwarf from any claims arising from the negotiations leading to the Share Sale Agreement; and

5. the new series of The Checkout be produced on commercial terms between Giant Dwarf and Cordell Jigsaw equivalent to those that had applied to series two to six, although without Mr Murray's involvement.

75. Mr Morrow rejected this offer the following day, 20 June 2019.

76. By this point, Mr Murray had made clear that he believed that Mr Morrow may have misled him in the circumstances leading to the execution of the Share Sale Agreement and may have acted in breach of his duties as director of the Joint Venture Company. [32]

    32. See Mr Murray’s email to Mr Easton of 11 June 2019 (referred to at [601]), Mr Morrow’s email to Mr Murray of 12 June 2019 acknowledging that “there appears to be a new dispute between us now” (referred to at [607]), and Mr Hamish Fraser’s letter to Mr Kay of 19 June 2019 (referred to at [653]).

77. However, at this stage, no proceedings were on foot, and Cordell Jigsaw was thus yet to propound its Cross-Claim and its contention, central to many of my findings, that it was an implied term of the Joint Venture Agreement that each joint venturer would inform the other of any opportunity to produce a further series of The Checkout or any equivalent or similar consumer affairs program for the ABC.

78. As Mr Katekar submitted, this offer “proceeded on the premise that Mr Morrow had misled Mr Murray into authorising [Cordell Jigsaw] to enter into the Share Sale Agreement” and “effectively asked Mr Morrow to accept that he had done so”.

79. Mr Katekar submitted that, acting reasonably, Mr Morrow should have accepted that he had misled Mr Murray into causing Cordell Jigsaw to enter into the Share Sale Agreement and that:

“He ought reasonably to have recognised that he had engaged in misleading and deceptive conduct that caused [Cordell Jigsaw] to enter into the [Share Sale Agreement] when it otherwise would not have done so. Mr Morrow ought reasonably have accepted defeat at that point.”

80. Although I have found that Mr Morrow did behave substantially as Mr Murray was in June 2019 contending, I am unable to conclude that it was unreasonable of Mr Morrow not to accept this offer which, as Mr Katekar accepted, invited him to accept his wrongdoing and to capitulate at this early stage.

81. In any event, Mr Murray made further offers, prior to and on the day that the Commercial Proceedings were commenced, to which I will now turn.

18 October 2019 offer

82. The second offer was made on 18 October 2019, immediately after the mediation.

83. Cordell Jigsaw offered to “settle the matter” on the basis that:

1. “the parties treat the Share Sale Agreement as reinstated”, subject to provision in the Share Sale Agreement that the Joint Venture Company pay Cordell Jigsaw a 2% fee being replaced with a provision that $59,000 be paid for each of series seven and eight; and

2. Cordell Jigsaw “signs the ABC-approved Quit Claim”.

84. As Mr Katekar submitted, this offer “represented a capitulation by [Cordell Jigsaw] on misleading and deceptive conduct but involved Giant Dwarf accepting that its purported termination of the [Share Sale Agreement] was invalid.”

85. Cordell Jigsaw withdrew that offer three days later on 21 October 2019.

86. As this offer was only open for three days, and as Cordell Jigsaw made an equivalent offer on 1 November 2019, which was rejected, I will consider Cordell Jigsaw’s application for indemnity costs in the light of that later offer.

1 November 2019 offer

87. The third offer was made on 1 November 2019, the day on which Mr Morrow commenced the Commercial Proceedings.

88. This was to the same effect as the 18 October 2019 offer but proposed a 2% fee against cash budget, rather than a flat fee of $59,000 for each of series seven and eight of The Checkout.

89. The offer was stated to be “in full and complete resolution of the dispute between us”. The correspondence, to which I have referred at fn 32, should have made clear to Mr Morrow and those advising him that “the dispute between us” included whether Mr Morrow had misled Mr Murray into agreeing to cause Cordell Jigsaw to sell its shares in the Joint Venture Company to Giant Dwarf and whether Mr Morrow had acted in breach of his fiduciary duties to the Joint Venture Company.

90. The offer was expressed to be open until 5 November 2019. Mr Morrow’s solicitor rejected this offer on 4 November 2019 on the basis that it “fails to remedy the damage our clients have suffered”.

