Palace Films Pty Ltd v Fairfax Media Publications Pty Ltd

Costs of application 1HER HONOUR: On 21 September 2012, I gave judgment in these proceedings dismissing the claim at the suit of the first plaintiff: see Palace Films v Fairfax Media Publications [2012] NSWSC 1136. It remains to determine the costs of that application. 2The position is complicated by the fact that there have been several earlier interlocutory judgments relating to other aspects of the proceedings determining matters raised against the first but also the second and third plaintiffs. Those applications have resulted in costs orders against "the plaintiffs" and a question accordingly arises as to whether, now that the first plaintiff is out of the proceedings, those earlier costs orders should be apportioned in some way or whether that apportionment should be left to a costs assessor. It will be necessary to return to that issue. 3The principal question argued in respect of costs is whether I should stay the prosecution of the claim at the suit of the second and third plaintiffs pending payment of any costs ordered against the first plaintiff today. For their part, the plaintiffs accept that the first plaintiff should pay the costs at least of the two motions which resulted in the dismissal of its claim. 4In order to explain the basis for the stay application, it is necessary to say something about the substantive proceedings. The claim, in defamation, arose from the publication of two articles in the "Australian Financial Review" and a third article in an on-line publication. The principal focus of the articles was the fortunes of various Australian film distribution companies including "Palace Films". The first plaintiff was a company named Palace Films Pty Limited. However, as I found in my earlier judgment, that company does not conduct any business and is, in effect, a shelf company. The film distribution business discussed in the articles sued on by the plaintiffs is, rather, conducted by an entity called "Palace Enterprises Pty Limited". 5The application by the defendants to have the proceedings at the suit of the first plaintiff dismissed rested on that circumstance. The application was preceded by a lengthy correspondence during which the defendants endeavoured to understand the precise status of the plaintiff. Importantly, for present purposes, that exchange of correspondence included two matters which the defendants submit were apt to mislead them in their understanding as to precisely what role the first plaintiff company played in the Palace corporate group. 6First, in a letter dated 17 November 2009 from Kennedys on behalf of some of the defendants to the solicitors for the plaintiff, Kennedys said: We note that the address given for the first plaintiff is not, according to our ASIC search, the registered office of the company which is registered at 233 Whitehouse Road, Balwyn, Victoria. Please confirm the correct address for the first plaintiff. 7That question was responded to in the following terms by the solicitor for the plaintiffs: The registered office of the First Plaintiff is at 233 Whitehorse Road, Balwyn, Victoria. However, it also conducts business at the address stated in the Statement of Claim which is more convenient for proceedings in the State of New South Wales (emphasis added). 8It later transpired, as revealed by Exhibit 1 in the dismissal application (a letter dated 26 August 2011 from the plaintiffs' solicitor to the solicitor for other defendants), that the first plaintiff had never traded. In that circumstance, the contention that it "conducts business" at the address identified in the statement of claim was apt to mislead. 9The second matter relied upon by Mr Richardson, who argued this application on behalf of all defendants, was as follows. First, in a letter dated 26 November 2009 from the plaintiffs' solicitor to Kennedys, it was stated that, apart from the second and third plaintiffs who are directors of the first plaintiff, there were no employees of the first plaintiff as at July 2009 or in the financial year 2009. Kennedys responded on 11 December 2009 as follows: On our instructions, the first plaintiff has a General Manager, Nicholas Whatson, who has recently been interviewed about the company's operations. 10Kennedys' letter enclosed a copy of the interview and asked the plaintiffs' solicitor to confirm his instructions. The response to that request said, simply: "noted". The article enclosed with Kennedys' letter records an interview between Benjamin Zeccola, the second plaintiff (described in the article as "Executive Director of Palace Cinemas") and "his colleague, Nicholas Whatson, General Manager of Palace Films". The interview discusses "the year ahead". The briefest attention to the letter and the enclosed article ought to have brought home to the plaintiffs' solicitor the fact that the defendants' solicitors were labouring under the misapprehension that the first plaintiff conducted the business discussed in the article. Careful attention to the proper conduct of the proceedings ought to have prompted a response correcting the misapprehension, rather than the glib response in fact given. 11In his submissions today, Mr Evatt made the extraordinary assertion that he saw nothing misleading in that exchange in the circumstances. I do not accept his position on that issue. 12The defendants submitted that, in the face of all of the correspondence exchanged between the parties but particularly focussing on the two exchanges outlined above, it could be concluded that the second and third plaintiffs, each a director of the first plaintiff, had conducted the proceedings vexatiously or in such a way as to warrant the court staying the prosecution of their claim pending payment by the first plaintiff of the costs of the proceedings at the suit of that company. 13I accept that there is force in the contention that the conduct of the second and third plaintiffs in respect of this issue was less than satisfactory. Notwithstanding my disagreement with the position put forward by Mr Evatt on behalf of the plaintiffs, however, I am reluctant to conclude, on the strength of correspondence between solicitors, that the vexatiousness described in submissions by the defendant ought to be visited upon the second and third plaintiffs. Further, I am concerned that, in the nature of some proceedings for defamation, these proceedings have raised a number of complications and technicalities, the interlocutory resolution of which has already occasioned delay in the prosecution of the second and third plaintiffs' claims. 14For those reasons, whilst I do not necessarily reject the characterization of the conduct put forward on behalf of the defendants, with the qualification I have articulated, I am not persuaded that I should exercise my discretion so as to stay the second and third plaintiffs' claims pending the payment of the first plaintiff's costs. I note, in that context, that the plaintiffs have put forward a proposal that the first plaintiff be ordered to pay the costs and that, if those costs, as agreed or assessed, are not paid within 28 days, the second and third plaintiffs would guarantee their payment. Some discussion between bench and bar at the hearing this morning has prompted agreement that the best way to give effect to that proposal would be to make a self-executing order that the second and third plaintiffs pay those costs, if not paid by the first plaintiff. That seems to me adequately to meet the defendants' concerns. 15The second and third plaintiffs have today sought leave to file in court a document titled "final statement of claim". The defendants submitted that leave to file that document ought not be granted, except with payment of costs as the price of that amendment. For substantially the same reasons as those I have outlined in respect of my refusal to grant the stay, I do not accept that submission. I propose to grant leave to the second and third plaintiffs to file that document, which I note is otherwise not objected to. 16It remains to consider how best to express the appropriate costs order as against the first plaintiff at this stage. Mr Richardson submitted, by reference to various phases of the proceedings thus far, that whilst what he calls the first phase could be seen to be one during which the argument attributable to the form of the pleading was fairly evenly divided as between the three plaintiffs, later phases of the proceedings saw argument predominantly directed to issues concerning only the first plaintiff. 17Mr Evatt submitted that it is too hard for the court to separate as between plaintiffs those earlier costs orders and that any attempt on my part to do so would be entirely arbitrary. He invited me to leave that matter for the assessor. 18Extra-curially, it has been communicated to me that assessors are frustrated when such tasks are left to them. Regrettably, however, there may be force in the contention that any attempt on my part to fix a fair apportionment of those earlier arguments as between plaintiffs may visit unfairness on one party or the other and accordingly, with some reluctance, I propose to accede to Mr Evatt's suggestion that I leave that issue for the assessor. 19For those reasons, I make the following orders: