Federal Court of Australia

Thunder Studios Inc (California) v Kazal (No 10) [2020] FCA 1636

ORDERS

THE COURT ORDERS THAT:

1.    Paragraph 1(a)(i), (b) and (c) of the respondents’ particulars relied on in mitigation dated 22 October 2020 be struck out.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

Introduction

1    Today is the fourth day of the trial. Yesterday, during the course of the cross-examination of Rodric David (the second applicant) senior counsel for Charif and Adam Kazal (the respondents) put matters to him that provoked objection by senior counsel for the applicants that these questions went outside any scope afforded to a defendant or respondent in a defamation action in cross-examining a plaintiff or applicant where there was no defence to which such cross-examination could relate.

2    Here, the matters complained of were first published in June 2013. Thunder Studios Inc (California) and Mr David claim damages for defamation and injurious falsehood by reason of the publication of defamatory imputations conveyed in the two matters complained of, being webpages, and also for contraventions of s 18 of the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth) by the publication of tweets directing people to the website on which the first of the two matters complained of appeared.

3    Relevantly, the proposed particulars of mitigation seek to rely on Mr David allegedly having directly provoked the publication of the first two matters complained of in June 2013. Those matters complained of remained on the internet for several years thereafter. The asserted provocation was that Mr David allegedly:

    provided, or had been a source of, information for articles published in The Sydney Morning Herald on 1 September 2010 and 16 March 2013;

    made a complaint to the Independent Commission Against Corruption of the State of New South Wales (ICAC) that led to a public hearing, and ICAC’s publication of a report in 2011 that made adverse findings about, among others, Charif Kazal; and

    engaged in conduct with Charif Kazal and his brother, Tarek (or Tony) Kazal, that gave rise to proceedings in the Grand Court of the Cayman Islands culminating in its decision of 23 November 2011. That decision included a finding that Mr David had been in breach of his fiduciary duty as a director of a company by participating in its board making an allotment of shares which that Court set aside.

4    The defamatory imputations relevant to the alleged provocation include that Mr David paid the journalist, Linton Besser, who wrote both of The Sydney Morning Herald articles, to smear the Kazal family in an attempt to cover up his own criminal theft, or to lie about the Kazal family and their business dealings, or to smear the Kazal family in an attempt to cover up his own corporate fraud and theft. Mr David has given evidence that all of the alleged imputations are false.

5    The respondents today sought to rely on two particulars of matters in mitigation of damages. However, neither respondent has a defence. Charif Kazal does not have a defence because it was struck out in September 2017 by operation of a self-executing order on his failure, for the third time, to answer interrogatories in accordance with his obligations to do so. I subsequently refused his application to re-instate his defence: Thunder Studios Inc (California) v Kazal (No 5) [2017] FCA 1572 (from which Bromwich J refused leave to appeal in Kazal v Thunder Studios Inc (California) [2018] FCA 593). Adam Kazal does not have a defence because he never filed one. However, about three years after the proceeding commenced, he sought to repair that position, while in prison for contempt of court in this proceeding, and I refused him leave to do so for reasons that I then gave: Thunder Studios Inc (California) v Kazal (No 3) [2017] FCA 1170.

6    Yesterday, I directed the respondents to provide a document by this morning in order to identify the matters upon which they proposed to rely in mitigation on the basis of their invocation of what have become known as the Burstein principles. That expression derives from Burstein v Time Newspapers Ltd [2001] 1 WLR 579, and in particular at 590–591 [25]–[26].

Principles

7    In Burstein [2001] 1 WLR 579, May LJ (with whom Aldous LJ agreed) expressed a principle or formulation, which has not yet attracted universal agreement, that in assessing damages for defamation a court can receive evidence to the effect that the claimant’s conduct has directly provoked the publication of which he complains: cf Australian Broadcasting Corporation v Chau Chak Wing (2019) 271 FCR 632 at 658–659 [83]–[84] per Besanko, Bromwich and Wheelahan JJ, see too at 662–665 [93]–[97]. His Lordship said that normally, and depending on the facts, evidence that was part of the context in which the publication complained of was made should be admitted whether or not it would be likely to reduce the claimant’s award of damages. He said that it could be supposed that a claimant who brought a defamatory publication upon himself or herself would normally receive a lower award of damages than one who had been defamed without provocation. He based that reasoning on what Lord Hailsham of St Marylebone LC had said in Broome v Cassell Co Ltd [1972] AC 1027 at 1071 in relation to the admissibility of evidence of direct provocation. May LJ said (Burstein [2001] 1 WLR at 590 [26]):