91. Mr Katekar submitted:

“Again, [Cordell Jigsaw] was effectively offering to capitulate on the misleading and deceptive conduct claim but uphold the Share Sale Agreement, agree to sign the Quit Claim, and allow Giant Dwarf to maintain ownership of [the Joint Venture Company] and only pay [Cordell Jigsaw] a 2% fee against the cash budget of The Checkout.” (Emphasis in original.)

92. The offer was made at a time when Mr Morrow’s position then was that Giant Dwarf had terminated the Share Sale Agreement. It is not clear what Mr Morrow (or Mr Murray for that matter) understood the implications of this to be so far as concerns Cordell Jigsaw’s shareholding in the Joint Venture Company nor as to Cordell Jigsaw’s entitlement to cause Mr Murray to be reappointed as a director of the Joint Venture Company.

93. By now, the ABC had made clear it was not going to commission a further series of The Checkout for FY2020[33] although it had stated it was “willing to consider a pitch for a new consumer affairs TV show”. [34] Further, the dispute between Mr Morrow and the ABC concerning the terms on which the ABC might commission The Help Desk was coming to a head. [35]

    33. See Ms Carnabuci’s letter of 5 July 2019 referred to at [686].

    34. See the emails sent to Mr Morrow and Mr Murray on 23 July 2019 referred to at [691]-[692].

    35. See the correspondence at [710]-[713].

94. However, the offer was made, literally, at the outset of the proceedings and long before the parties’ positions were finally articulated. As I have set out, Mr Murray had by then made known the substance of his complaints, but Cordell Jigsaw’s contentions as to the implied term of the Joint Venture Agreement had not then been articulated.

95. In all these circumstances, although by this offer Cordell Jigsaw proposed an outcome for Mr Morrow and Giant Dwarf that was considerably better than Mr Morrow and Giant Dwarf have achieved, and significantly less favourable than Cordell Jigsaw has achieved, I am not able to conclude that it was unreasonable for Mr Morrow and Giant Dwarf not to have accepted the offer.

Disentitling conduct?

96. Mr O’Neill developed detailed submissions to the effect that Mr Murray and Cordell Jigsaw had engaged in “disentitling conduct” so as to warrant the conclusion that there should be no order for costs in their favour in the Commercial Proceedings.

97. The particulars of such “disentitling conduct” related almost entirely to the Defamation Proceedings (for example, pressing the defence of justification in relation to the allegation of fraud, failure to apologise and maintenance of the allegation that Mr Morrow had a bad reputation).

98. I do not see these matters as being relevant to the costs order I should make in the Commercial Proceedings.

Orders only against Mr Morrow and Giant Dwarf

99. Mr Murray and Cordell Jigsaw do not seek any costs order against the Joint Venture Company. Accordingly, the costs orders will be directed only to Mr Morrow and Giant Dwarf.

Costs in the Defamation Proceedings

100. Mr Morrow was successful in the Defamation Proceedings and, on the face of it, is entitled to his costs of those proceedings.

101. Mr Katekar submitted that, nonetheless, there should be no order as to costs because, first, Mr Morrow only succeeded in recovering a “paltry” or “derisory” amount of damages; and second, because Mr Murray had, shortly after the Defamation Proceedings were commenced, sent Mr Morrow’s solicitors letters which Mr Katekar submitted showed that his claim for economic loss was bound to fail.

102. I do not see how the relatively modest amount of damages that I have awarded Mr Morrow is, of itself, a reason not to award him costs, at least on the ordinary basis.

103. However, questions arise by reason of s 40 of the Defamation Act 2005 (NSW), to which I will now turn.

Section 40 of the Defamation Act

104. Section 40 of the Defamation Act is in the following terms:

“40   Costs in defamation proceedings

(1)   In awarding costs in defamation proceedings, the court may have regard to—

(a) the way in which the parties to the proceedings conducted their cases (including any misuse of a party’s superior financial position to hinder the early resolution of the proceedings), and

(b) any other matters that the court considers relevant.

(2)   Without limiting subsection (1), a court must (unless the interests of justice require otherwise)—

(a) if defamation proceedings are successfully brought by a plaintiff and costs in the proceedings are to be awarded to the plaintiff – order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the defendant unreasonably failed to make a settlement offer or agree to a settlement offer proposed by the plaintiff, or

(b) if defamation proceedings are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant – order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.

(3)   In this section—

settlement offer means any offer to settle the proceedings made before the proceedings are determined, and includes an offer to make amends (whether made before or after the proceedings are commenced), that was a reasonable offer at the time it was made.” (Emphasis in original.)

105. In Davis v Nationwide NewsPty Ltd McClellan CJ at CL said:

“Section 40(2) obliges parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party’s conduct. The section contemplates that an order for costs on an indemnity basis may be made even if a party making an offer does not do better in the proceedings than the offer which he or she has made.”[36]

36. At [27].

106. As Mr O’Neill submitted:

“These provisions are (and were intended to be) radical. It is sufficient to point to the consequence of their operation: indemnity costs are awarded for the whole proceedings, even if the trigger for their operation is events occurring well after the commencement of proceedings, being obviously different from the way in which offers of compromise operate under the UCPR. These provisions are clearly intended to operate as a real spur, in the public interest, to encourage parties (both plaintiffs and defendants) to make and to accept reasonable offers of settlement.” (Emphasis in original.)

107. The questions that arise under s 40(2)(a) are whether:

1. Mr Murray, as the unsuccessful party, unreasonably failed to make a reasonable settlement offer to Mr Morrow, or unreasonably failed to accept a reasonable settlement offer made by Mr Morrow; and

2. if so, the interests of justice nonetheless require that no order for indemnity costs (for the whole proceedings) be made against him.

108. Mr Murray contends he made one reasonable settlement offer. Mr Morrow contends he made three reasonable settlement offers. None of these offers was accepted.

Mr Murray’s offer of 24 September 2020

109. Mr Morrow commenced the Defamation Proceedings on 11 September 2020.

110. On 24 September 2020, Mr Murray wrote to Mr Morrow’s solicitor, Mr Kay:

“Without tipping our hand too much, I’d direct you to some of the documents about your client’s behaviour provided in the contract dispute by the ABC under your client’s own subpoena (ie the period post 10 April 2019). These are buried in the bundle of 2000 odd pages. They are extremely damaging to both your client’s case and his reputation. Your client’s own business partners are quoted in some of them. Those allegations are much worse than anything I said and I will be instructing our legal team to make full use of them to defend our position and demonstrate the real reputational position occupied by your client in the industry and with his former staff and partners. None of that loss of reputation has anything to do with me or my actions. Let me know if you’d like me to send you copies of a selection of the documents in question to save your client the time and cost of trying to find them.”

111. Mr Murray continued:

“Without Prejudice Offer

In order to give your client an opportunity to withdraw the action before he incurs any more costs, we will consent to your client discontinuing the defamation action without costs at any time until 5:00pm Wednesday 30 September 2020. After that time, we will have to engage solicitors and formally brief counsel, and we will seek costs for any work we are required to do to defend this matter, including the preparatory work from the date of service.” (Emphasis in original.)

112. On 28 September 2020, Mr Kay replied, rejecting Mr Murray’s offer and stating:

“If you wish to provide us documents … that you believe are relevant to the defamation proceedings, that is your prerogative.”

113. On 30 September 2020, Mr Murray replied to Mr Kay, enclosing two documents.

114. The first document was an email sent by an ABC employee, Mr Simon Melkman to Mr Michael Carrington on 1 April 2019, which recorded that Mr Morrow “wants us to proceed with negotiations and commissioning decisions without informing [Cordell Jigsaw], which would be both contentious and detrimental to [Cordell Jigsaw].”

115. The second document was a document called “the Help Desk Briefing Document” which was circulated by Mr Peter Munro to Mr Carrington and other ABC staff on 28 November 2019 which contained the recommendation that:

“[T]he ABC cease discussions with Giant Dwarf on The Help Desk, given the ongoing and significant reputational risk to the ABC, irreconcilable creative differences and the irreparable breakdown in our working relationship with Julian Morrow.”

116. Mr Murray concluded:

“The first document comes from our ABC subpoena. The other two documents are from your client’s ABC subpoena. This material is the tip of the iceberg. It is highly damaging for your client and if he continues the defamation action, we will aggressively lead this evidence both as a defence and a mitigating factor in assessing damages and reputation of your client.

