Aboriginal Nations Pty Limited v John Fairfax Publications Pty Limited and West Australian Newspapers Limited [1998] ACTSC 193 (22 April 1998)

  
  
  
  
  

  
   

  

   IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

   MILES CJ

  

  

   Practice and Procedure
- security for costs - application made against
corporation by defendants in defamation proceedings - credible testimony
establishes
reason to believe that corporation will be unable to pay costs if
unsuccessful - residual discretion - plaintiff's solicitors act
on
no-win-no-fee basis - basis of retainer evidence of professional judgment in
likely success of action - corporation's assets will
not be diminished by
paying costs of its own lawyers - application refused.

  

   Cross-Vesting Legislation - proceedings by corporation
against separate
publishers of separate newspapers for identical articles - whether "related"
to proceedings in New South Wales by
director/shareholder arising out of same
articles - held not so related - whether "otherwise in interests of justice"
to transfer
proceedings to New South Wales - whether New South Wales is
"natural forum" - one newspaper published predominantly in New South
Wales the
other in Western Australia - substantial readership of first in the Australian
Capital Territory - issues relating to ATSIC
grants - relative inconvenience
to various witnesses - no order made.

  

   Cross-Vesting Legislation - Jurisdiction of Courts (Cross-vesting) Act 1993
in operation on 17 April 1997 - Commonwealth cross-vesting legislation ceases
to apply - Australian Capital Territory a State for
purposes of cross-vesting
scheme - constitutional validity of scheme.

  

   Corporations Law, s.1335(1)

   Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), sub-s.5(2)

   Judiciary Act 1903 (Cth), s.23

   Law and Justice Legislation Amendment Act 1997 (Cth), schedule 12

   Jurisdiction of Courts (Cross-vesting) Act 1993 (ACT)

  

   Gould v. Brown  [1998] HCA 6 (2 February 1998)

   Re Hamilton-Irvine and the Companies Act 1985 (1990) 94 ALR 428

   Accfin International Securities Co. Limited
v. Trustees Executors and
Agency Co. of Australasia Limited (1990) 99 FLR 432

   Murphy and Another v. FAI General Insurance Co.
Limited and Others (1993) 7
ANZ Ins Cases para.61-188, pp.78,097-8

   Cascade Group Ltd and Another v. Carlton & United Brewery
Ltd (1992)
ATPR 41-172

   Arrowcrest Group Pty Ltd v. Advertiser News Weekend Publishing Co. Pty Ltd [1993] ACTSC 23; 
(1993) 113 FLR 57

  

  

   CANBERRA, 29 August 1997 (hearing), 22 April 1998 (decision)

   #DATE 22:4:1998

  

   Counsel
for the first applicant/defendant: A. Leopold

   Solicitors for the first applicant/defendant: Freehill Hollingdale &
Page

  

   Counsel for the second applicant/defendant: A. Leopold

   Solicitors for the second applicant/defendant: Allen Allen &
Hemsley

  

   Counsel for the respondent/plaintiff: P.W. Gray

   Solicitors for the respondent/plaintiff: Snedden Hall & Gallop

  

  

   THE COURT ORDERS THAT:

  

   1. The motions be dismissed.

  

  

   MILES CJ

  

   The defendants apply on notices
of motion for orders that the plaintiff
provide security for costs and that the proceedings be transferred to the
Supreme Court of
New South Wales pursuant to cross-vesting legislation.

  

   The plaintiff sued each defendant for a separate libel. The matter
complained of is almost identical in each case. It appeared in a newspaper
published by the first defendant and in another newspaper
published by the
second defendant. The publication was on 14 September 1996 in each case. It is
alleged that both newspapers are
published and circulated throughout
Australia.

  

   It is unnecessary to set out the matter complained of or the imputations
and
meanings pleaded. They have to do with the role played by a Mr. Llew
Cleaver and a Mr. Paul Fenech in training Aboriginal and Torres
Strait Island
peoples in the making of films. Both men were or had been senior employees of
the Australian Broadcasting Commission
(ABC) concerned with programs about
indigenous affairs. They were also directors of and shareholders in the
plaintiff. They were
said to have negotiated with the ABC for the purchase by
the ABC of a film made by the plaintiff. The newspaper articles state that
an
ABC internal investigation had found a conflict of interests and that the
Australian Federal Police were investigating.

