FEDERAL COURT OF AUSTRALIA

Fisher v Houston [2013] FCA 1026

THE COURT ORDERS THAT:

1.    The respondent pay the applicant’s costs of this proceeding incurred after 16 July 2012.

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

REASONS FOR JUDGMENT

1        The prospective applicant, Mr Steven Fisher, is the Managing Director of a company in the clothing industry. He has a mobile telephone but only provided the number to a limited group of persons. He was, therefore, surprised when, in March 2012, whilst attending a board meeting, he received a call on his mobile telephone from a journalist, the prospective respondent, Mr Cameron Houston. Mr Houston asked Mr Fisher if he wished to comment, on or off the record, about a legal proceeding in which a business associate of Mr Fisher’s was involved.

2        Mr Fisher had never provided his mobile telephone number to Mr Houston. Nor, so far as he was aware, had any of the persons in whom he had confided the number. He was, as a result, concerned that his privacy may have been breached by some third person who had, without his authority, given his number to Mr Houston. Such a breach may have involved a contravention of the Privacy Act 1988 (Cth) (“the Act”) if the third person was acting on behalf of an organisation or an agency as defined in the Act. No contravention would have occurred if the third person was an individual acting in his or her personal capacity.

3        Mr Fisher was concerned to establish whether or not he had a cause of action against a third party for a contravention of the Act. To this end he instructed his solicitors to write to Mr Houston asking that he identify the name of the person who supplied the number to him. Those letters were sent on 26 March 2012 and 5 April 2012. Mr Houston did not respond. Mr Fisher then filed an originating application seeking orders in the nature of preliminary discovery pursuant to Rules 7.22 and 7.23 of the Federal Court Rules 2011 (Cth) (“the Rules”). The orders sought would have required Mr Houston to attend for oral examination and/or produce documents which Mr Fisher expected would facilitate the identification of the third party who had supplied Mr Houston with his telephone number.

4        Mr Fisher’s application was filed on 11 April 2012. Shortly afterwards consent orders were made. They provided for the filing of further affidavit material and written submissions. A hearing date was fixed for 1 October 2012.

5        Pursuant to these orders Mr Fisher filed and served written submissions on 9 July 2012. Those written submissions foreshadowed the commencement of a proceeding under the Act. These submissions made it clear that Mr Fisher accepted that he could only succeed in his proposed action if the person who had supplied his telephone number to Mr Houston was acting as a servant or agent of an organisation or other body covered by the Act. Mr Fisher implicitly conceded that he had no viable cause of action if the person concerned had acted in a personal capacity.

6        Mr Houston did not file an affidavit but written submissions were filed in which he said that he had declined to go into evidence because to do so may have led to the disclosure of the name of the person who had supplied him with the number. It was implicit in the submissions that Mr Houston was relying on the code of ethics to which he subscribed as a journalist.

7        On 5 September 2012 Mr Fisher swore a further affidavit in which he disclosed, for the first time in the proceeding, that he had provided the telephone number to 51 other persons. On 26 September 2012 Mr Houston swore an affidavit in which he deposed that he had not received the telephone number from any organisation or agency as defined in the Act. He further deposed that he had obtained the number from “an individual who provided the number to me in that individual’s personal capacity”. He declined to name the individual for ethical reasons.

8        Upon being made aware that the telephone number had been supplied by an individual rather than someone acting on behalf of an organisation or agency, Mr Fisher determined to discontinue his application. On 27 September 2012 a Notice of Discontinuance, signed by the legal representatives of each party was filed.

9        Despite the discontinuance of the proceeding both parties maintained an entitlement to a favourable costs order. Written submissions were filed in support of their respective claims.

THE SUBMISSIONS

10        Mr Fisher submitted that he acted reasonably when instituting, maintaining and discontinuing the proceeding. He contended that Mr Houston had the ability and responsibility to disclose the information sought and that his refusal to do so caused Mr Fisher to bring an application and expend significant legal resources unnecessarily.

11        Mr Fisher further submitted that, in the absence of a response from Mr Houston, and following reasonable inquiries, he had a strong basis to believe that the source of the telephone number was an agency or organisation. He submitted that he had no alternative but to file an application so as to determine who had interfered with his privacy.

12        Mr Fisher said that Mr Houston was never required to disclose the name of the person who provided him with the telephone number: he was simply required to state whether it was an individual acting in that capacity, or otherwise an institution or agency. For this reason, Mr Fisher contended that no ethical or professional prohibition prevented Mr Houston from disclosing the source of the telephone number as being an individual acting in a personal capacity.

13        Mr Fisher further submitted that Mr Houston strung the matter along by failing adequately to respond to submissions and file and serve documentation on time. Mr Fisher alleged that Mr Houston’s failure to disclose the information until the eleventh hour was a tactical decision given that no act, fact, matter or thing changed between March 2012 and September 2012 which would warrant a good faith change in attitude.

14        Mr Fisher argued that he acted reasonably by promptly discontinuing the application following receipt of Mr Houston’s affidavit, dated 26 September 2012, as it was not feasible to bring an action for breach of privacy against an individual acting in a personal capacity under the Act. Mr Fisher notified Mr Houston of this decision at the earliest opportunity.

15        Mr Houston contended that he was under no obligation to volunteer information relating to the identity or character of the person who provided Mr Fisher’s telephone number and that such an entitlement would only have accrued if Mr Fisher was successful in his application for preliminary discovery.

