Federal Court of Australia

Roberts-Smith v Fairfax Media Publications Pty Limited (No 42) [2023] FCA 750

ORDERS

THE COURT ORDERS THAT:

1.    The parties be heard as to the appropriate order in light of these reasons.

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

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    This is an Interlocutory application brought by Seven Network (Operations) Limited (SNOL), Australian Capital Equity Pty Ltd (ACE) and Herbert Smith Freehills seeking orders under r 24.15 of the Federal Court Rules 2011 (Cth) that subpoenas to produce documents issued to each of those entities be set aside. Rule 24.15(1) provides that the Court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in relation to it. In the case of each applicant for relief under r 24.15, the submission made is that the subpoena does not have a legitimate forensic purpose in that the documents referred to in the subpoena could not affect the determination of the application to which the documents are said to relate. There is a fourth subpoena issued by the respondents and addressed to Addisons, a legal firm. A partner of the firm, Ms Justine Munsie, appeared in response to the subpoena and made an oral application that the subpoena be set aside. She relied on the submissions made by SNOL, ACE and Herbert Smith Freehills.

2    On 1 June 2023, I delivered judgment in three proceedings for damages for defamation brought by Mr Ben Roberts-Smith VC MG against various media organisations and journalists (Roberts-Smith v Fairfax Media Publications Pty Limited (No 41) [2023] FCA 555). The three proceedings were heard together and, in the result, I made an order in each proceeding that the proceeding be dismissed. The respondents made an application in each proceeding that the applicant pay their costs assessed on an indemnity basis. The applicant accepts that he should pay the respondents’ costs on an indemnity basis from 17 March 2020. There is a dispute between the applicant and the respondents about whether he should do so in relation to the period from the date upon which the proceedings were commenced on 15 August 2018 to 17 March 2020. That dispute has been set down for argument in early September 2023, together with the costs of certain interlocutory applications where the resolution of the issue was referred to me for determination as the trial judge.

3    The respondents also seek costs orders against SNOL and ACE. The orders which they seek against those entities are as follows:

3.    An order that Australian Capital Equity Pty Limited (ACE) pay the Respondents’ costs of the proceedings, assessed on the indemnity basis.

4.    Alternatively to order 3, an order that ACE pay the Respondents’ costs of the proceedings, with such costs to be assessed on the indemnity basis from 11am on either 13 June 2019, 18 March 2020, 30 November 2020, or such other date as the Court determines is appropriate.

5.    Alternatively to orders 3 and 4, orders that:

(a)    Seven Network (Operations) Limited (SNOL) pay the Respondents’ costs of the proceedings up to and including 23 June 2020, assessed on the indemnity basis;

(b)    ACE pay the Respondents’ costs of the proceedings from 24 June 2020, assessed on the indemnity basis.

6.    Alternatively to orders 3 to 5, orders that:

(a)    SNOL pay the Respondents’ costs of the proceedings up to and including 23 June 2020;

(b)    ACE pay the Respondents’ costs of the proceedings from 24 June 2020,

with such costs to be assessed on the indemnity basis from 11am on either 13 June 2019, 18 March 2020, 30 November 2020, or such other date as the Court determines is appropriate.

4    The respondents’ application in relation to costs is supported by an affidavit of Mr Peter Llewellyn Bartlett sworn on 21 June 2023. Mr Bartlett is a solicitor and a partner of the firm representing the respondents.

5    The significance of the dates, 13 June 2019, 18 March 2020 and 30 November 2020, is that on or about each of those dates, the respondents made an offer to the applicant to resolve the proceedings. The significance of the dates, 23 June 2020 and 24 June 2020, is that prior to 24 June 2020, SNOL was paying the applicant’s legal costs in relation to the defamation proceedings and in relation to the IGADF Inquiry into war conduct under a loan agreement between the applicant and SNOL. From 24 June 2020, ACE was paying the said legal costs under a loan agreement between the applicant and ACE and, as part of that agreement, ACE had paid out the applicant’s existing debt to SNOL.

6    The Court has power to make an award of costs against a third party (Federal Court of Australia Act 1976 (Cth) s 43). This is not the occasion to discuss the relevant principles at length. It is sufficient to refer to the following authorities.

7    In Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178, Mason CJ and Deane J (with whom Gaudron J agreed) said the following (at 192–193):

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.