  


  No defences were filed at the date of the hearing of the motions. The two
defendants are represented by different solicitors. The
solicitor for the
first defendant is Mr. D. Moulis of Sydney, although Ms. Leanne Norman also of
Sydney has the principal conduct
and carriage of the matter. The solicitor for
the second defendant is Mr. K.M. Cush of Canberra, assisted by Mr. R.T.
Williams of
Sydney. All these solicitors named are members of firms whose
Canberra office is given as the address for service of the defendants.

  

   Applications for security for costs

  

   The applications for security for costs are made under s.1335(1) of the
Corporations
Law which provides:

  

   Where a corporation is a plaintiff in any action or any other legal
proceeding, the court having jurisdiction
in the matter may, if it appears by
credible testimony, that there is reason to believe that the corporation will
be unable to pay
the costs of the defendant if successful in his, her or its
defence, require sufficient security to be given for those costs and
stay all
proceedings until the security is given.

  

   The defendants accept the figures supplied by the plaintiff to the effect
that the plaintiff has a "current net worth" of $200,000 and made only a
"modest profit" of $37,258.84 in the year ended 30 June
1997.

  

   Mr. Williams estimates the costs incurred by his firm so far and to be
incurred until the conclusion of a hearing estimated
to last ten days to be in
the order of $200,000. About 75 percent or $150,000 would be recoverable on
taxation on a party and party
basis.

  

   Ms. Norman deposes to similar matters. She estimates her client's costs up
to and including an eight day hearing to
be in the region of $175,000, with an
expected 60 to 90 percent recovery on a party and party basis.

  

   It so happens that both
Mr. Williams and Ms. Norman arrive at the same
figure which, it is submitted, is appropriate for security to be given. That
figure
is $150,000.

  

   The applications are resisted basically on the ground that, if the
plaintiff continues to carry on business,
it is likely to attract funds by way
of a grant from the Aboriginal and Torres Strait Islanders Commission (ATSIC)
sufficient to
pay any costs that may reasonably be expected to be ordered
against it in the event of losing the case against both defendants.

  

   The applications for security for costs raise issues distinct from those
raised by the applications for an order that the
proceedings be transferred to
the Supreme Court of New South Wales, but the latter applications do reveal
some matters relevant to
both applications.

  

   On 11 November 1996 defamation proceedings were commenced in the Supreme
Court of New South Wales arising
out of the articles published by each
defendant. The plaintiff in those proceedings (the New South Wales
proceedings) is Mr. Llew
Cleaver, the person already referred to. The last
known address of Mr. Cleaver is at Mount Colah in New South Wales. Witnesses
expected
to be called in the New South Wales proceedings include Mr. Paul
Fenech, Mr. Vaughan Hunter, Mr. Mark Hamlyn and Mr. Keith Salvat,
all of
Sydney. Defences have been filed in the New South Wales proceedings. Both
defendants put in issue identification and defamatory
meaning, and in the
alternative claim qualified privilege arising essentially out of the public
interest in the affairs of the ABC,
in indigenous affairs and in federal
Government funding. A "constitutional" defence of publishing in pursuance of a
constitutional
freedom to engage in reasonable political discussion is also
raised.

  

   It is reasonable to assume that if the action proceeds
in this Court,
similar defences will be filed in these proceedings, although the defendants
would no doubt take advice on whether
to put identification in issue. In
summary, it is impossible to say that one side or the other has overwhelming
prospects of success
in the defamation proceedings, wherever a trial may take
place. There are obviously arguments to be put on either side and how the
issues would ultimately be resolved is not a matter on which the Court should
at this stage express a view. In any event the surrounding
circumstances can
be expected to be relevant to the ultimate outcome of the proceedings and
those circumstances will have to be the
subject of evidence called in the
ordinary way.

  

   There are two legs to sub-s.1335(1) of the Corporations Law. The first is
the requirement that credible testimony should establish that there is reason
to believe that the corporation will be unable to pay
the costs of the
defendant if the defendant is successful. That is not a very high threshold.
It involves the application of an objective
test. It assumes that the
defendant will be successful and does not require any assessment of the
chances of success. The testimony
of the solicitors that their likely costs
are about $150,000 each is credible.

  

   The other leg of the section is quite different.
The Court has a residual
discretion to grant or refuse the application for security. The discretion is
wide, so wide that the legislation
does not seek to fetter its width. The
discretion must be exercised only after giving due weight to a basic principle
that impecuniosity
should not deny a litigant access to the process of
justice. The strength of the ground for believing in the prospective inability
of the plaintiff to pay the defendant's costs if the plaintiff is unsuccessful
is also relevant.

