John Fairfax & Sons Pty Ltd v Cojuangco

Where, on application by any person, it appears to the Court that -

(a) the applicant, having made reasonable inquiries, is unable to ascertain the identity of a person for the purpose of commencing proceedings against that person or is unable to ascertain the description of any person sufficiently for that purpose; and

(b) some person has or may have knowledge of facts, or has or may have in his possession, custody or power any document or thing, tending to assist in the ascertainment of the identity or description of the person concerned,

(c) to attend before the Court or an officer of the Court and be orally examined on any matter relating to the identity or description of the person concerned; and

(d) to produce any document or thing in his possession, custody or power relating to the identity or description of the person concerned.

The respondent applied for preliminary discovery under this rule of the identity of sources of information upon which a news story and article published in The Sydney Morning Herald on 13 February 1985 had been based. The Sydney Morning Herald is a newspaper published by the first appellant, John Fairfax & Sons Ltd. ("Fairfax"). The second appellant, Peter Hastings, is the author of the article.

The article appeared under the heading "Corruption as an art form". It began in this way:

In Indonesia and Thailand, graft and corruption, often on a large scale, are part of the scenery - a form of political and economic overhead. In the Philippines they have been elevated to an art form.

One of the leading local US banks maintains that of the Philippines' $US26 billion foreign debt, the President and close "cronies" like coconut king Eduardo Cojuangco, and sugar baron Roberto Benedicto, not to mention the First Lady, have totally squandered $US9 billion of it.

The respondent is a prominent businessman in the Philippines who has extensive bloodstock and grazing interests in New South Wales. In the past, he has been appointed by the Philippines Government as an "Ambassador at large". He seeks to identify the second appellant's sources of information so that he may bring proceedings in New South Wales for defamation against the persons who have provided information to the second appellant for the parts of the article of which he complains. It is common ground that such persons would be liable in defamation in New South Wales for information given to the second appellant in the Philippines provided that re-publication in New South Wales was intended by them or was a natural and probable result of providing the information: Webb v. Bloch [1] ; Sims v. Wran [2] .

1. (1928) 41 C.L.R. 331, at pp. 363-366. 2. [1984] 1 N.S.W.L.R. 317, at p. 320.

Although the Rules in terms permitted the respondent's application to be heard ex parte, Hunt J., mindful no doubt of requirements of natural justice, directed that notice of the application be given to the two appellants. The appellants conceded that the respondent had established: (1) that he had a cause of action in defamation against the persons who supplied information to the second appellant; (2) that he had made reasonable inquiries as to the identity of those persons; (3) that he had been unable to ascertain their identity; (4) that the appellants have knowledge of facts which will identify those persons; and (5) that they will not disclose those facts without an order for preliminary discovery.

The appellants contended that the application should be refused on discretionary grounds. Hunt J. rejected this contention and made the following orders:

1. That Peter Hastings attend before the court on a date to be fixed to be examined in relation to the identity and further description of the persons referred to as "a senior American bank official", "prominent local businessmen" and of a bank identified as "one of the leading local US banks" in a newspaper article attributed to him and published in the "Sydney Morning Herald" newspaper on 13 February 1985

2. That Peter Hastings produce to the court on his examination all memoranda, notes, note books, diaries, draft articles, correspondence, records of interview and other documents and papers and copies of which relate to or record any interview, meeting, conversation or other action with the persons or bank referred to in the first order and which identify any of those persons or bank by name or further description.

3. That John Fairfax & Sons Ltd. by its proper officer produce to the court on a date to be fixed all memoranda, notes, note books, diaries, draft articles, correspondence, records of interview and other documents and papers and copies of which relate to or record any interview, meeting, conversation or other action with the persons or bank referred to in the first order and which identify any of those persons or bank by name or further description.

