Federal Court of Australia

Al Muderis v Nine Network Australia Pty Limited (No 3) [2024] FCA 204

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s application to vary order 3 of the orders of Justice Bromwich made on 19 December 2023 be dismissed.

2.    The applicant pay the respondents’ costs of and incidental to this application.

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

REASONS FOR JUDGMENT

BROMWICH J

1    On 19 December 2023, I made an adverse ruling on an interlocutory application (IA) brought by the applicant, Dr Al Muderis, challenging the respondents’ journalist privilege claim pursuant to s 126K of the Evidence Act 1995 (Cth) and seeking an order that s 126K(1) not apply: Al Muderis v Nine Network Australia Pty Ltd [2023] FCA 1623. I ordered that Dr Al Muderis pay the respondents’ costs of and incidental to the IA. Dr Al Muderis objected to the costs order at the time it was pronounced and reasons were published. The respondents’ position has always been that the costs order in their favour was appropriate.

2    I granted Dr Al Muderis leave to apply to vary the costs order soon after he voiced, by his counsel, his objection to it. These are the reasons for the adjudication of his ensuing application to vary the costs order, and to order instead that the costs of the IA be costs in the cause. Whatever the outcome of this application, it will be a matter for costs assessment, in the event of a dispute, to determine what additional costs were incurred in response to the IA going beyond those already incurred for the principal proceeding.

3    Journalist privilege under s 126K(1) of the Evidence Act was claimed by the respondents in relation to the identities of sources of the fourth respondent, Ms Grieve, that would otherwise be required to be disclosed in accordance with an order for discovery made by the trial judge. At the interlocutory hearing, Dr Al Muderis argued that the s 126K(1) privilege was not available as the respondents had failed to prove that Ms Grieve had promised the relevant informants that she would keep their identities secret and, in the alternative, that the Court should make an order that the privilege not apply on public interest grounds pursuant to s 126K(2). Both arguments wholly failed. The broader background to the matter is described in [1]-[4] of my prior judgment, which I incorporate by reference here.

4    The opposing positions on the costs variation application were addressed by written submissions, with both sides being content for the dispute to be determined on the papers. As foreshadowed, Dr Al Muderis asks that it be varied to order costs in the cause. The respondents ask that the order remain unchanged. For the reasons that follow, I have decided not to vary the costs order made in favour of the respondents.

5    The award of costs is at the discretion of the Court: Federal Court of Australia Act 1976 (Cth) s 43(2). The discretion is not unconfined; rather, it must be exercised judicially, not arbitrarily or capriciously or on grounds unconnected with the litigation, having regard to relevant principles and the justice of the case in all the circumstances: Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Mukiza [2022] FCAFC 105 at [4] (Markovic, Thawley and Cheeseman JJ). Where no order is made as to costs following an interlocutory application or hearing, r 40.04 of the Federal Court Rules 2011 (Cth) provides that costs will follow the event, often referred to as the “default position” on costs: see Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd (No 2) [2017] FCA 385 at [5] (Gleeson J), citing James v Commonwealth Bank of Australia (No 2) [2015] FCA 599 at [20] (Katzmann J); cf DHP19 v Secretary of the Department of Health (No 2) [2019] FCA 1531 at [4] (Thawley J).

Dr Al Muderis’ submissions

6    Dr Al Muderis submits that the default position in relation to costs of interlocutory hearings and applications does not apply universally, pointing to the uncontroversial observation of Wigney J in Murdoch v Private Media Pty Ltd (No 2) [2022] FCA 1607 at [12] that the “just result” of an IA will not always be costs in the cause, and in some circumstances may depend on the outcome of the principal proceeding. He submits that this is such a case.

7    Dr Al Muderis submits that the IA was a necessary step in testing the respondents’ defence under s 29A of the Defamation Act 2005 (NSW) in the principal proceeding, and therefore the outcome of the IA is bound up with the ultimate outcome of that defence. He submits that the nature and integrity of Ms Grieve’s sources is significant in determining whether it was reasonable for the respondents to believe that the publication of the matter was in the public interest: Defamation Act s 29A(1) and (3)(e); see also Murdoch v Private Media Pty Ltd [2022] FCA 1275 at [68] (Wigney J). In summary, he submits that:

(a)    due to the assertion of the privilege in respect of the identity of the sources, their integrity and reliability cannot be tested – submissions of this kind were put before me at the interlocutory hearing;

(b)    on those bases, he will make submissions in the primary proceedings seeking that orders be made limiting or excluding evidence of what Ms Grieve was allegedly told by confidential sources under ss 136 and 135 respectively of the Evidence Act;

(c)    the bringing of the IA, and failure to succeed on that IA, is a step which will be considered as a relevant factor by the trial judge in determining whether to make such an order;

(d)    in the principal proceeding, he intends to submit that the s 29A defence should fail in part due to the successful assertion of journalist privilege over the identities of the confidential sources as the trial judge cannot be satisfied as to the reliability and integrity of them, referring to Duma v Fairfax Media Publications Pty Ltd (No 3) [2023] FCA 47, in which such orders were made by Katzmann J in a defamation proceeding, though where different sections of the Defamation Act were at issue;

(e)    he would not be properly in a position to make this submission if he had not taken all steps legally available to him to challenge the assertion of journalist privilege, again citing Duma.

