Benhayon v Rockett (No 9)

1. [1]

   On 9 November 2015, proceedings were commenced by the plaintiff suing the defendant for the contents of an article that she had placed on her web log (“blog”) in November 2014, as well as three comments that she had placed on the same blog in the days immediately following, as well as a tweet.

2. [2]

   On 8 December 2015, an amended statement of claim was filed which added pleadings regarding the publication of some additional imputations.

3. [3]

   Negotiations by exchange of letters of offer were pursued between late December 2015 and early February 2016. These negotiations reached a stalemate, and a formal Defence was filed on 29 February 2016.

4. [4]

   This was followed by a further iteration of the statement of claim which was amended to adopt, in substance, some contextual imputations that had been pleaded by the defendant after an unsuccessful application by the plaintiff to strike out the defence of contextual truth.

5. [5]

   Seventeen further tweets that the defendant had made after the filing of the initial statement of claim were added as additional matters complained of to a further amended statement of claim filed on 28 October 2016.

6. [6]

   The matter proceeded to trial before a jury on 3 September 2018. On 15 October 2018, the jury delivered answers to a series of questions, the effect of which was to make findings overwhelmingly in the defendant’s favour. In particular, the defence of truth was made out to all but four of the imputations, and in respect of these remaining four, contextual truth was found to apply to one of them, honest opinion to apply to every imputation except one, and statutory qualified privilege to apply to every imputation.

7. [7]

   It was, for the defendant, a comprehensive victory and for the plaintiff, a comprehensive defeat.

8. [8]

   In respect of questions that arose pursuant to s 30(1)(c) of the Defamation Act 2005 (NSW), a determination as to whether the opinions expressed related to a matter of public interest (in relation to the defence of honest opinion) and whether the recipients of the matters complained of had an interest, or apparent interest, in having the information on some subject, and that the matters were published to the recipients in the course of giving them information on that subject, were (properly) conceded by counsel for the plaintiff. Accordingly I formally determined those issues in favour of the defendant in my judgment and orders made on 6 December 2018.

9. [9]

   There was entry of judgment in the defendant’s favour in respect of each of the matters complained of on which the trial proceeded, that is numbers 1-3 and 6-22 inclusive, and the proceedings were otherwise dismissed.

10. [10]

    Costs follow the event, (Uniform Civil Procedure Rules 2005 (NSW) r 42.1 (“UCPR”)) and so I ordered that the plaintiff pay the defendant’s costs of the proceedings, reserving the question of whether the plaintiff should pay the defendant’s costs of the proceedings on an indemnity basis. Argument was heard on 6 December 2018 as to indemnity costs and whether I should accede to the defendant’s application to use material discovered but not tendered at the trial.

Offers of settlement

1. [11]

   On 2 February 2016, a written offer of settlement was made by the defendant’s then solicitor.

2. [12]

   This letter of offer had been preceded by a letter of offer dated 21 December 2015. That letter and offer was relied upon as background to and articulation of the available defences that underpinned the defendant’s offer of 2 February 2016.

3. [13]

   It is necessary to set out the content of the letters in full. The 21 December 2015 letter sent by the defendant’s solicitor stated:

4. [14]

   The plaintiff’s solicitor rejected the offer on 24 December 2016:

5. [15]

   The defendant made a further offer in writing to settle the proceedings on 2 February 2016:

6. [16]

   The plaintiff made a counter offer by letter dated 8 February 2016 providing what was in my opinion, an unreasonable and extreme counterproposal, requiring an “apology” that in effect demands that the defendant state publicly that she has acted fraudulently, illegally and with malice:

7. [17]

   It is common ground that no other offers were exchanged.

Statutory test and authorities

1. [18]

   Costs are provided for in s 40 of the Defamation Act:

2. [19]

   As stated in Davis v Nationwide News Pty Ltd [2008] NSWSC 946 at [26]-[27] per McClellan CJ at CL, s 40(2) of the Defamation Act:

3. [20]

   Obviously the defendant here has done significantly better than the offer that she made on 2 February 2016, however this is not a relevant consideration under s 40 of the Act, and I have not been asked to entertain the application for indemnity costs on the basis of any offer of compromise being made pursuant to the UCPR or on Calderbank principles.

4. [21]

   Section 40(1) provides that I may have regard to the way parties have conducted their cases, but it seems to me that s 40(2) mandates that I order that the plaintiff pay costs of and incidental to the proceedings on an indemnity basis, if I conclude that the plaintiff unreasonably failed to accept a settlement offer of the defendant, unless the interests of justice dictate otherwise.