16        Mr Houston also maintained that he was subject to ethical and professional constraints which made it difficult for him to provide any information without the risk of inadvertently revealing the identity of the individual. Only following receipt of Mr Fisher’s second affidavit, in which he deposed that his telephone number had been confided in some 51 persons, was Mr Houston able to disclose that the source of the information was an individual acting in his or her personal capacity.

THE LEGAL PRINCIPLES

17        It is well established that in civil proceedings, the Court has the power to award costs against a party: see ss 37P and 43 of the Federal Court of Australia Act 1976 (Cth).

18        The power to award costs is a discretionary power to be exercised judicially: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [9]. Subject to that requirement it is an unfettered power. Rule 26.12(7) of the Rules provides that, subject to certain exceptions, a party who discontinues proceedings is liable to pay the costs of each other party. One of the exceptions is that an order of the Court might “provide otherwise”. This approach is consistent with s 43(2) of the Federal Court of Australia Act 1976 (Cth) which provides that:

“…

(2)    Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.”

19        Ordinarily, costs follow the event. A hearing is conducted on the merits of the case and it is the determination of the merits that dictates who should pay costs. In circumstances where proceedings are discontinued before hearing, the court should not determine costs by engaging in a hypothetical trial: see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622.

20        In Lai Qin, at 624-5, McHugh J identified two situations in which the Court may be able to make a costs order in favour of one party or against another in the absence of a hearing: (i) where the Court is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action, and (ii) in cases where the Court feels that, although the parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. Such cases were, as his Honour said, likely to be rare.

21        In cases such as the present a broader range of considerations will inform the Court’s exercise of discretion. In Primary Health Care Limited v Australian General Practice Network Limited [2012] FCA 174, Stone J set out considerations relevant in the exercise of the Court’s discretion when determining costs following the discontinuance of a proceeding. Her Honour stated at [7]:

“Considerations relevant to the exercise of the Court’s discretion generally, and in this case, are: whether the proceedings were reasonably commenced; whether, in all the circumstances, the parties’ conduct in maintaining and defending the proceedings was reasonable; and the nature of the applicants’ reasons for seeking to discontinue the proceedings.”

CONSIDERATION

22        Mr Fisher took prudent and reasonable steps to obtain the information which he sought before approaching the Court. Prior to filing his application Mr Fisher also made inquiries of his wife and longstanding colleagues who denied providing the number to Mr Houston or anyone who could have provided the number to Mr Houston.

23        He engaged his solicitor to write to Mr Houston, affording him two opportunities to respond. Both letters expressed Mr Fisher’s intention to issue proceedings seeking an order for preliminary discovery against Mr Houston if he failed to disclose the source of Mr Fisher’s telephone number. Mr Houston failed to respond to both letters and an application was filed.

24        It is widely accepted that, when an application for preliminary discovery is made, the respondent is entitled to remain passive until the applicant has made out its case: see Costin v Duroline Products Pty Limited [2013] FCA 501. In this case, Mr Houston’s failure to respond demonstrated his unwillingness to cooperate at the outset. At no time prior to commencement of, or early in, the proceedings did Mr Houston inform Mr Fisher that he was bound by ethical and professional standards which prevented him from disclosing the source of the telephone number or that he could make disclosure, consistently with those principles, if Mr Fisher satisfied him that a response could not indirectly lead to identification of the informant. Mr Houston adopted an unnecessarily obstinate stance in the face of a reasonable request by Mr Fisher.

25        For these reasons, I consider that proceedings were reasonably commenced.

26        Mr Houston’s uncooperative acts continued throughout the period during which the proceeding was pending. He elected not to file an affidavit in July 2012 as ordered by the Court. He did so, belatedly, on 26 September 2012, less than one week prior to the hearing, in response to Mr Fisher’s second affidavit. In his affidavit, Mr Houston deposed that Mr Fisher’s telephone number had been provided to him by an individual who was acting in his or her personal capacity.

27        Mr Houston received Mr Fisher’s written submissions on or shortly after 9 July 2012. Until that point he was entitled, having regard to the terms of the two solicitors’ letters to which he did not respond, to believe that what Mr Fisher wanted was the name of the individual who had made the disclosure. Thereafter, however, it was clear that Mr Fisher’s proposed action depended fundamentally on the capacity in which Mr Houston’s informant had acted. From this point on there was no reason why he could not have filed an affidavit which dealt with that issue in the terms contained in the affidavit which was filed on 26 September 2012.

28        I do not accept Mr Houston’s explanation that it was only following receipt of Mr Fisher’s second affidavit, in which Mr Fisher deposed that his telephone number had been confided to a large number of people, that it became possible for him (Mr Houston) to disclose that his informant had acted in a private capacity. Whilst it is understandable that Mr Houston would have wished to have avoided inadvertent disclosure of the identity of the person concerned, the person’s identity would not have been compromised by disclosure of the capacity in which he or she had acted. The same person may, for example, have acted in either capacity. To disclose the capacity would not serve to identify the individual. Had he provided this information the proceeding would, almost certainly, have then been discontinued and the additional costs of preparation for trial would not have been incurred.

29        Mr Fisher acted promptly by filing a Notice of Discontinuance, signed by both parties, as soon as he recognised that proceedings were no longer warranted.

CONCLUSION

30        In the circumstances I will order that Mr Houston pay Mr Fisher’s costs of the application incurred after 16 July 2012. I have fixed this date to take account of the need for Mr Houston to consider and take advice on his position after receipt of Mr Fisher’s written submissions and to prepare and file an affidavit.

Associate:

Dated:    11 October 2013