The Court of Appeal (Kirby P., Glass and Mahoney JJ.A.) dismissed the appellants' appeal from those orders with costs. In the Court of Appeal the appellants contended that the primary judge's exercise of discretion miscarried in two respects, which Mahoney J.A. described as "the effective remedy factor" and "the newspaper rule factor". The primary judge held that, in deciding whether an order should be made under Pt 3, the court should take into account whether the plaintiff has an effective cause of action against persons other than the persons whose identity is in question. The primary judge rejected the appellants' submission that the respondent had an effective remedy against them. Hunt J. thought that the appellants might plead and succeed on a defence of qualified privilege under s. 22 of the Defamation Act 1974 N.S.W.. The appellants argued that his Honour embarked on an irrelevant exercise in assessing the respondent's prospects of success in an action for defamation against the appellants and that, if relevant, his Honour's assessment of "the likelihood of a successful defence" under s. 22 could not be supported on the evidence. The Court of Appeal rejected these submissions on two grounds. First, that the prospects of success in such an action were a relevant consideration, at least in the circumstances of this case. Secondly, that it could be inferred from the appellants' failure to indicate whether they would rely on s. 22 that they would not renounce that defence and that, in the words of Mahoney J.A., there was an "appropriate basis" for concluding that the defence "might well succeed".

The appellants contended that Hunt J. had given insufficient weight to the newspaper rule. The Court of Appeal rejected this submission, concluding that his Honour had rightly taken it into account without giving it decisive weight, finding on balance that the discretionary factors favoured the respondent.

In this Court the appellants submit, first, that the newspaper rule applies to applications under Pt 3. The precise area of operation of the newspaper rule, which has been variously described as a rule of practice or a rule of law, is shrouded in uncertainty, as might be expected of a principle erected on shifting foundations. It has its origin in the practice of the English common law courts in defamation actions of refusing to order production and inspection of documents or to force a defendant to disclose the source of his information in interlocutory proceedings, in the absence of special circumstances justifying the making of such an order: see Hennessy v. Wright [No. 2] (1888), reported as a note to Parnell v. Walter [3] ; Hope v. Brash [4] . Initially the practice seems to have been based on the view that the disclosure of the source of information was irrelevant, even in a case in which the plaintiff pleaded express malice in answer to a plea of privilege or fair comment, and that the application for disclosure amounted to a "fishing" expedition: Hennessy v. Wright [5] . Subsequently it was recognized that the disclosure of the identity of an informant could be relevant to the issue of malice: Elliott v. Garrett [6] ; Plymouth Mutual Cooperative and Industrial Society Ltd. v. Traders' Publishing Association Ltd. [7] ; Adam v. Fisher [8] ; Lyle-Samuel v. Odhams Ltd. [9] . This recognition led to the view that it might be more accurate to base the refusal to make an order on the ground that it would be oppressive to compel disclosure before the trial: McGuinness v. Attorney-General (Vict.) [10] . So, the immunity has been described as one "carved out of the general field of relevance": South Suburban Co-operative Society v. Orum [11] . It was acknowledged that disclosure could be obtained at the trial of the action itself (Plymouth Mutual Co-operative [12] ), although it has been suggested that there is a judicial discretion to disallow questions at the trial directed to ascertaining the identity of sources of information: Attorney-General v. Mulholland [13] .

1. (1890) 24 Q.B.D. 441, at pp. 445, 449. 2. [1897] 2 Q.B. 188, at pp. 191, 192-193. 3. (1890) 24 Q.B.D., at pp. 448, 449. 4. [1902] 1 K.B. 870. 5. [1906] 1 K.B. 403, at pp. 412-413, 418-419. 6. (1914) 30 T.L.R. 288. 7. [1920] 1 K.B. 135, at pp. 143-144. 8. (1940) 63 C.L.R. 73, at p. 92. 9. [1937] 2 K.B. 690, at p. 703. 10. [1906] 1 K.B., at p. 418. 11. [1963] 2 Q.B. 477, at pp. 492-493.

As the very name of the rule implies, in the beginning it applied to newspaper defendants and was regarded as creating an exceptional immunity in favour of newspapers and journalists employed by them on a full-time basis: Lyle-Samuel [14] ; South Suburban [15] , Lawson & Harrison v. Odhams Press Ltd. [16] . It has been held that the rule does not apply in favour of the author of a defamatory letter published in a newspaper: South Suburban. And there is great uncertainty about the possible application of the rule to freelance journalists and others who publish information to the public: see the discussion by Lord Fraser of Tullybelton inBritish Steel Corporation v. Granada Television Ltd. [17] . In McGuinness [18] Starke J. thought that the rule was not confined to newspapers and defamation actions and that it was of general application. The New Zealand Court of Appeal applied the rule in an action of slander of title: Broadcasting Corporation of New Zealand v. Alex Harvey Industries Ltd. [19] . Subject only to this exception, Starke J.'s view of the rule has not been accepted.

