FEDERAL COURT OF AUSTRALIA

Kazal v Thunder Studios Inc (California) [2018] FCA 593

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be dismissed with costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from transcript)

BROMWICH J:

Introduction

1    This is an application by Mr Charif Kazal for leave to appeal from an interlocutory order made by a judge of this Court, refusing an extension of time to comply with orders previously made. As the orders were interlocutory, leave to appeal is required: s 24(1A) of the Federal Court of Australia Act 1976 (Cth).

2    Mr Charif Kazal and his brother, Mr Adam Kazal, are the first and second respondents respectively in proceedings commenced in this Court by Thunder Studios Inc (California) and its principal, Mr Rodric David. Broadly speaking, the proceedings concern the applicants’ claim that the respondents published material in May and August 2013 containing defamatory imputations, malicious falsehoods, and representations that were misleading or deceptive, or were likely to mislead or deceive: s 18 of the Australian Consumer Law (contained in Sch 2 of the Competition and Consumer Act 2010 (Cth)).

3    On 7 September 2017, the primary judge relevantly made procedural orders in the following terms:

4.    The First Respondent provide sufficient answers, verified by affidavit, to the Applicants’ interrogatories 13, 15, 36(b) and 44 on or before 4.00pm on 15 September 2017.

5.    In the absence of compliance with Order 4 above, the First Respondent’s Defence (including any amended pleadings) be struck out.

4    The primary judge made the above orders in circumstances in which there had previously been default by Mr Charif Kazal in complying with orders to serve verified answers to the applicants’ interrogatories. That history was described in his Honour’s reasons as follows:

9    On 19 May 2017, following a case management hearing on 8 May 2017, I made orders by consent that Charif file and serve verified answers to the agreed interrogatories on or before 30 May 2017. Charif breached that order. He said that his solicitors had served his unverified answers on 15 June 2017 “… as I was away at the time” and that his solicitors later served his verified answers on 30 June 2017, being the day on which he verified them.

10    It is notable that, first, Charif gave no explanation as to why he had failed to comply at all with the order that the verified answers be filed and served by 30 May 2017, secondly, he sought to explain why his solicitors served unverified answers two weeks late only by saying that he was away at the time and thirdly, without giving any further explanation for the subsequent delay, he said that he had verified the answers one month after the date that they were due, once he had returned, also at an unspecified date, to Australia.

11    On 6 July 2017, Thunder Studios and Mr David complained of inadequacies in those answers. On 7 July 2017, I ordered Charif to file and serve sufficient verified answers to the interrogatories on or before 21 July 2017. On that occasion, I referred to his then answers to interrogatories 44 and 45. Those interrogatories sought details of information that Charif had with respect to each matter complained of at the time of its first publication and the enquiries that he had made to ascertain its accuracy. Those interrogatories went to his defence of qualified privilege.

12    Charif once again defaulted in complying with the Court’s orders. He said that, on 21 July 2017, his solicitors wrote to the applicants’ solicitors, seeking further time in which he could answer the interrogatories. The letter said that:

due to personal matters, he has been unable to properly review all documents in his possession to effect Discovery and Sufficient Answers to Interrogatories.

13    The letter foreshadowed that Charif expected to comply by 27 July 2017. Neither the letter or Charif gave any explanation of the “personal matters” that prevented his complying with the 7 July 2017 order. Charif said that his solicitors served unverified answers on 28 July 2017 and verified ones on 31 July 2017. His 31 July 2017 verified answer to interrogatory 44 did not comply with the well-settled obligation of a publisher who pleaded, as Charif had done, a defence of qualified privilege to provide a detailed list of information as Hunt J explained the publisher must do in Palmer v John Fairfax & Sons Ltd (1986) 5 NSWLR 727 at 732B-733G.

14    On 15 August 2017, the applicants’ solicitors complained to Charif’s solicitors of the inadequacy of the answers to, among others, interrogatory 44, as well as interrogatories 13, 15(a), (b), (c)(i), (ii) and (iii), 36(b) and 38. The letter foreshadowed that Thunder Studios and Mr David would seek orders that those answers be provided within 14 days, failing which Charif’s defence should be struck out. In accordance with that foreshadowed course, Thunder Studios and Mr David filed an interlocutory application on 16 August 2017, seeking, among others, an order that Charif provide sufficient answers to their interrogatories by 1 September 2017 and that in default of compliance Charif’s defence and cross-claim be struck out.