  

   Mr. John Edward McGuire,
a solicitor, also of Sydney, with the conduct of
the matter for the plaintiff (and not a member or employee of the solicitors
on
the record) swore an affidavit to which were annexed a profit and loss
account for the year 30 June 1997. It shows an income of $1,384,666.40,
with
total expenses of $226,971.15, an operating profit of $33,966.13, and after
investment income is taken into account, a net profit
of $37,258.84. The
income includes $262,305.67 from sales. Mr. McGuire's figures also show sales
estimated to increase in 1998 to
$676,500. He deposed further that he
anticipated an ATSIC grant to the plaintiff in the 1988 financial year of
$1,395,917 compared
with $903,813 in the previous year. A net profit of
$612,700 is predicted. I do not think that any further detailed reference is
necessary.

  

   Mr. McGuire was cross-examined. I accept that his figures are genuine and
that there is a reasonable basis for
them.

  

   The point was taken on behalf of the defendants that the ATSIC grant is or
would be made subject to a condition that
any income generated by the project
for which the grant is made (the Approved Project) must be used towards the
objectives of the
Approved Project. At the hearing I indicated a provisional
view that the ATSIC conditions were likely to have the effect that any
proceeds of the grant and any income earned by the company as a result could
be used to pay the successful defendant's costs only
in breach of the ATSIC
conditions. Since the hearing further evidence has been adduced (in accordance
with leave) from an ATSIC officer,
which expresses the opinion that
"unbudgeted expenditure on legal costs associated with normal commercial
disputes of your company
would be consistent with project objectives and could
reasonably be applied to grant-generated income". Another letter from another
ATSIC officer appears to express a similar attitude at greater length and with
less clarity.

  

   Mr. McGuire was frank in setting
out in his further affidavit the basis of
his firm's retainer from the plaintiff. The retainer is on a "no win/no pay"
basis from
the date on which senior counsel advised that the plaintiff had
good chances of success. The terms of the retainer are relevant in
two
respects. First, they show that the plaintiff has secured legal representation
and embarked upon litigation on a favourable basis,
knowing that it is under
no obligation to pay its solicitors if it loses the case and expecting that if
it wins the case the costs
(or some of the costs) will be paid by one or other
of the defendants. On the other hand, the defendants have no choice. They are
brought into the litigation, reasonably fearing that even if they win, they
are unlikely to recover their costs from an impecunious
plaintiff. Secondly,
and in contrast, the terms of the retainer suggest that, unless the
arrangement is champertous (which it is
not), the basis of the solicitors
forfeiting their right to fees from their client is a professional judgment
that the client's chances
of success are sufficiently high as to give rise to
an expectation that costs will be recoverable from the party or parties
against
whom proceedings are to be taken.

  

   Another matter to which the terms of retainer are relevant is that the pool
of resources
available to satisfy any order for costs against the plaintiff
will not be diminished by any liability of the plaintiff to pay its
own
solicitors.

  

   In summary, I am not convinced that there is sufficient likelihood that at
the end of the likely hearing
of this action (which should extend to eight or
ten days only if the defendants wish to extend it) the plaintiff will be
unable to
satisfy an order for costs or that the plaintiff's action should be
permitted to proceed only on condition that it gives security.
I therefore
refuse the application for security for costs.

  

   Transfer of proceedings to the Supreme Court of New South Wales

  

   I turn now to the applications to transfer the proceedings to the Supreme
Court of New South Wales. The notices of motion
state that the applications
are made pursuant to the Jurisdiction of Courts (Cross-vesting) Act 1987
(Cth). At the time of the hearing of the motions the cross-vesting scheme, or
some of it, was subject to constitutional challenge.
In Gould v. Brown  [1998]
HCA 6 (2 February 1998), the High Court divided equally on the question of
whether it is constitutionally within the power of State parliaments
to enact
laws that confer jurisdiction on federal courts. The judgment of the Chief
Justice supported the power and the decision
of the Court followed accordingly
by virtue of s.23 of the Judiciary Act 1903 (Cth). As I understand it, there
is nothing in the judgments of the majority to support any challenge to the
power of this Court
to confer jurisdiction upon a State court, in respect of
proceedings commenced in this Court.