1. [1920] 1 K.B., at pp. 143, 145. 2. [1937] 2 K.B., at pp. 703-705. 3. [1949] 1 K.B. 129. 4. [1981] A.C. 1096, at pp. 1198-1199. 5. (1940) 63 C.L.R., at p. 92. 6. [1980] 1 N.Z.L.R. 163.

The need to justify the existence of a special immunity in favour of newspapers naturally led the courts to give emphasis to the freedom of the press and the important part played by newspapers in promoting the free flow of information to the public. Commencing with the judgment of Buckley L.J. in Adam v. Fisher, the courts have seen the rule as having a basis in public interest and public policy. Some judges have taken the view that this is the sole rationale for the rule. In Alex Harvey Industries [20] Woodhouse J. said:

it is very much concerned with the public interest and the benefit for society in having discussion and evaluation of affairs that is informed. For example, potential sources of information that might usefully be aired in public should not be discouraged by the distracting thought that their identity could quickly be disclosed in proceedings taken against a newspaper which then might never have to face trial itself. On this footing his Honour considered that the immunity was not confined to defamation actions and that the rule was absolute in its operation, not being subject to a qualification relating to special circumstances. But his Honour acknowledged that one reason for the rule was the desirability of discouraging plaintiffs at the interlocutory stage from delving round for other targets. 1. [1980] 1 N.Z.L.R., at p. 166.

Even stronger affirmations of the public policy rationale for the rule are to be found in the judgments of Lord Denning M.R. in the Court of Appeal and Lord Salmon in dissent in Granada. Lord Salmon [21] quoted with approval the comments of Lord Denning M.R. [22] :

The public has a right of access to information which is of public concern and of which the public ought to know. The newspapers are the agents, so to speak, of the public to collect that information and to tell the public of it. Viewed in this light, the rule would be wide-ranging and could not be confined logically to defamation actions and interlocutory applications. In an endeavour to impose some qualification on the wide immunity which the principle, thus based, would have conferred on the media, Lord Denning M.R. asserted [23] that a newspaper's immunity exists only if "it acts with a due sense of responsibility" [24] : see also Isbey v. New Zealand Broadcasting Corporation [No. 2] [25] . 1. [1981] A.C., at p. 1189. 2. [1981] A.C., at p. 1129. 3. [1981] A.C., at p. 1130. 4. [1981] A.C., at p. 1191. 5. [1975] 2 N.Z.L.R. 237, at p. 239.

In Granada the majority of the House of Lords rejected this broad view of the newspaper rule. Their reasons for so doing are convincing. It is a fundamental principle of our law, repeatedly affirmed by Australian and English courts, that the media and journalists have no public interest immunity from being required to disclose their sources of information when such disclosure is necessary in the interests of justice: see McGuinness [26] ; Granada [27] . The point is that there is a paramount interest in the administration of justice which requires that cases be tried by courts on the relevant and admissible evidence. This paramount public interest yields only to a superior public interest, such as the public interest in the national security. The role of the media in collecting and disseminating information to the public does not give rise to a public interest which can be allowed to prevail over the public interest of a litigant in securing a trial of his action on the basis of the relevant and admissible evidence. No doubt the free flow of information is a vital ingredient in the investigative journalism which is such an important feature of our society. Information is more readily supplied to journalists when they undertake to preserve confidentiality in relation to their sources of information. It stands to reason that the free flow of information would be reinforced, to some extent at least, if the courts were to confer absolute protection on that confidentiality. But this would set such a high value on a free press and on freedom of information as to leave the individual without an effective remedy in respect of defamatory imputations published in the media.

1. (1940) 63 C.L.R., at pp. 102-104. 2. [1981] A.C., at pp. 1169-1170, 1179-1181.