Let me know before 9:30am tomorrow if he wants to discontinue. I will brief Bird and Bird to act. They will then deal with you on your latest proposal.”

117. This was in effect a “walk away” offer by Mr Murray. It was not accompanied by an apology. But it pointed to the difficulty that Mr Morrow was likely to have, and which I found he did have, [37] in proving any connection between Mr Murray’s allegedly defamatory communications with the ABC, and Mr Morrow’s estrangement from the ABC and thus his claim to have suffered economic loss by reason of Mr Murray’s communications.

     37. At [957]-[968].

118. Ultimately, I have made a relatively modest award of damages in Mr Morrow’s favour; far less than was advocated for on his behalf.

119. In those circumstances, my conclusion is that Mr Murray’s offer to “walk away” was reasonable, and thus that he did not fail to make a reasonable offer to settle the proceedings.

120. However, contrary to Mr Katekar’s submission set out at [101] above, I do not see Mr Murray’s September 2020 offers as being a reason to make an order as to costs. Mr Morrow has succeeded in the Defamation Proceedings and should have his costs.

Mr Morrow’s offer of 28 September 2020

121. In his email of 28 September 2020, Mr Kay proposed:

“Given that the original proceedings now have a trial date, being 1^st February 2021, and those proceedings will traverse issues being central to the defamation proceedings, including the basis of several imputations pled in those proceedings, and the question of malice, our clients believe that it would be equally prudent to await the determination of those proceedings before either party advances their pleadings or case in the defamation proceedings. Clearly, the determination of those matters one way or another in the original proceedings will have significant relevance to each of the parties’ prospects of success in the subsequent defamation proceedings.

In such circumstances, our clients believe that it would be most prudent for the parties to agree to stay the defamation proceedings, pending determination of the original proceedings.”

122. In substance, Mr Morrow’s proposal was that the Defamation Proceedings be stayed until the outcome of the Commercial Proceedings.

123. This was not an offer to “settle the proceedings” for the purposes of s 40(3).

124. In any event, as Mr Katekar submitted:

“… all the impugned communications [in the Defamation Proceedings] were already a part of the injurious falsehood claims in the Commercial List case, that would not necessarily have spelt victory for [Cordell Jigsaw] in the Defamation Case (as has been seen), so a stay would only have delivered multiple trials for [Cordell Jigsaw] rather than just one.”

Mr Morrow’s offer of 22 December 2020

125. On 22 December 2020, Mr Morrow made an Offer of Compromise under Uniform Civil Procedure Rules 2005 (NSW) r 20.26 to accept $49,999 in the Defamation Proceedings.

126. On the same day, Giant Dwarf and Mr Morrow served an Offer of Compromise in the Commercial Proceedings for $999,999.

127. Neither offer was accepted.

128. The two Offers of Compromise were not stated to be interdependent. But they were linked in that there were common underlying facts between the two proceedings. The communications said to constitute defamatory publications in the Defamation Proceedings were also said to constitute injurious falsehoods for the purpose of the Commercial Proceedings.

129. Thus, had Mr Murray accepted the offer in the Defamation Proceedings, unless he caused Cordell Jigsaw also to accept the offer made in the Commercial Proceedings, he and Cordell Jigsaw would have remained exposed in the Commercial Proceedings to the injurious falsehood allegations, arising from the same material.

130. In those circumstances, it was not unreasonable of Mr Murray not to accept Mr Morrow’s 22 December 2020 offer.

131. In any event, Mr Morrow ultimately recovered less than that offer.

Mr Morrow’s offer of 23 March 2021

132. Finally, on 23 March 2021, Mr Kay wrote to Mr Fraser inviting Mr Murray to withdraw his plea of justification to the allegation of fraud.

133. That was not an offer “to settle proceedings”.

Conclusion in relation to s 40

134. My conclusion is that s 40 is not enlivened.

Unreasonable maintenance of a defence of justification to the allegation of fraud

135. Mr O’Neill submitted that Mr Murray’s and Cordell Jigsaw’s “unreasonable maintenance” of a defence of justification to the allegation of fraud was a reason to award Mr Morrow indemnity costs in the Defamation Proceedings.