15    I heard that application on 18 August 2017, when Charif was represented, as he had been on earlier occasions, by counsel who was well-experienced in defamation proceedings but who did not appear on 4 December 2017 or today. Counsel for Charif on 18 August 2017 accepted that the 31 July 2017 answers to interrogatories 44 and 45 “… suffered from the vice in Palmer” (5 NSWLR 727) and that the second attempt was no better. After discussing with counsel how long Charif needed to prepare proper answers, his counsel sought 28 days to do so but opposed a “guillotine” order (i.e. an order that in default of compliance his defence would be struck out). At the hearing, I said that I would require Charif to answer the five interrogatories, including interrogatory 44, properly within 28 days, which was by 15 September 2017, and that in default his defence would be struck out. The parties took some time to prepare orders to reflect numerous rulings that I had made in relation, not only to the interrogatories, but to other matters that were in issue at the hearing on 18 August 2017. Ultimately, on 7 September 2017, I made orders, including orders 4 and 5, reflecting what I had ruled and decided on 18 August 2017 as I have described above.

5    Mr Charif Kazal did not comply with order 4 reproduced at [3] above. By operation of order 5, his defence was struck out.

6    Over two months later, by an interlocutory application filed by leave in Court on 4 December 2017, Mr Charif Kazal sought an extension of time to comply with order 4 made on 7 September 2017, which would have the effect of reinstating his defence. The primary judge heard that application on 4 December 2017 and 8 December 2017. At the conclusion of the hearing on the latter date, his Honour dismissed the application, giving detailed reasons ex tempore. His Honour’s judgment was subsequently revised and published on 31 January 2018: Thunder Studios Inc (California) v Kazal (No 5) [2017] FCA 1572.

7    Mr Charif Kazal now seeks leave to appeal from the primary judge’s order dismissing the application to extend the time for compliance with the order to provide sufficient answers, verified by affidavit, to the applicants’ interrogatory questions numbered 13, 15, 36(b) and 44, and thereby to have his defence reinstated. Absent success in his proposed appeal, the trial will proceed without any defence at all, because his brother, Mr Adam Kazal, has also been refused leave to file a defence, albeit for quite different reasons which do not presently require elaboration.

The application for leave to appeal and the proposed grounds of appeal

8    The application for leave to appeal is in the following terms:

1.    His Honour erred in refusing to extend from 4pm 15 September 2017 to 4pm 22 September 2017 the time for compliance with his Honour’s self-executing order of 7 September 2017;

2.    The consequence of his Honour refusing the extension of time sought is that the Applicant’s Defence is struck out.

3.    It is not in the interests of justice that the principal proceedings should proceed without the Applicant being able to rely on his Defence;

4.    It would not be in conformity with the overarching purpose of the civil practice and procedure provisions that the trial proceed without the Applicant being able to rely on his Defence, with the appeal against his Honour’s decision of 8 December 2017 deferred to be dealt with after the trial, because:

a.    The Appeal has good prospects of success;

b.    There is no realistic prospect of the issue on the Appeal becoming moot, with the result that the appeal will need to be dealt with after the trial, if it is not dealt with now;

c.    To deal with the Appeal after the trial would be likely to result in waste of costs, time and judicial and court resources.

5.    Accordingly, leave should be given to agitate the appeal at the present interlocutory stage.

9    The proposed ground of appeal in Mr Charif Kazal’s draft notice of appeal is as follows:

His Honour Justice Rares erred in refusing to extend from 4pm 15 September 2017 to 4pm 22 September 2017 the time for compliance with his self-executing order made 7 September 2017 for the service of further verified answers to interrogatories.

Leave to appeal considerations

10    While the discretion to grant leave to appeal pursuant to s 24(1A) of the Federal Court of Australia Act and the corresponding rule for bringing such an application, being r 35.11(a) of the Federal Court Rules 2011 (Cth), is unfettered, the legislature has evinced a policy against the bringing of interlocutory appeals except where the Court, acting judicially, finds reason to grant leave. Generally speaking, a tight rein should be kept on interlocutory decisions on a point of practice. However, leave will more readily be granted on an interlocutory decision determining a substantive right: see Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (Decor v Dart) at 399-400. Given that the effect of the orders in the present case is to maintain the position whereby Mr Charif Kazal is forced to proceed to trial without a defence, this application will be treated as at least involving something akin to a substantive right, without deciding whether it truly has that character.

11    The guidance to the exercise of discretion to grant leave to appeal approved in Decor v Dart is cast in the form of two interrelated tests that bear on each other:

(1)    whether, in all the circumstances, the decision is attended with sufficient doubt to warrant it being reconsidered on appeal; and

(2)    whether substantial injustice would result if leave were refused, supposing the impugned decision to be wrong.

The correctness of those tests is not in doubt. There will continue to be cases raising special considerations and, accordingly, this Court should not regard its hands as tied by these tests. No special consideration has been suggested as applying to this case beyond the practical impact of the primary judge’s decision standing.

12    Because the decision sought to be appealed is discretionary, Mr Charif Kazal needed to at least point to the real possibility of a viable argument that the primary judge erred in the manner described by the High Court in House v The King (1936) 55 CLR 499 at 504-505. Although that passage is well-known, its pithy exposition warrants reproduction because of its direct application to this case:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

13    Particular express asserted errors were pointed to on behalf of Mr Charif Kazal, as detailed below. A faint submission was made as to some other kind of error being present by reason of the harsh result, but this was not developed to the point of being able to assist the Court. No such implied error is apparent, because the primary judge plainly recognised that the effect of his Honour’s decision was harsh, but concluded, for reasons that were not shown to be wrong, that it was not unjust. It follows that nothing less than pointing to a viable express error will suffice in this case.

The asserted express errors relied upon

14    The written submissions for Mr Charif Kazal at [14] asserted the following errors:

It is submitted that his Honour erred in refusing to extend the time for compliance with Order 4 because:

a.    He gave undue weight (at [13]) to the failure to comply with the “well-settled obligation” described by Hunt J in Palmer v John Fairfax (1986) 5 NSWLR 727. However, that obligation relates to the statutory defence of qualified privilege, the touchstone of which is reasonableness of conduct, not, it is submitted, the common law defence of qualified privilege, the touchstone of which is reciprocity of duty or interest. The First Respondent’s Amended Defence pleads only common law qualified privilege.

b.    He mistook the import of the First Respondent’s evidence that he had been “unavailable to verify the answers” as indicated that the First Respondent never intended to verify the answers while overseas.

c.    He applied an overly-stringent standard in considering the steps the First Respondent should have taken to ensure compliance with the Order;

d.    He gave insufficient weight to the natural tendency of a lay litigant to rely on his lawyers;

e.    He gave excessive weight to the failure of the First Respondent to give evidence in the extension application explaining earlier slippages in the timetable.

First asserted error – giving undue weight to the failure to comply with the “well-settled obligation” described in Palmer v John Fairfax (1986) 5 NSWLR 727

15    Mr Charif Kazal asserted that [13] of the primary judge’s reasons, reproduced at [4] above, contained this error. It should be noted that at [15], his Honour recorded counsel for Mr Charif Kazal as having accepted that the 31 July 2017 answers to interrogatories suffered from the vice in Palmer v John Fairfax & Sons Ltd (1986) 5 NSWLR 727 at 732B- 733G that his Honour had described at [13].

16    The parties to this interlocutory application each provided detailed reasons as to why his Honour had, or had not, erred in relation to Palmer. However, at the hearing of the application for leave to appeal, I raised the question of how any such error, assuming it was an error, had affected the decision sought to be appealed. While Palmer was referred to by his Honour in the “Consideration” part of his Honour’s reasons at [34], that reference was confined to explaining the antecedent reasons why the 7 September 2017 order had been made requiring Mr Charif Kazal to provide a better answer to interrogatory question 44. Nothing turned on the reason for the conclusion that the answer given was inadequate, and the order to provide a better answer was not opposed. If it had been necessary to decide, in all likelihood I would have concluded that his Honour did not err in this respect, but, given the circumstances, there is no need to decide that either way. That is because, at most, the reference to Palmer was no more than a background explanation as to why that part of the 7 September 2017 order to provide better answers had been made.

17    Counsel for Mr Charif Kazal was unable to point to any other reason why the reference to Palmer had in any way infected the conclusions the primary judge reached in refusing an extension of time in which to comply with order 4 made on 7 September 2017. That aspect of the error sought to be agitated on appeal has no serious prospect of success. This reason for granting leave to appeal is not made out.