That is why the courts have refused to accord absolute protection on the confidentiality of the journalist's source of information, whilst at the same time imposing some restraints on the entitlement of a litigant to compel disclosure of the identity of the source. In effect, the courts have acted according to the principle that disclosure of the source will not be required unless it is necessary in the interests of justice. So, generally speaking, disclosure will not be compelled at an interlocutory stage of a defamation or related action and even at the trial the court will not compel disclosure unless it is necessary to do justice between the parties.

The liability of the media and of journalists to disclose their sources of information in the interests of justice is itself a valuable sanction which will encourage the media to exercise with due responsibility its great powers which are capable of being abused to the detriment of the individual. The recognition of an immunity from disclosure of sources of information would enable irresponsible persons to shelter behind anonymous, or even fictitious, sources.

In conformity with what we have said, the newspaper rule has been held to have no application to commissions of inquiry: McGuinness; Attorney-General v. Clough [28] ; Mulholland . In Granada Lord Salmon sought to explain Clough and Mulholland on the ground that disclosure of sources of information was ordered in those cases because the public interest in national security necessarily outweighs the public interest in the free flow of information. No such explanation is available to undermine the authority of this Court's decision in McGuinness. There the Court unanimously held that the refusal of an editor of a newspaper to answer relevant questions before a Royal Commission relating to his sources of information could not be supported and that he had no lawful excuse for refusing to answer questions.

In that case Dixon J. authoritatively explained the nature and effect of the newspaper rule [29] :

The foundation of the rule is the special position of those publishing and conducting newspapers, who accept responsibility for and are liable in respect of the matter contained in their journals, and the desirability of protecting those who contribute to their columns from the consequences of unnecessary disclosure of their identity The appellant stands upon these decisions and says that they disclose a development which, in reason and logic, should not stop at discovery, but should supply a general justification for withholding the names of contributors and the sources of information at all stages of any legal proceeding. The answer is that it is not a rule of evidence but a practice of refusing in an action of libel against the publisher, &c., of a newspaper to compel discovery of the name of his informants. It "rests not on a principle of privilege but on the limitations of discovery", to quote the comment of Professor Wigmore, who expresses himself somewhat strongly against the pretensions to a privilege on the part of journalists: Treatise on Evidence, 2nd ed., vol. 5, sec. 2286, n. 7. 1. (1940) 63 C.L.R., at pp. 104-105.

Two factors of importance emerge from Dixon J.'s comments. First, the rule is one of practice, not of evidence. Secondly, although the rule rests on a recognition of the public interest in the free flow of information, the law gives effect to that recognition of the public interest by exercising a discretion to refuse to order disclosure of sources of information in interlocutory proceedings in defamation and, perhaps, other analogous actions, even though disclosure would be relevant to the issues for trial in the action. The law does not protect that public interest to the extent of conferring an immunity on the media from disclosure of its sources.

The question then is whether the newspaper rule has any part to play in the determination of an application under Pt. 3, r. 1. The appellants, relying on the statement by Woodhouse J. in Alex Harvey Industries [30] , go so far as to submit that the newspaper rule should now be regarded as absolute and that, in any event, the exceptions to it must be rare. The appellants point to the fact that there is no reported decision in which disclosure has been compelled on the basis that special circumstances were shown to exist. Indeed, the appellants assert that the courts have failed to define or describe the circumstances which would justify an exercise of the judicial discretion to compel disclosure.

The force of these arguments may be acknowledged. However, it has long been accepted that the rule is not a rule of law or evidence and that it is no more than a rule of practice which guides or informs the exercise of the judicial discretion in interlocutory proceedings in defamation (and related) actions. Equally, and consistently with the character of the rule as one of practice, it has long been accepted that special circumstances may justify the making of an order compelling disclosure.

The newspaper rule is not capable of applying directly to proceedings under Pt 3, r. 1. The respondent to an application under Pt 3, r. 1 is not, as such, a defendant in a defamation action. Such an application is not an interlocutory proceeding in such an action. One very powerful reason for denying that the rule has a direct application to the present class of preliminary discovery is that the object of such an application is to ascertain the identity of an informant so that the applicant may sue him. The object of an interlocutory application in a defamation action is to obtain evidence, admissions or better particulars with respect to the issues for trial in the action. If the only object of such an application were to identify the defendant's source of information with a view to bringing an action against the informant, the purpose of the application would be foreign to the proceedings. Yet that purpose is the very object of an application for preliminary discovery.