… If it were necessary, as I think it is not, to confine the question in the present case to provocation by the claimant or conduct which is causally connected to the publication of the libel, I am inclined to think that the ambit of this class of admissible conduct should be confined to exceptional cases in which provocative conduct of the claimant would be admissible even though it did not directly or exclusively provoke the defendant.

    (emphasis added)

8    Later in his reasons, May LJ said ([2001] 1 WLR at 597–598 [40]–[41]):

The questions which the judge had to consider in the present case were essentially procedural case management questions. Although questions relating to the admissibility of evidence may raise issues properly characterised as issues of law, not only is the admissibility of evidence essentially procedural, but the authorities to which I have referred show that the admissibility or otherwise of evidence of reputation in reduction of libel damages is heavily affected, if not determined, by questions of procedural fairness and of case management. It will, generally speaking, normally be both unfair and irrelevant if a claimant complaining of a specific defamatory publication is subjected to a roving inquiry into aspects of his or her life unconnected with the subject matter of the defamatory publication. It is also in accordance with the overriding objective that evidence should be properly confined, both in its subject matter and its duration, to that which is directly relevant to the subject matter of the publication. Thus under the Civil Procedure Rules, the court now has ample power to deal justly with the problems which, in the main, gave rise to the first and third limbs of the decision in Scott v Sampson 8 QBD 491.

Considering the decision as to admissibility which the judge had to make in the present case in the first instance as a matter of case management and of what is just, I consider that some parts of the particulars on which the defendants wanted to rely should have been admitted. There was a background context to the defamatory publication. To keep that away from the jury was, I think, to put them in blinkers. To determine the relevant background context and to confine it properly, it is necessary to start with the defamatory publication itself.

(emphasis added)

9    May LJ also said ([2001] 1 WLR at 600 [47]):

In my view, these authorities show that it is not permissible to advance an unsustainable defence of justification and thereby, under the guise of particulars of justification, seek to rely on particulars which Scott v Sampson 8 QBD 491  and Speidel v Plato Films Ltd [1961] AC 1090 would not permit. That, however, does not prevent a defendant from frankly accepting that there is no proper plea of justification, but seeking to rely in reduction of damages on particulars which Scott v Sampson and Speidel v Plato Films Ltd do not exclude. If this were not so, there is a danger that the jury would be required to assess damages in blinkers, in ignorance of background context directly relevant to the damage which the claimant claims has been caused by the defamatory publication. This is consistent with the sense of what Lord Denning said in Speidel v Plato Films Ltd, where his conclusion was that it was permissible to adduce the evidence in question. Thus, in my view, a defendant is not prevented from taking the sensible course of accepting that the publication means what it says and that it is not on the facts justified, and yet putting in evidence directly relevant facts which in other circumstances might have been ingredients of a defence of justification. It would, I think, be illogical and unfair if this were not so. Evidence in support of a plea of justification which fails is admissible in reduction of damages. But the very same evidence would not be admissible to a sensible defendant who acknowledges that it will not support a plea of justification. What is not permissible is to plead a defence of partial justification which in truth is no defence at all.

(emphasis added)

10    Sir Christopher Slade, in agreeing with May LJ’s reasons said (at [2001] 1 WLR at 602 [57]): “[j]ustice obviously requires the admissibility of evidence as to actions by a plaintiff which have directly provoked the libel in question”.