  

   However, it must be recognized
that the power of this Court does not derive
from the Commonwealth Act. It is perhaps not surprising that the diligence of
counsel,
which was evident in otherwise comprehensive submissions, failed to
reveal that the Commonwealth Act ceased to apply to proceedings
commenced in
this Territory when on 17 April 1997 by schedule 12 of the Law and Justice
Legislation Amendment Act 1997 (Cth), the definition of "State" in sub-s.3(1)
of the Commonwealth Act was amended to include the Australian Capital
Territory. On
the same day, the Jurisdiction of Courts (Cross-vesting) Act
1993 (the ACT Act), an enactment of the Legislative Assembly of the
Australian
Capital Territory, came into operation: see sub-s.2(2) of the ACT Act. For the
purposes of the cross-vesting scheme, or
at least for the purposes of the
Commonwealth Act and the ACT Act, the Australian Capital Territory is deemed
to be a State. These
matters appear to have been overlooked in Gould v. Brown
(see eg. 151 ALR at 419, note 86), the hearing of which commenced on 9 April
and concluded on 4 June 1997.

  

   Some of the provisions of the ACT Act do not have their exact counterparts
in the Commonwealth
Act, but I am unaware of any differences which are
relevant to the present applications. In particular, there is no relevant
difference
between the provisions of sub-s.5(2) of the Commonwealth Act and
the same sub-section in the ACT Act. Nevertheless, it must be recognized
and
stated clearly that the power of this Court to act under the cross-vesting
scheme now derives from the ACT Act and not from the
Commonwealth Act.

  

   The relevant provisions are as follows:

  

   5.(2) Where -

  

   (a) a proceeding (in this subsection
called the "relevant proceeding") is
pending in the Supreme Court (in this subsection called the "first court");
and

  

   (b)
it appears to the first court that -

  

   (i) the relevant proceeding arises out of, or is related to, another
proceeding pending
in the Supreme Court of another State or of a Territory and
it is more appropriate that the relevant proceeding be determined by
that
other Supreme Court;

  

   (ii) .....

  

   (iii) it is otherwise in the interests of justice that the relevant
proceeding
be determined by the Supreme Court of another State or Territory;

  

   the first court shall transfer the relevant proceeding
to that other
Supreme Court.

  

   The defendants rely primarily on sub-para.5(2)(b)(i) for which purpose it
is necessary to show
that the proceeding in this Court "is related to" the
proceeding pending in the Supreme Court of New South Wales. The defendants
do
not submit that the proceeding in this Court "arises out of" the proceeding
pending in the Supreme Court of New South Wales.

  

   The word "related" is capable of a wide range of meanings. Clearly it has
to be read in context. The Act does not use the
term "related proceeding". The
use of the words "related to" in juxtaposition to the words "arises out of"
may suggest something
closer than a loose association. An apparent resemblance
or similarity should be contrasted with a relationship.

  

   Reference
was made to various authorities for various propositions as to
the meaning of the term "related" in the cross-vesting legislation.
Some
examples follow.

  

   In Re Hamilton-Irvine and the Companies Act 1985 (1990) 94 ALR 428,
Beaumont J held that an application
in the Federal Court by a convicted person
for leave to be appointed a director and secretary of a company was not
related to an
application in the Family Court by that person's spouse seeking,
inter alia, an adjustment of the interests they each held as shareholders
in
the company, because the proceedings were not dependent upon, linked to or
associated with each other.

  

   In Accfin International
Securities Co. Limited v. Trustees Executors and
Agency Co. of Australasia Limited (1990) 99 FLR 432, McKenzie J considered
proceedings
commenced in the Supreme Court of Queensland for money owing on a
guarantee and proceedings in the Supreme Court of Victoria concerned
with the
operation of the same trust as that involved in the Queensland proceedings and
with the liability of the trust arising out
of certain transactions including
that giving rise to the Queensland proceedings and with the liability of some
of the defendants
party to the Queensland proceedings in respect of the
operation of the same trust. His Honour concluded that the proceedings were
related because some of the issues were common and that the transaction, the
subject of the Queensland proceedings, was one of the
transactions common to
the Victorian proceedings. His Honour also considered of significance the
relationship between certain defendants
and third parties.

  

   In Murphy and Another v. FAI General Insurance Co. Limited and Others
(1993) 7 ANZ Ins Cases para.61-188,
pp.78,097-8, Giles J held that it was
sufficient if there were "over-lapping parties, identity of a major issue, and
identity of
other issues of fact and law".