Second asserted error at [36] to [39] of the primary judge’s reasons

18    This asserted error turns on what the primary judge said at [36] to [39] of his Honour’s reasons as follows (with his Honour’s original emphasis in bold):

35    Charif’s evidence explaining his breach of order 4 was simply that, although he knew of the order to verify and file the answers by 15 September 2017, on that day:

I was still in the United States … out of the country and unavailable to verify the Answers.

36    That evidence was not correct. He would have been able to verify the answers, had he made arrangements in New York to do so. He chose not to make any arrangements there either in advance of the time specified in order 4 or later. It is not an explanation of his default for him to assert that, by the time he and his lawyers finalised the drafting of his answers, it was in the early morning, around 2.00am, in New York, which he knew was about 4.00pm on 15 September 2017 in Sydney. Both Charif and his lawyers knew that his answers had to be verified and filed by that time. First, they did not seek an extension before 15 September 2017, despite their awareness of the consequence of non-compliance under order 5, and the difficulties that his conduct in being in New York on 14 and 15 September 2017 caused (the reason for which he did explain) in having his answers verified while he was there, particularly having regard to the then state of preparation of his draft answers. Secondly, Charif made no attempt to verify his answers subsequently while in New York. As his evidence made clear, he never intended to do so because, in his words, he was “out of the country and unavailable to verify the Answers”.

37    He chose to be out of the country and his “unavailability” consisted in his failure to arrange to be with someone before whom he could verify his answers in New York, before the expiry of the time in order 4. He did not make arrangements to attend upon such a person then, or even after the expiry of the time in order 4. Indeed, he chose to wait, as I infer he always intended, until it suited him to verify his answers after his subsequent return to Australia, when he would no longer be “unavailable”. In fact, he only did so, again for reasons he did not explain, two days after his return on 19 September 2017.

38    So the question that arises is: what is the injustice against which Charif is seeking relief? In my opinion, it is the consequence of his deliberate, unexplained and conscious choice to be “unavailable” in New York as a result of which he made no arrangements to comply for the third time with an order that he file and serve verified answers to the interrogatories on or before the date ordered by the Court, in this instance, 15 September 2017.

39    I am unable to see, in those circumstances, why the orders of 7 September 2017, or their operation, have created injustice to Charif. No doubt the consequence of his wilful and deliberate flouting of the Court’s orders is harsh on him in this litigation, for he has presently lost his defence to the current statement of claim. But he lost that defence because he did not intend to, and did not, comply with the order to verify his answers until it suited him on his subsequent return to Australia. Nothing prevented him from putting himself into the position to verify his answers with, if need be, his own amendments to the draft he then had in New York during 14 or early on 15 September 2017 New York time, or seeking to do so, after receiving the final version, later during the day on 15 September 2017 after, perhaps, the time had passed in Sydney and then returning the verified answers promptly.

19    Counsel was unable to explain how it was not open to the primary judge, on the totality of the evidence before his Honour, including the sparse and limited evidence from Mr Charif Kazal himself, to conclude that there was no intention to verify the answers while overseas, but rather, as had happened before, initially providing them as an unverified draft and verifying them only upon return to Australia. As the passage quoted from House v The King above at [12] makes clear, it is not enough that an appeal court might reach a different conclusion. In my opinion, the inference his Honour drew was fairly available to him. Indeed, even though it was not the only conclusion open, it was a reasonably compelling inference to draw on the available evidence. No arguable case for error has been demonstrated. That aspect of the error sought to be agitated on appeal therefore has no serious prospect of success. This reason for granting leave to appeal is not made out.

Third, fourth and fifth asserted errors as to weight or emphasis given to evidence

20    In terms, the third, fourth and fifth asserted errors refer to the weight or emphasis that the primary judge gave to the facts that were established on the evidence before his Honour along with inferences his Honour drew. This language points to the difficulty in any of these arguments succeeding. As with the second asserted error, it has not been shown how it was that the conclusions his Honour reached were not open to him. The asserted errors do not rise above discontent with aspects of the reasons his Honour gave for the conclusion reached. No arguable case for establishing error has been demonstrated. Those aspects of the errors sought to be agitated on appeal therefore have no serious prospect of success. These reasons for granting leave to appeal are not made out.

Conclusion

21    None of the asserted errors sought to be agitated on appeal have been shown to be viable. The proposed appeal is doomed to fail. The application for leave to appeal must therefore be refused with costs.

Associate:

Dated:    30 April 2018