136. As I recorded in the principal judgment, Cordell Jigsaw did not in its Cross-Claim in the Commercial Proceedings allege that Mr Morrow had behaved fraudulently. [38]

     38. At [841] and [940].

137. I also found that the matter was compounded by Mr Katekar’s closing submission that “we do say that he fraudulently made a representation to us”. [39]

     39. At [850] and [941].

138. But I took this matter, as well as the other matters referred to at [935] to [953] into account when assessing my award of aggravated damages.

139. I do not see how this matter can also be relevant to, or found, an order for indemnity costs.

Conclusion

140. I make the following orders in the Commercial Proceedings being proceedings 2019/343896:

1. The Amended Summons is dismissed.

2. Order pursuant to s 237 of the Australian Consumer Law that the Share Sale Agreement dated 8 April 2019 and made between the first and second plaintiffs and the first defendant be rescinded.

3. Order that the plaintiffs do all such things and execute all such documents as are necessary so as to cause the second plaintiff to transfer to the first defendant with effect from 8 April 2019 the shares in the first plaintiff that the first defendant transferred to the second plaintiff pursuant to the Share Sale Agreement and to cause the second defendant to be reinstated, with effect from the date of these orders, as a director of the first plaintiff.

4. Order that within 14 days of the making of these orders the first plaintiff pay to the first defendant:

1. $110,535.20 for the first defendant’s 40% share of the PDV Offset refund, net of costs, for series four of The Checkout received by the first plaintiff from the ATO on 24 February 2020;

2. interest pursuant to s 110 of the Civil Procedure Act 2005 (NSW) on $110,535.20 calculated on and from 25 February 2020 to the date of these orders;

3. $147,286.66 for the first defendant’s 40% share of the PDV Offset refund, net of costs, for series three of The Checkout received by the first plaintiff from the ATO on 28 July 2020;

4. interest pursuant to s 110 of the Civil Procedure Act 2005 (NSW) on $147,286.66 calculated on and from 29 July 2020 to the date of these orders;

5. $230,304.37 for the first defendant’s 40% share of the PDV Offset refund, net of costs, for series two of The Checkout received by the first plaintiff from the ATO on 13 February 2022;

6. interest pursuant to s 110 of the Civil Procedure Act 2005 (NSW) on $230,304.37 calculated on and from 14 February 2022 to the date of these orders.

5. Declare that the first plaintiff is liable to pay the first defendant 50% of the PDV Offset refund, net of costs, and receipts from the ATO for series one of The Checkout.

6. Order that the Amended Cross-Summons otherwise be dismissed.

7. Order that the second and third plaintiffs pay the defendants’ costs of the Amended Summons.

8. Order that the first and second cross-defendants pay the cross-claimants’ costs of the Amended Cross-Summons.

9. Stay orders 2, 3, 7 and 8 (but not order 4) for 35 days from the date of these orders, subject to receipt by the Court within seven days of the making of these orders of an undertaking from the third plaintiff that he will execute all such documents and do all such things so as to cause the first plaintiff to pay to the first defendant 50% of any PDV Offset refund, net of costs, that the first plaintiff receives during the period these orders are stayed from the ATO for series one of The Checkout

10. Grant the first defendant liberty to apply on short notice for orders against the second and third plaintiffs in the event that the first plaintiff fails to comply with order 4 above.

11. Grant the parties liberty to apply on 24 hours’ notice in relation to the form of these orders, such liberty to be exercised by 5 pm on 1 July 2022.

141. I make the following orders in the Defamation Proceedings, being proceedings 2020/264993:

1. Order that the defendants pay the plaintiff:

1. general damages of $30,000;

2. aggravated damages of $5,000.

2. Order that the defendants pay the plaintiff interest, including interest on costs from 5 July 2019, at the rate of 3.5%.

3. Note the undertaking given to the Court by the second defendant, on his own behalf, and on behalf of the first defendant that he will not publish any statement to the effect that the plaintiff engaged in fraud against the first defendant.

4. Order that the defendants pay the plaintiff’s costs of the proceedings.

5. Grant the parties liberty to apply on 24 hours’ notice in relation to the form of these orders, such liberty to be exercised by 5 pm on 1 July 2022.

**********

Endnotes

Amendments

28 June 2022 - Amendment made to correct minor typographical errors

Decision last updated: 28 June 2022