On the other hand the policy considerations which underlie the existence of the rule are unquestionably factors to be taken into account in the exercise of the judicial discretion that Pt 3, r. 1 confers. If it were otherwise, the making of orders for preliminary discovery would undermine the status and strength of the rule in its application to defamation actions at the interlocutory stage. However, to say that the policy considerations behind the newspaper rule are relevant in an application for preliminary discovery does not mean that an applicant will fail unless he makes out a case of special circumstances. What an applicant must show is that the order sought is necessary in the interests of justice; in other words, the making of the order is necessary to provide him with an effective remedy in respect of the actionable wrong of which he complains.

Where an applicant complains of a defamatory publication in a newspaper a court will refuse an order for preliminary discovery if it appears that the applicant has an effective remedy against the newspaper or journalist without the necessity for making such an order. But where, as here, it appears that the newspaper and the journalist may well plead statutory qualified privilege under s. 22 of the Defamation Act, a judge is entitled to exercise his judicial discretion in favour of making the order sought if the newspaper and the journalist do not relinquish that defence and the judge considers that the defence might well prevail. In this respect we agree with Mahoney J.A. that Hunt J.'s reference to "the likelihood of a successful defence" was susceptible of misunderstanding but that in its context the reference should be read as a statement that the defence was open to be pleaded and might well succeed. So understood, his Honour's statement was in our opinion correct. No doubt if the matter went to trial the success of the defence might well turn on Mr Hastings giving evidence. But it is not profitable to speculate on that possibility.

The appellants submit that it is inappropriate for a judge in deciding an application for preliminary discovery to speculate on the prospects of a successful defence under s. 22, particularly in the absence of evidence going to the issues raised by such a defence. The short answer to this submission is that it is necessary to consider whether the applicant is left without an effective remedy if an order is not made and that the judge is not called upon to decide whether the statutory defence will succeed; it is for him to form a conclusion that the defence might well succeed on the materials before him. Accordingly, the appellant has not persuaded us that the primary judge erred in principle in applying Pt 3, r. 1 or that he had regard to irrelevant considerations in exercising his discretion.

Indeed, in our view his Honour was correct in exercising his discretion in favour of making the orders he made. The striking feature of the case is that the publication complained of consists essentially of defamatory imputations attributed to "a senior American bank official and prominent local businessmen" and "one of the leading local US banks". The thrust of the publication is that the imputations have a solid basis of support in the views of persons prominent in banking and business circles and of a leading bank having its headquarters in the United States. By identifying their sources in this general way and giving prominence to them, the appellants have endowed the imputations with an aura of authority and authenticity which would be lacking if the imputations rested merely on the newspaper's and the journalist's assertions. From the respondent's viewpoint the attribution of the imputations to these apparently authoritative sources is far more damaging than a mere assertion of the imputations without any reference to sources would have been. It is incongruous and unjust that the appellants, having derived the advantage that comes from identifying in general terms the sources of the allegations that they make against the respondent, should now seek to deny him an opportunity of identifying precisely those sources, by invoking the newspaper rule.

For our part we much doubt whether the newspaper rule would be applied to a case such as the present if the question were to arise in the context of an interlocutory application in a defamation action against the appellants in which malice was in issue. It may be that the rule has no application when the newspaper identifies its source in a general way and relies on that source to point up the authenticity of the imputations. But this is by the way. In the context which we have supposed, the circumstances would be special so as to justify a departure from the rule. Apart from the striking feature already mentioned, the defamation is of a very serious kind. The respondent is a prominent personality in the Philippines. His reputation might well be gravely compromised by imputations attributed to the sources mentioned in the publication. He should be given the opportunity of discovering the precise identity of the sources and deciding upon such action as he then considers appropriate.

In saying this we would not wish it to be thought that we necessarily accept that the newspaper rule always applies in interlocutory proceedings in the absence of special circumstances. It may be that, as with an application under Pt 3, r. 1, all that the applicant has to show is that the making of an order is necessary in the interests of justice. But that is a question for another day.

For the foregoing reasons we would dismiss the appeal.