11    Subsequently, in Warren v Random House Group [2009] QB 600 (at 646–647 [78]–[79]), Sir Anthony Clarke MR, May and Wilson LJJ said:

The decision of this court in Burstein v Times Newspapers Ltd  [2001] 1 WLR 579, cited above, established two important interlocking propositions. (a) In relation to the court’s assessment of damages for libel it is open to a defendant to seek to rely upon such facts as fall within the “directly relevant background context” to the defamatory publication. See in particular the judgment of May LJ, at para 42. (b) It is illogical and undesirable that a defendant can seek to rely upon such facts in relation to such assessment only if he has presented them as part of a substantive defence to liability, in particular within a plea of justification of the publication. He can rely upon them as freestanding matters pleaded as relevant only to the assessment of damages: see in particular the judgment of May LJ, at para 47.

… But, although we are clear that the “directly relevant background context” is the best encapsulation within a single phrase of the criterion for admissibility, we agree with the observations of Moses LJ in Turner’s  case [[2006] 1 WLR 3469], at paras 87–89, to the effect that, taken on its own, it would give insufficient guidance to judges called upon to apply it. There is no substitute for examination in each case of whether the material qualifies as background context directly relevant to the assessment of the damage sustained by the claimant as a result of the publication, in particular the damage to his reputation in the sector of his life to which it relates and the injury to his feelings. Indeed, as Keene LJ pointed out in Turner’s case, at para 60, the claimant’s reputation should largely have been repaired by publication of the correction and apology which attends acceptance of an offer of amends, with the result that injury to feelings tends to play an especially prominent part in determination of compensation under the Act. Keene LJ also called for caution in the application of the principle. Then he stated, at para 56:

“If evidence is to qualify under the principle spelt out in Burstein’s case, it has to be evidence which is so clearly relevant to the subject matter of the libel or to the claimant’s reputation or sensitivity in that part of his life that there would be a real risk of the [court’s] assessing damages on a false basis if [it was] kept in ignorance of the facts to which the evidence relates.”

(citation and emphasis added)

Consideration

12    During the course of giving evidence-in-chief, Mr David said that when he first saw the matters complained of in June 2013 he felt “a mixture of anger and despondency. There had been a period of time where I thought possibly they [the respondents and their brothers] were getting on with their own lives, just as I was, and clearly their vendetta marched on.”

13    The respondents wish to challenge that evidence in relation to, first, its credibility and, secondly, its connection to the damages which the applicants seek.

14    At the moment, I am prepared to accept that there may be a sufficient connection between the publication of the 16 March 2013 article and the matter complained of to warrant its consideration, first, as part of the context in which the assessment of damages should be arrived at and, secondly, as potentially going to credit.

15    However, I am not persuaded that the particulars relating to any prior conduct of Mr David in connection with the 2010 article, his relationship, if any, with the ICAC inquiry or his conduct giving rise to the proceedings in the Cayman Islands is relevant to the assessment of damages for defamation, injurious falsehood or misleading and deceptive conduct, if the relevant imputations or representations are found to have been conveyed or made. Those particulars are outside the principle in Burstein [2001] 1 WLR 579, as explained in Warren [2009] QB at 646–647 [78]–[79]. The judgment of the Grand Court in Re Emergent Capital Limited [2011] 2 CILR 329 is in evidence. That may or may not lead to cross-examination giving rise to questions of admissibility in the course of the hearing which I do not consider I can rule on in advance.

16    One of the particular difficulties with what has happened is that at no prior point did the respondents, and in particular Charif Kazal when he had a defence on the record, seek to rely on the material in the particulars now advanced as part of their case in mitigation of damages. Charif Kazal’s struck out defence relied on his having published, under qualified privilege, a defence to an attack on him and his family by Mr Besser and The Sydney Morning Herald by reason of which, he then claimed, the matters complained of were a response to that provocation. Notably, his defence of qualified privilege did not allege that the occasion of qualified privilege arose due to any direct or indirect connection with Mr David and the publication of, or his being the source for, the articles. Rather, that defence alleged that those two articles, and a swathe of others, constituted attacks on both the respondents and their broader family which created an occasion of qualified privilege because the matters complained of were replying to those attacks by the newspaper and the journalist.

Conclusion

17    For those reasons, I will not allow particulars 1(a)(i), (b) and (c) to be relied on in mitigation of damages and I strike out the whole of paragraph 1 of those particulars. I will leave to when it arises the issue of admissibility of questions relating to the findings of the Grand Court.

Associate:

Dated:    11 November 2020