  

   In Cascade Group Ltd and Another v. Carlton & United Brewery Ltd (1992)
ATPR 41-172, Sheppard
J held that "commonality of facts does not necessarily
mean that proceedings are related to other proceedings".

  

   No common
thread is discernible from these decisions. I will not attempt a
definition of the word "related". However, I do not think that a
defamation
action is to be regarded as related to another defamation action simply
because the language of the matter complained
of is the same in each case.
Whether words are defamatory of X is not necessarily the same question as
whether those words are defamatory
of Y. The issue of identification (which is
expressly raised in the New South Wales proceeding and which may be raised in
the Australian
Capital Territory proceeding) is different in each case,
according to the surrounding circumstances. The issue of whether the words
are
capable of the defamatory meanings alleged is also different in each case. The
question whether the words in fact bear out the
imputations and meanings
alleged is also different depending upon the surrounding circumstances.
Further, on the issue of qualified
privilege, assuming it is raised in the
Australian Capital Territory proceeding, the matter of public interest is
likely to be approached
differently in each case according to the identity of
the plaintiff, as is the issue of malice, if raised. The issue of the
constitutional
defence based on freedom to publish will also be different in
the case of the proceedings brought by the company and those brought
by an
individual former shareholder and director. The fact that the imputations are
pleaded in similar or identical terms does not
overcome these differences.

  

   Moreover, the present plaintiff has no means of intervening or playing any
part, as I see it,
in the action brought by Mr. Cleaver in the Supreme Court
of New South Wales. I am not convinced that there is any likelihood that
if
the Australian Capital Territory proceeding were transferred to the Supreme
Court of New South Wales that that Court would order
that the hearing of the
two proceedings be consolidated. In any event, I am not convinced that even if
there were such likelihood,
that in itself would mean that the proceedings
should be regarded as related.

  

   In my view, therefore, sub-para.5(2)(b)(i)
of the ACT Act does not apply.

  

   The alternative submission under which the applicants seek to have the
order made is under
sub-para.5(2)(b)(iii). The Court must make the order if it
appears to the Court that it is "otherwise in the interests of justice"
to do
so.

  

   Several previous decisions of this and other courts were referred to on the
meaning of these terms. One of them
was a previous decision of my own,
Arrowcrest Group Pty Ltd v. Advertiser News Weekend Publishing Co. Pty Ltd [1993] ACTSC 23; 
(1993) 113 FLR 57, in which an order was made transferring defamation
proceedings to the Supreme Court of South Australia. There
is no point in
discussing the similarities and differences between that case and this, or
comparing the situation in this case with
that in other cases in this Court or
elsewhere. The proceedings have been commenced here. There has to be a reason
for transferring
them and only in that sense is there an onus cast on the
applicant. The legislation authorises the transfer only if it appears to
the
Court that the transfer is "otherwise in the interests of justice". If that is
how it appears to the Court then the order follows.
Whilst the Court has to
make a value judgment, once it is made, there is no discretion about whether
or not the order should follow.

  

   There does not appear to me to be anything in the submission on behalf of
the defendants that New South Wales is the "natural
forum" for the Australian
Capital Territory proceeding. One of the newspapers is printed there and
published predominantly in New
South Wales, but it has a substantial
readership in the Australian Capital Territory. I doubt whether The Sydney
Morning Herald claims
to be a newspaper of parochial character. The other
newspaper is printed in Western Australia and published predominantly in that
State. The plaintiff has its principal place of activity in Sydney but its
functions are by no means limited to the metropolitan
area of that city. Its
relationship to the ATSIC is likely to be the subject of consideration and
evidence. ATSIC is a statutory
corporation established by Commonwealth
legislation with headquarters in Canberra. Some of the proposed witnesses for
the plaintiff
either live in Canberra or come to Canberra from time to time.
Canberra, in my view, is as "natural" a venue for this case as is
Sydney. The
plaintiff has a legitimate interest in bringing the proceedings in this Court
and keeping them here. There may be some
inconvenience to the first defendant
in defending the proceedings here rather than in New South Wales. As far as
the second defendant
is concerned, there is no appreciably greater
inconvenience in defending the proceedings in the Australian Capital Territory
than
in New South Wales. In my view, it is not "otherwise in the interests of
justice" to require the plaintiff to continue the proceedings
in New South
Wales.

  

   The motions are dismissed. Unless the parties wish to be heard, I propose
to order that the applicant
defendants pay the respondent plaintiff's costs.