The Federal Capital Press of Australia Pty Ltd v Balzola

The Proceedings

1. The proceedings arise out of the publication in the Canberra Times on 28 August 2012 of an article headed "Mosque Campaign lawyer also fought Islamic school plan". Mr Balzola is a solicitor who represents a group known as "Concerned Citizens of Canberra". The group objects to the construction of a mosque in Canberra.
2. Mr Balzola's Second Further Amended Statement of Claim (2FASC) pleaded the following imputations: "(1) The plaintiff is key figure in a franchise aimed at denying religious freedom to Muslims; (2) The plaintiff is a Christian activist who opposes development applications for the building of mosques on religious grounds and without regard to the merit of the application; and (3) The plaintiff pretends to represent Concerned Canberra Citizens opposed to the building of a mosque in Gunghalin on traffic and planning issues, when in fact, he is a Christian activist who opposes the mosque in order to deny Muslims religious freedom."
3. Capital Press filed a Further Amended Defence (FAD), in which it pleaded the defence of justification pursuant to s 25 of the Defamation Act 2005 (NSW) (Defamation Act) and the defence of contextual truth pursuant to s 26.
4. Sections 25 and 26 of the Defamation Act provide as follows: "25 Defence of justification It is a defence to the publication of defamatory matter if the defendant proves that the defamatory imputations carried by the matter of which the plaintiff complains are substantially true. 26 Defence of contextual truth It is a defence to the publication of defamatory matter if the defendant proves that: (a) the matter carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations ("contextual imputations") that are substantially true, and (b) the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations."
5. Capital Press' pleaded contextual imputations were as follows: "(A) The plaintiff is a hypocrite, in that he is the President of a group called 'The Religious Freedom Institute', but in fact actively campaigns to deny Muslims freedom to practice their religion in Australia; (B) The plaintiff is an intolerant person in that he is waging a campaign against the Islamic faith by representing people taking legal action opposing the development of Islamic institutions such as schools and mosques in Australia; and (C) The plaintiff, a Sydney solicitor, is meddling in local planning issues in Canberra by taking an active role in the opposition of the development of a mosque at Gunghalin for the purposes of furthering his own agenda of fighting Islam in Australia."
6. Before Mahony DCJ, Mr Balzola sought orders striking out the contextual imputations pleaded by Capital Press. His Honour declined to strike out Contextual Imputations (A) and (B), on the ground that each differed in substance and kind from the three imputations pleaded by Mr Balzola. However, his Honour considered that Contextual Imputation (C) was not different in kind and struck it out.
7. Mr Balzola, having unsuccessfully sought to strike out Contextual Imputations (A) and (B), sought leave to adopt them in his own pleading. Mr Balzola relied on the Court of Appeal decision in Fairfax Media Publications v Kermode [3] (Kermode) as establishing the principle that it is open to a plaintiff in defamation proceedings to adopt a defendant's pleaded contextual imputations.
8. Mahony DCJ accepted the principle advanced on Mr Balzola's behalf and noted that he had a discretion as to whether Mr Balzola should be given leave to amend. His Honour recorded that Capital Press opposed the grant of leave on the grounds that Mr Balzola had already had ample opportunity to plead his case in the various iterations of his Statement of Claim and that it would be contrary to the overriding purpose stated in s 56 of the Civil Procedure Act 2005 (NSW) ("just, quick and cheap resolution of the real issues in dispute") to allow an amendment to the 2FASC at such a late state in the proceedings.
9. Despite Capital Press' arguments, Mahony DCJ was not persuaded that: [4] "the application comes so late in the proceedings that leave should not be granted to [Mr Balzola] to re-plead the contextual imputations. No issue of prejudice was raised other than that [Capital Press] would lose the advantage of its defence pursuant to s 26. This was the same argument raised in Kermode and [Holt v TCN Channel Nine Pty Ltd [5] ] and rejected by the Court of Appeal. I therefore grant leave to [Mr Balzola] to re-plead contextual Imputations (A) and (B) by way of a [3FASC]."
10. In Balzola (No 2), Gibson DCJ struck out Contextual Imputations (A) and (B) from Capital Press' FAD. Both parties accepted before her Honour that once Mr Balzola was granted leave to plead back the contextual imputations, it was no longer open to Capital Press to rely on them in its defence. This followed from the decision in Kermode, to the effect that a contextual imputation cannot be pleaded in a defence unless it is an imputation "in addition to the defamatory imputations of which the plaintiff complains", within the meaning of s 26 of the Defamation Act.
11. Gibson DCJ stated that although Capital Press had not disputed the correctness of Kermode before Mahony DCJ, it proposed to challenge the decision in its application for leave to appeal from Mahony DCJ's decision.

Capital Press' Contentions

1. Capital Press submits that leave to appeal should be granted to argue two grounds. The first is that the exercise of Mahony DCJ's discretion to permit Mr Balzola to amend the 2FAS miscarried because his Honour paid insufficient attention to the delay in bringing forward the proposed amendment and to the "harsh injustice" that would be caused to Capital Press by depriving it of the defence under s 26 of the Defamation Act. Mr Blackburn SC, who appeared with Ms Barnett for Capital Press, submitted that although Mahony DCJ did not strike out Contextual Imputations (A) and (B) from the FAD, such an order was inevitable once Mr Balzola was permitted to amend the 2FAS to plead the contextual imputations.
2. Secondly, Capital Press submits that it should be permitted to challenge in this Court the correctness of the decision in Kermode. Mr Blackburn contends that doubt has been placed upon the reasoning of Kermode in subsequent cases and that a cogent argument against the conclusion reached by the Court was not advanced in that case.

Ground 1

1. The first ground, considered independently of the correctness of Kermode, challenges the discretionary decision of the District Court on a matter of practice and procedure. Appellate courts exercise particular caution in reviewing interlocutory rulings in matters of practice and procedure. Consequently, the task facing a party challenging a discretionary ruling of this kind is a difficult one. [6] It is ordinarily appropriate to grant leave from such a ruling only where there is an issue of principle involved, or an injustice going beyond what is reasonably arguable. [7]
2. The first ground on which Capital Press relies does not raise any issue of principle. Mahony DCJ considered the matters on which Mr Blackburn now relies, but did not give them the weight that Mr Blackburn says they should have been accorded. While other judges may have exercised the discretion differently, that is not a basis for granting leave to appeal.
3. Nor can it be said that the discretionary decision to allow Mr Balzola to amend the 2FASC, even if incorrect, causes serious injustice to Capital Press. Assuming Kermode to be correctly decided, it remains open to Capital Press (as Mahony DCJ pointed out) to attempt to prove the truth of Contextual Imputations (A) and (B) pleaded back by Mr Balzola. While proving the truth of the contextual imputations might not provide a complete defence if other pleaded imputations are not found to be true, it would be open to Capital Press to rely on the truth of the contextual imputations to reduce any damages award, perhaps to the point where only nominal damages are awarded.
4. Leave to appeal on the first ground should be refused.

Ground 2

1. The argument Capital Press wishes to advance in support of Ground 2 is that an imputation pleaded by the plaintiff in defamation proceedings which is found to be true must constitute a contextual imputation upon which the defendant can rely as a defence under s 26 of the Defamation Act. Mr Blackburn submits that it would be "ludicrous" for a defendant to be placed in the position of having to prove that the defamatory imputations pleaded by the plaintiff, including those found to be true, do not further harm the plaintiff's reputation beyond the harm caused by contextual imputations found to be true.
2. The "principal question" debated in Kermode was: [8] "whether the defence of contextual truth for which s 26 of the 2005 Act provides permits a defendant to 'plead-back' any or all of a plaintiff's imputations."
3. McColl JA, who delivered the leading judgment concluded that s 26 of the Defamation Act required that question to be answered in the negative. Her Honour then summarised the courses of action open to a defendant seeking to justify defamatory material. [9] Her Honour said that a defendant can: "(a) prove that the defamatory imputations carried by the defamatory matter of which the plaintiff complains are substantially true: s 25; (b) prove that rather than the defamatory imputations pleaded by the plaintiff, the defamatory matter carries nuance imputations which are substantially true; (c) to the extent that the defendant fails to establish all the defamatory imputations carried by the defamatory matter of which the plaintiff complains are substantially true, rely on those proved to be true in mitigation of the plaintiff's damages: partial justification; and (d) to the extent the defendant cannot prove that the defamatory imputations carried by the defamatory matter of which the plaintiff complains are substantially true, prove that it carries contextual imputations that are substantially true, by reason of which the defamatory imputations do not further harm the reputation of the plaintiff: s 26."
4. There is a question as to whether this summary is an exhaustive statement of the courses of action open to a defendant. It if is, Mr Blackburn may well be correct to say that a defendant cannot contend that contextual imputations which are adopted by the plaintiff and which the defendant proves to be true, overwhelm the defamatory effect of the imputations pleaded by the plaintiff which are not found to be true. Assuming the summary in Kermode to be exhaustive, the defendant would be limited to a defence of partial justification although, depending on the circumstances, the plaintiff might be awarded only nominal damages.
5. It is, however, by no means certain that the summary stated in Kermode is exhaustive. In Born Brands Pty Ltd v Nine Network Australia Pty Ltd (Born Brands), [10] Basten JA (with whom Meagher JA and Tobias AJA agreed) noted that, on one view, the decision in Kermode was confined to the pleading point. On that view, the Court in Kermode did not need to consider whether a defendant can rely on the plaintiff's imputations that are proved to be true in order to overwhelm the effect of imputations not proven to be true. [11]
6. Basten JA went on to make the following observations: [12] "[83] There is some uncertainty about the precise inter-relationship of the courses of action identified at (c) and (d) [of the Summary in Kermode]. It is clear, however, that the propositions set out in this paragraph were not intended to be an exhaustive statement of the courses available to a defendant. Other defences are available in appropriate cases. … [86] The reasoning in Kermode … appears to assume that the defences in ss 25 and 26 are to be applied sequentially and … in the order in which they appear in the Act. However, there is an alternative reading of the legislation, namely that the tribunal of fact must consider holistically the effect of the defamatory matter on the reputation of the plaintiff, deciding at the end of the day whether, by reference to the imputations pleaded by both plaintiff and defendant, any imputations which have not been shown to be substantially true cause any further harm to the reputation of the plaintiff once the effect of the substantially accurate imputations has been assessed."
7. In the light of these observations in Born Brands it is arguable that, even if a defendant cannot plead any of the plaintiff's imputations as a contextual imputation, the defendant may still be able to rely on the truth of those imputations as "overwhelming" any imputations not proved to be true. That is, a defendant may be entitled to show that the plaintiff's reputation has not been further harmed by the imputations not shown to be true, once the effect of the substantially true imputations has been taken into account.
8. The precise import of the decision in Kermode raises potentially important issues. But this does not necessarily mean that it is appropriate for them to be raised on an application for leave to appeal from an interlocutory decision granting leave to amend pleadings. Once Mahony DCJ's exercise of discretion is put to one side, Capital Press' application for leave to appeal effectively involves a challenge only to the orders made by Gibson DCJ striking out Contextual Imputations (A) and (B) from the FAD.
9. Capital Press' submissions seem to assume that it can rely on the truth of the pleaded back Contextual Imputations (A) and (B) as a defence to Mr Balzola's claim only if it is permitted to retain the contextual imputations in the FAD. The observations in Born Brands suggest that this assumption may not be correct.
10. If the assumption underlying Capital Press' submission is not correct, an appeal against the decision to strike out the contextual imputations from the FAD may not resolve the substantive issue Capital Press wishes to raise. That issue is whether Capital Press can rely on the truth of Contextual Imputations (A) and (B), which Mr Balzola has pleaded back, to demonstrate that Mr Balzola's reputation has not been further harmed by the pleaded imputations not proved to be true, thereby establishing a defence to Mr Balzola's claim in defamation.
11. If Capital Press is given leave to appeal, one possible outcome of the appeal is that the Court rejects the challenge to Kermode on the pleading question, but leaves open the further issues that Born Brands suggests may have to be resolved. The Court hearing the appeal may well take the view that it is premature to attempt to resolve these further issues in the absence of findings as to which, if any, of Mr Balzola's pleaded imputations (including Contextual Imputations (A) and (B)) have been proven to be true. The Court may also be reluctant to go beyond the pleading question because the other issues may never arise in the proceedings. Whether they do arise will depend on findings made at the hearing.
12. If the Court takes this view, a grant of leave to appeal will not necessarily advance the proceedings towards finality. A case that has already been protracted will be further delayed and the parties will incur further substantial costs. A cheaper and more expeditious course is for the matter to proceed to a hearing. This can be done without occasioning serious injustice to Capital Press since, in the event of an unfavourable judgment, it will retain its right of appeal.
13. It is possible, as Mr Blackburn points out, that a successful appeal after final judgment will require a new trial. But that is always a risk, and in any event, the risk will not be eliminated if Capital Press is granted leave to appeal. For the reasons that have been given, a grant of leave to appeal carries the likelihood of further delay and expense without necessarily resolving the real issue in dispute between the parties.
14. Accordingly, leave to appeal should be refused. Capital Press should pay Mr Balzola's costs of the application for leave to appeal.

Endnotes

1. Balzola v Federal Capital Press of Australia Pty Ltd [2015] NSWDC 23 (Balzola No 1).
2. Gibson DCJ made the order on 23 April 2015 but gave reasons on 27 August 2015: Balzola v Federal Capital Press of Australia Pty Ltd (No 2) (District Court, Gibson DCJ, 27 August 2015, unrep) (Balzola No 2).
3. [2011] NSWCA 174; 81 NSWLR 157.
4. Balzola (No 1) at [47].
5. [2014] NSWCA 90; 86 NSWLR 96.
6. Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 at [73] (Ward JA, Emmett and Gleeson JJA agreeing), and authorities cited there.
7. Dank v Cronulla Sutherland at [75] and authorities cited there.
8. Kermode at [15].
9. Kermode at [86].
10. [2014] NSWCA 369.
11. Born Brands at [82].
12. Born Brands at [83], [86]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 September 2015