8    In FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 (FPM Constructions v City of Blue Mountains), Basten JA (with whom Beazley JA agreed) identified five matters of which some, if not the majority, have been satisfied in those cases where costs orders have been made against third parties. Those five matters are as follows (at [210]):

…

(a)    the unsuccessful party to the proceedings was the moving party and not the defendant;

(b)    the source of funds for the litigation was the non-party or its principal;

(c)    the conduct of the litigation was unreasonable or improper;

(d)    the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e)    the unsuccessful party was insolvent or could otherwise be described as a person of straw.

9    In HRX Pty Ltd v Scott [2013] NSWSC 451, Bergin CJ in Eq referred to the guiding principle as to whether an order would be in the interests of justice with the Court exercising its full power judicially. Her Honour went on to say (at [56]):

Factors for consideration in determining whether an order should be made under s 98 of the Act include: that the non-party played an active part in the conduct of litigation; that the non-party funded the litigation; that the non-party had been the cause of the proceedings in that such proceedings would not have been undertaken had it not been for the non-party’s intervention; that the unsuccessful party to the litigation is a “man of straw”; and that the non-party, or its principal, had a substantial interest (not necessarily financial) in the litigation: FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [210]–[214] per Basten JA; Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 at 2815-2816 per Lord Brown of Eaton-under-Heywood; May v Christodoulou (2011) 80 NSWLR 462 at 481 [111] per Sackville AJA.

10    As will become clear, the respondents’ case is that the documents sought by the subpoenas it has issued are, or may be, relevant to the part SNOL and/or ACE played in the conduct of these proceedings.

The Subpoenas

11    There are four subpoenas and they are directed to the following parties: SNOL; ACE; Herbert Smith Freehills; and Addisons. In the argument before me, Herbert Smith Freehills represented themselves and SNOL and ACE. Addisons represented themselves. The application to set aside the subpoenas was issued by Herbert Smith Freehills on behalf of SNOL, ACE and themselves. As I have said, a partner of Addisons appeared in response to the subpoena and made an oral application to set aside the subpoena against that firm.

12    The subpoena addressed to SNOL seeks the following documents or things:

1.    All invoices issued to Seven Network (Operations) Limited (SNOL) by Addisons and/or Herbert Smith Freehills containing a record related to:

(a)    attendance at Court by a lawyer to observe the hearing in Ben Roberts-Smith v Fairfax Media Publications Pty Limited & Ors (and related proceedings) (Proceedings), including attendance via the online live stream, on behalf of SNOL;

(b)    correspondence with any lawyer from Addisons and/or Herbert Smith Freehills retained on behalf of SNOL in relation to the Proceedings and/or advice given to SNOL in relation to the Proceedings.

2.    All documents comprising correspondence with any lawyer from Addisons and/or Herbert Smith Freehills in relation to the Proceedings and records of any advice given to SNOL in relation to the Proceedings, excluding the content of such correspondence and/or advice.

The subpoena addressed to ACE is in identical terms, save and except that it is addressed to ACE.

13    The respective subpoenas issued to Herbert Smith Freehills and Addisons are in materially identical terms. The subpoena to Herbert Smith Freehills seeks the following documents or things:

1.    All documents comprising a disclosure of costs and/or costs agreement issued to Seven Network (Operations) Limited (SNOL) and/or Australian Capital Equity Pty Limited (ACE) relating to work undertaken in relation to the Ben Roberts-Smith v Fairfax Media Publications Pty Limited & Ors (and related proceedings) (Proceedings).

2.    All documents recording time entries of any fee earner related to attendance at Court to observe the hearing in the Proceedings, including attendance via the online live stream, on behalf of SNOL and/or ACE.

3.    All documents recording time entries of any fee earner related to correspondence with any person on behalf of SNOL and/or ACE and/or advice given to SNOL and/or ACE in relation to the Proceedings.

4.    All invoices issued to SNOL and/or ACE containing a record related to the work referred to in paragraphs 2 and/or 3 above.

5.    All documents comprising correspondence with any person on behalf of SNOL and/or ACE and/or records of any advice given to SNOL and/or ACE in relation to the Proceedings, excluding the content of such correspondence and/or advice.

The Evidence on the Applications to Set Aside the Subpoenas

The agreement between the applicant and SNOL

14    Each of the three proceedings were commenced on 15 August 2018.

15    The terms of the agreement between the applicant and SNOL are said to be embodied in a letter dated 6 August 2019. That letter is said to record the terms on which SNOL has been funding, and will continue to fund, the applicant’s legal costs associated with the current defamation proceedings against Fairfax and the proceedings relating to the IGADF Inquiry into war conduct, including solicitors’ and counsel’s fees and disbursements. The letter records the following:

… We recognize that part of you being a target by our opposition (Nine/ Fairfax) in the stories the subject of the actions, arises out of your employment by Seven.