8    Dr Al Muderis further submits that:

(a)    the uncertainty of the ultimate outcome of the principal proceeding, particularly the s 29A defence which may fail in part because of the assertion and maintenance of the journalist privilege, is a primary reason why the costs of the hearing should be costs in the cause;

(b)    the s 29A defence may fail because of the successful assertion of journalist privilege, such that this case can be distinguished from Whitebox in which an argument was made and rejected that the costs of a successful application challenging an assertion of privilege should properly be costs in the cause: see Whitebox at [8] and [14];

(c)    the respondents would always have needed to establish that Ms Grieve had promised not to reveal her sources’ identities in order to rely on the s 126K(1) privilege at trial, regardless of whether Dr Al Muderis brought the IA challenging that privilege claim, suggesting that it would be unjust for him to pay costs that would otherwise have been incurred in advancing the respondents’ privilege claim at trial;

(d)    the respondents will need to rely on the second affidavit of Ms Grieve at trial to uphold the privilege, an affidavit which I note was prepared in support of the respondents’ case in opposing the relief sought by the IA;

(e)    the conduct of the respondents “significantly increased” the costs associated with the IA as:

(i)    the application could have been heard as part of the substantive trial in periods during the first two weeks of the trial that were otherwise wasted due to the respondents overestimating the time they required for cross-examination of witnesses or because they were not ready to proceed with cross-examination;

(ii)    the respondents provided the lengthy second Grieve affidavit to him at 5:44 pm on 6 November 2023 (it was filed a short time before at 5.39 pm), the day before the IA was originally listed to be heard before the trial judge; and

(iii)    the respondents only suggested on the day the IA was originally listed to be heard that they objected to it being heard by the trial judge.

The respondents’ submissions

9    The respondents emphasise that Dr Al Muderis failed entirely in his IA, and submit that he fails to articulate a reason to depart from the default position on costs in this case. They argue that the possibility that their s 29A defence might fail does not displace the default position on costs in interlocutory applications, referring to Gleeson J’s rejection of a similar argument for costs in the cause in relation to a sought advanced ruling in Whitebox at [8], [14]. The respondents also dispute that they will need to rely on the second Grieve affidavit at the principal trial, instead contending that they will rely on my prior findings in determining the IA.

10    The respondents submit that any issue of increased costs caused by their conduct can be dealt with in taxation but, in any case, Dr Al Muderis’ submissions on this point are “meritless”, noting:

(a)    the time wasted during the first two weeks of the trial was due to a late decision by Dr Al Muderis to defer his oral evidence, which he originally was to have given as the first witness and for a period of 10 days – this submission is to the effect that this delay was the fault of Dr Al Muderis, not of the respondents, a submission that I accept given that this is precisely what occurred;

(b)    it was inevitable that the IA would need to be heard by a different judge due to the way Dr Al Muderis chose to advance it as, on his case, the IA required consideration of Ms Grieve’s credibility – I also accept this submission;

(c)    Dr Al Muderis only made clear that he intended to cross-examine Ms Grieve on credibility on the date the IA was originally listed to be heard before the trial judge, at which point the trial judge correctly decided that another judge should hear the IA – having read the transcript before her Honour upon being allocated this dispute, necessarily prior to hearing the IA, I also accept this submission; and

(d)    it is wrong to characterise the second Grieve affidavit as being filed late, when provision was made for further evidence in relation to the IA, an extension for filing further evidence had been granted by the trial judge, and, when earlier opposing an application to adjourn the s 126K hearing, Dr Al Muderis indicated that he would not be inconvenienced by receiving the further evidence on the date the second Grieve affidavit was in fact filed – I accept that it is incorrect for Dr Al Muderis to characterise the second Grieve affidavit as being late in any relevant way in all the circumstances.

Consideration

11    If Dr Al Muderis is not successful in the principal proceeding, variation of the costs order in the way he requests would likely have no effect as he would most likely be liable for all the respondents’ costs, including for the IA (subject to any offers of settlement that might have been made). However, if he is successful in the principal proceeding, what he now seeks would most likely result in him receiving costs for an application that was wholly unsuccessful, even if it was tactically useful for him, as he seems in substance to submit (again, subject to any offers of settlement that might have been made). I find it difficult to view the latter scenario as just for three reasons, which are also independent reasons as to why the default position of costs following the event should apply.

12    First, it is important context that it is reasonably apparent that the respondents did not claim the s 126K privilege in order to gain any forensic advantage in the principal proceeding, for the reasons set out in the next paragraph. Quite to the contrary, their evidentiary position in the trial of the principal proceeding would most likely have been better in relation to this aspect of the reliance on information from confidential sources had their identity been required to be disclosed, albeit against their wishes. That is because Ms Grieve would have been better able to justify what she had relied upon, rather than having, in effect, to rely upon the nature of the information she was given, without the benefit of the trial judge knowing the identity and thereby being able to have regard to such considerations as the role and status of the person who had provided it. Dr Al Muderis is generally better off without the respondents having that support for Ms Grieve’s claim of reasonable belief. That said, I remain of the view expressed in my prior judgment that the confidential source information is likely to be of quite marginal significance to the respondents’ s 29A defence.

13    The purpose of the statutory privilege is to protect the “free flow of information and the circumstances of its imparting” by allowing journalists to protect their informants’ identities, as is essential to gaining the confidence of other sources in future: see Ashby v Commonwealth (No 2) [2012] FCA 766; 203 FCR 440 at [22]. It is therefore taken up in defence of the broader ability of journalists to protect their sources, rather than to gain a forensic advantage in the principal proceeding. In that context, I consider that the respondents’ claim of journalist privilege was reflective of a different purpose than the advancement of their case in the principal proceeding, going to the future viability and success of investigative journalism insofar as it depends on confidential sources.

14    Indeed, as Dr Al Muderis observes in his reply submissions, it might well be the case that the maintenance of journalist privilege under s 126K here undercuts the respondents’ ability to make out the s 29A defence, as it limits their ability to advance evidence of the nature and integrity of Ms Grieve’s sources. In this context, Dr Al Muderis’ submission that the outcome of his s 126K application was a necessary step in challenging the respondents’ s 29A defence shows only that he brought the IA for the purpose of attempting to advance his case in the principal proceeding, whereas the respondents did not make the journalist privilege claim to advance their case in the principal proceeding.

15    Properly understood, then, the IA was distinct and separate enough from the principal proceeding that a just outcome would be that costs follow the event. That finding is reinforced by the fact that the outcome of the substantive proceeding turns not only on the success or failure of the s 29A defence, but also on the outcome of other defences advanced by the respondents as well. Even if I were to accept that the IA was closely related to undermining the success of the s 29A defence, I do not accept that it follows that it is sufficiently bound up with the outcome of the principal proceeding to order costs in the cause.

16    Secondly, while the respondents might well have borne the onus of proving that the s 126K privilege applied to Ms Grieve’s sources’ identities regardless of whether the privilege continued to be challenged by Dr Al Muderis, if so, that was always going to be a separate hearing, whether heard by the trial judge or another judge, in which better and further evidence was required to do so to discharge the respondents’ evidential burden due to such a challenge, whenever and wherever that occurred. The respondents were always going to incur additional costs in dealing with it and in responding to arguments advanced by Dr Al Muderis in opposing the privilege, which may or may not have needed the second Grieve affidavit.

17    As both parties appear to recognise, the second Grieve affidavit would not have been prepared without Dr Al Muderis’ challenge, whenever and however that occurred. Moreover, unless Ms Grieve’s credibility was not going to be in issue, which was unlikely given Dr Al Muderis’ stance, this was always going to have to be heard by a judge other than the trial judge. If the second Grieve affidavit does end up substantially featuring in the trial, despite the respondents’ present intention not to have that occur, the costs having been incurred so far only for the IA, that will likely be a matter for costs assessment in any event.

18    Finally, I am unconvinced by Dr Al Muderis’ submissions that the respondents’ conduct contributed to unreasonably increased costs of the IA at all, let alone to an extent that renders costs following the event unjust. Some of the background to the case management of this proceeding (in particular claims as to how the first part of the substantive proceeding was managed) is difficult for me to assess, as I lack some context that might be apparent to the trial judge. Nevertheless, the following facts make clear that increased delay or costs in this application cannot lay only, or even principally, at the respondents’ feet:

(a)    orders made on 17 October 2023 by the trial judge made provision for the respondents to be able to serve and file further evidence in relation to the IA, putting Dr Al Muderis on notice that such further evidence may be relied upon by the respondents;

(b)    at a case management hearing on 1 November 2023, counsel for Dr Al Muderis had indicated that he would not be inconvenienced by the filing and serving of further evidence by the respondents on 6 November 2023 (the date on which the second Grieve affidavit was in fact filed), making claims that this was genuinely a hindrance unpersuasive;

(c)    Dr Al Muderis had only made it clear that he intended to cross-examine Ms Grieve on 7 November 2023, the date on which the IA was initially listed to be heard before the trial judge, at which point it became clear to her Honour and the respondents that it had to be heard in front of another judge.

19    In any case, to the extent that the respondents’ conduct contributed to any increased cost associated with the IA, this is a matter to be dealt with through taxation.

20    Accordingly, I decline to vary order 3 made on 19 December 2023. It follows that the application to do so must be dismissed with costs.

Associate:

Dated:    8 March 2024

SCHEDULE OF PARTIES