Nevertheless because of what we understand to be the strong case to defend your reputation and the unfairness aspects, and that fact that the company wishes for you to use experienced solicitors and Senior Counsel – who may be more expensive than you would ordinarily engage as an individual – we are prepared to make available funding of legal costs and disbursements on the terms set out herein.

16    The terms of the loan between the applicant and SNOL are then set out and the letter records that the applicant should be aware that the Chairman will guarantee repayment. Under the terms of the loan, it must be repaid 12 months after the cessation of the applicant’s employment by SNOL for any reason, or 12 months after all legal proceedings, including appeals (if any), have concluded. The terms provide that the applicant is required to take whatever actions SNOL reasonably requires to appeal or to recover costs.

The agreement between the applicant and ACE

17    The terms of the agreement between the applicant and ACE are set out in a letter dated 24 June 2020 and signed by Mr Ryan Stokes who is said to be the Chief Executive Officer of the company. The applicant appears to have signed the letter in order to indicate his acceptance on 25 June 2020. The purpose of the loan as set out in the letter is said to be as follows:

18    ACE agrees to loan the applicant sufficient funds to enable him to repay his loan from SNOL. Clauses 6 and 7 of the letter are in the following terms:

The respondents placed particular emphasis on clause 7 of the letter and the reference to the continued oversight and management of the defamation proceedings and inquiry by SNOL’s legal team.

19    The application to set aside the subpoenas is supported by an affidavit of Ms Melissa Jane Gladstone affirmed on 28 June 2023. Ms Gladstone is a partner of Herbert Smith Freehills.

20    In her affidavit, Ms Gladstone outlines the work performed by each of Herbert Smith Freehills and Addisons for SNOL and ACE.

21    As far as the work performed by Herbert Smith Freehills is concerned, that firm has advised ACE with respect to its potential liability for an order for third party costs as raised in correspondence sent by the respondents’ solicitors to ACE and Herbert Smith Freehills on 14 May 2021 and 20 May 2021 respectively. As I understand it, there is no dispute between the parties about that category of advice. The respondents are not seeking any documents relating to that category of advice. The other area which involved Herbert Smith Freehills providing advice to ACE or SNOL concerned subpoenas issued on 21 April 2022 and 22 April 2022 to ACE, SNOL, Mr Kerry Stokes and Mr Bruce McWilliam. As I understand it, there is no dispute between the parties concerning this category of advice. The respondents are not seeking any documents relating to that category of advice.

22    Ms Gladstone deposes that she has spoken to Ms Justine Munsie who is a partner at Addisons. She states in her affidavit that she was told by Ms Munsie that Addisons was retained to advise and act for Persons 5, 11 and 35 in relation to the IGADF Inquiry and then their participation in the proceedings. She was further advised by Ms Munsie that the work performed under this retainer was billed to Seven Group entities, and later ACE, but it was not performed on behalf of, or for the benefit of, ACE or SNOL. She states that Ms Munsie is a partner at Addisons responsible for the work Addisons performed in relation to the IGADF Inquiry and these proceedings.

23    Ms Gladstone received further information from Ms Munsie. Ms Munsie told her that Addisons performs work for SNOL and related Seven Group entities as principal defamation and commercial copyright lawyers, as well as ACMA and privacy matters, for SNOL’s benefit. Ms Gladstone deposes as follows:

17    … In relation to these Proceedings, the scope of the work performed, and the extent of the communications between Addisons and ACE or SNOL, comprised:

(a)    attending court during the trial of the Proceedings;

(b)    advice to SNOL about issues concerning news broadcasting relating to these Proceedings; and

(c)    ad hoc discussions with SNOL or ACE regarding the Proceedings, and matters relevant to SNOL’s reputation and obligations as an employer.

24    In the course of oral submissions before me, counsel for the respondents indicated that the respondents were not seeking documents or entries in documents relating to the advice identified in para 17(b), that is to say, advice about issues concerning news broadcasting relating to these proceedings.

25    The balance of Ms Gladstone’s affidavit deals with the time SNOL, ACE and Herbert Smith Freehills will require to comply with the subpoenas.

26    In my opinion, it is appropriate to confine the subpoenas as suggested by SNOL, ACE and Herbert Smith Freehills as follows (using the subpoena to SNOL as the example):

(1)    In respect of paras 1 and 2, documents relating to compliance with subpoenas previously issued in the proceedings be excluded from production;

(2)    In respect of paras 1 and 2, documents relating to responding to correspondence (set out below) about foreshadowed third party costs applications, applications be excluded from production:

(a)    the letter from MinterEllison to ACE dated 14 May 2021;

(b)    the letter from Herbert Smith Freehills to MinterEllison dated 18 May 2021; and

(c)    the letter from MinterEllison to Herbert Smith Freehills dated 20 May 2021.

(3)    In respect of paras 1 and 2, documents relating to advice to SNOL about issues concerning news broadcasting relating to these proceedings be excluded from production.

Analysis

27    The principles relating to the setting aside of a Subpoena to produce documents are well-established. A subpoena will be set aside if it is oppressive or an abuse of process. The absence of a legitimate forensic purpose or a conclusion that the issuing party is fishing for a case rather than evidence in support of a case, will lead to the setting aside of a subpoena. An issuing party need not establish that the documents being sought will definitely advance his or her case and it is sufficient if the documents could possibly throw light on the issues or it appears to be “on the cards” that they will do so. In Trade Practices Commission v Arnotts Ltd (No 2) [1989] FCA 340; (1989) 88 ALR 90, Beaumont J said (at 103):

Without restricting this inquiry, it is convenient to address the present application in the first instance by reference to two questions:

(1) Does the material sought have an apparent relevance to the issues in the principal proceedings, ie, is adjectival, as distinct from substantive, relevance established? Does the subpoena have a legitimate forensic purpose to this extent? This involves a consideration of the matter from the standpoint of Arnotts.

(2) Is the subpoena seriously and unfairly burdensome or prejudicial? This is to look at the matter from the point of view of Mattingly.

…

The test of adjectival relevance is satisfied if the material has apparent relevance. In my opinion, the documentation called for here could possibly throw light on the issues in the main case. In my opinion, adjectival relevance is established.

(See also Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [23]–[24] per Brereton J; Cairns BC, Australian Civil Procedure (12th ed, Lawbook Co, 2020) at 708–709; Zuckerman AAS, Wilkins S, Adamopoulos J, Higgins A, Hooper S and Vial A, Zuckerman on Australian Civil Procedure (LexisNexis Butterworths Australia, 2018) at [15.161]–[15.172].)

28    Paragraph 1 of the subpoena addressed to SNOL is limited to invoices which record certain matters, being attendances at Court and correspondence or advice. The paragraph does not include the correspondence or advice, but just the invoices containing narrations recording the fact of the correspondence or advice. The essence of SNOL’s submissions in support of the application to set aside the subpoena is that the fact that its own lawyers attended to observe the proceedings could not be a factor which supports the making of a third party costs order. Nor could it be relevant that SNOL corresponded with and received advice from its own lawyers about the proceedings. SNOL submitted that neither of those matters rendered it the “effective litigant” or the “real party” to the suit. It could not be the basis for a finding that the proceedings were pursued in the interests of SNOL, rather than in the interests of the applicant. SNOL submitted that the fact that its own lawyers observed the proceedings and communicated with their client about the proceedings is not evidence that SNOL controlled, directed or took an active part in the conduct of the proceedings on the applicant’s behalf. That circumstance would not establish any of the five criteria identified by Basten JA in FPM Constructions v City of Blue Mountains and set out above.

29    SNOL submitted that there is nothing surprising about the fact that it would wish to follow the conduct of the proceedings as they involved a senior executive of the Seven Network Group and SNOL had provided a loan to the applicant for the legal costs of the IGADF Inquiry and the proceedings until ACE provided a loan to the applicant in June 2020. Furthermore, SNOL is a news organisation reporting on the proceedings which were high profile and very often the subject of news broadcasts.

30    SNOL submitted that the fact that it received correspondence or advice from its lawyers “could not be relevant to whether a third party costs order should be made”. The Court could not safely draw any inference as to the content of any communications or advice that SNOL may have received from its own lawyers. SNOL referred to the suggestion in the letter from the respondents’ solicitors dated 19 June 2023 to the effect that any competent lawyer observing the proceedings would, or should, have advised SNOL that the applicant’s prospects were so impaired that it was unreasonable for SNOL and/or ACE to continue to lend money to the applicant to fund his legal costs. SNOL submitted that the Court could not infer simply from the fact that SNOL’s lawyers observed the proceedings, that those lawyers did form, or should have formed, that view and did give, or should have given, that advice not least because neither SNOL nor its lawyers had access to documents subject to suppression orders, evidence given in closed Court or closed Court judgments. SNOL submitted that in light of the fact that the content of the communication or advice will not be disclosed, the highest the evidence could rise would be that SNOL was monitoring the proceedings.

31    SNOL made a particular submission in relation to para 2 of the subpoena addressed to it. It submitted that if a document comprising communications between SNOL and its lawyers was created for the dominant purpose of providing legal advice to SNOL, then the whole of the document was privileged. It submitted that it is not open to a party to subpoena wholly privileged documents by requiring the subpoenaed party to assume the burden of masking all of the substantive content of the document.

32    ACE submitted that the subpoena addressed to it lacks a legitimate forensic purpose for the same reasons the subpoena addressed to SNOL lacks a legitimate forensic purpose.

33    Counsel for the respondents made the observation in the course of submissions that with the limitations referred to above (at [26]), the evidence suggests that in relation to Herbert Smith Freehills, there will be a nil return in relation to that subpoena.

34    The parties to whom the subpoenas are addressed submitted that even if the above arguments are not successful and the subpoenas are not set aside, nevertheless they should be limited in terms of time.

35    First, they submitted that the trial at first instance concluded on 27 July 2022 and that documents created after this date could not rationally inform a consideration of whether it is appropriate to make a third party costs order for the respondents’ costs of the proceedings. ACE submitted that the respondents have not explained how it would be relevant to their third party costs application that, assuming it to be the case, ACE had engaged Herbert Smith Freehills to review the judgment and advise on the prospects of appeal. It submitted that it may seek such advice for the purposes of considering any request made by the applicant for the funding of any appeal he may seek to bring. It submitted that if it was to obtain such advice from its own lawyers, that fact could not support a third party costs order in respect of the first instance proceedings.

36    Secondly, SNOL and ACE submitted that the subpoenas should be limited in time to reflect the periods in relation to which each of those companies was providing funds to the applicant. The subpoena to SNOL should be limited to the period up to and including 23 June 2020 and the subpoena to ACE should be limited to the period from 24 June 2020.

37    For their part, the respondents submitted that the subpoenas they had issued had a legitimate forensic purpose. They submitted that this was not the right stage in the determination of the application at which to argue about what inferences might be drawn from documents that have not yet been produced. The Court cannot be satisfied at this stage that there is no conceivable basis upon which the documents which are sought might be relevant to the exercise of the Court’s discretion. The respondents submitted that the inference that might be drawn about a third party’s involvement in a proceeding might be different if they were in attendance at Court on only one day, as compared with the inference that might be drawn if they were in attendance at Court on every day of the 110 days of the hearing.

38    The respondents also submitted that it is not possible to identify a hard separation between the period prior to 23 June 2020 and the period from 24 June 2020 onwards. In this respect, they referred to and relied upon clause 7 of the ACE letter dated 24 June 2020. That clause refers to not only oversight and management, but the continued oversight and management by SNOL’s legal team. That is said to be important for a successful outcome to the proceedings.

39    In my opinion, the subpoenas (including the subpoena addressed to Addisons) should be confined in the manner indicated in [26] above. So confined, they reveal a legitimate forensic purpose.

40    In my respectful opinion, the flaw in the argument for setting aside the subpoenas is that it sets the test of relevance at too high a level. The part played in the litigation by SNOL and ACE is undoubtedly relevant to the third party costs application, although it is but one factor. No doubt a direct instruction from one of those parties to the applicant about the conduct of the litigation might be the best evidence of direct and active involvement. Further, it is likely that the respondents will at the appropriate time place significant weight on clause 7 of the applicant’s agreement with ACE. Neither of those observations mean that other forms of involvement or degrees of involvement are not relevant, albeit, considered alone they may not carry the day for the respondents. The fact is that where documents may possibly throw light on the issues, then they are properly the subject of a subpoena to produce them.

41    With respect to the argument that legal professional privilege would attach to the whole of a document falling within para 2 in the case of the subpoena addressed to SNOL, that is a matter to be determined if and when a claim of privilege is made.

42    As to the suggested limitations with respect to time periods, I reject both suggested limitations. I accept the respondents’ submission that there is no clear line or separation between SNOL and ACE, particularly in light of clause 7 of the letter of agreement between the applicant and ACE and the reference to SNOL’s legal team. As to the other suggested time limitation (i.e., the last day of the hearing), a number of things might be said about that, including that the proceedings at first instance are not “concluded” until judgment is handed down or until all final orders are made. In any event, I am satisfied that documents sought after 27 July 2022 may possibly throw light on the issues I will need to determine.

Conclusion

43    Subject to the matters referred to in [26] above, I reject the grounds advanced in support of an order setting aside the subpoenas. I will hear the parties as to the appropriate order in light of these reasons.

Associate:    

Dated:    5 July 2023

SCHEDULE OF PARTIES