5. [22]

   Counsel for the plaintiff, Mr Olson, submits (correctly with respect), that as a matter of general principle, the purpose of an order under s 40(1)(a) for costs to be assessed on an indemnity basis must remain compensatory, not punitive. He argued that properly read in context, the type of conduct which is likely to attract an order for costs to be assessed on this basis would include conduct which unnecessarily prolongs or overcomplicates proceedings as instances of activity that may amount to a misuse of a party’s superior financial position, to hinder early resolution of the proceedings.

6. [23]

   Mr Olson submitted that whilst expressed as an illustration of a party’s conduct that the court can consider, in the context of s 40(1)(a), when read together with the foundational principle that indemnity costs are compensatory not punitive, an indemnity costs order under s 40(1)(a) should be directed towards conduct that causes a loss or disadvantage to the opposing party, rather than to reflect approbation about unhelpful or even unacceptable conduct on the part of one of the parties to the litigation.

7. [24]

   It is evident that the plaintiff was in a superior financial position to that of the defendant. There was direct evidence of significant wealth amassed by the plaintiff, and, under his control, significant wealth derived from Universal Medicine activities. The solicitor for the plaintiff was made aware early in the proceedings that the defendant did not have financial resources available to her and that she was, soon after the proceedings commenced, bankrupt. Her resources were obviously very limited. During long periods of the litigation she did not have a solicitor acting for her, so correspondence had to be conducted directly between the lawyers at Universal Law and the defendant herself.

8. [25]

   It is in this context that a number of matters were raised in the affidavits tendered in support of the application for indemnity costs, and in the submissions seeking indemnity costs made by Mr Molomby SC on behalf of the defendant.

9. [26]

   There were three broad areas of conduct identified by Mr Molomby SC as conduct I should consider relevant to s 40(1). The first was a request made by Universal Law that the defendant, without the assistance of a solicitor, produce 238 categories of documents for discovery within a 14 day period. This is a remarkably short period of time given the number of categories of documents sought and the logistics of preparing, collating and making the documents available even if the defendant had the resources of a solicitor to assist. A courteous request for extension of time was refused, followed by a threat to approach the court to seek orders and costs. This was, at best, an unreasonable and discourteous approach.

10. [27]

    Second, an 85 page list of documents was provided to the defendant as material responsive to categories for discovery. Obviously such a list contained thousands of documents. Despite repeated requests, Universal Law refused to identify by labelling, which document corresponded to which description in the list. The defendant had to instead undertake the labelling of every document herself manually.

11. [28]

    Whilst this conduct is unhelpful and bordering on obstructive, it did not in my view amount to conduct that caused undue delay or distraction away from early resolution of the proceedings. It seems by this stage, the parties were appropriately pursuing elucidation of each other’s cases and associated interlocutory disputes and arguments were not, in that context, out of place.

12. [29]

    Third, and far more troubling in terms of approach and content of correspondence, is the conduct of Universal Law in correspondence sent at the time of the illness and death of the defendant’s father in late 2017. The defendant notified Universal Law, in the context of needing to complete a litigation task, that her father was seriously ill. She requested that her father’s condition be kept confidential. The response from Universal Law stated:

13. [30]

    This was followed by what was submitted by Mr Molomby SC to be the culmination of oppressive behaviour. On the day of the defendant’s father funeral, a date which had been notified to Universal Law by a polite and low-key request that correspondence in relation to the litigation could avoid that date “out of respect for my family”, a 31 page letter was emailed at 3.59pm directly to the defendant by Universal Law. The defendant had no solicitor on the record for her at this time.

14. [31]

    Whilst it is important to place the letter in context, namely an active and ongoing dispute about discovery of documents, the tone of the letter is unnecessarily peremptory and demeaning. There was no order or compulsion requiring the letter be sent that day. The choice of date seems to have been deliberate. Most concerningly, the letter contains a number of personal insults, directed to the defendant, about her character, professionalism, motivation and probity. For obvious reasons I will not repeat them. They appear in multiple places in the letter, including pages 1, 7, 8 and 13.

15. [32]

    They are at best, unprofessional and most discourteous. They are at worst, bullying and harassment, deliberately deployed at a time when the defendant is likely to be distracted, sad and vulnerable, with the aim of demoralising her about the litigation she was defending.

16. [33]

    There is no place for any such personal remarks and insults in any professional correspondence in legal proceedings. Solicitors have ethical duties and obligations. In that part of the Australian Solicitors’ Conduct Rules dealing with “Fundamental Duties of Solicitors”, a number of ethical duties are stated, including that a solicitor must:

17. [34]

    The timing and circumstances of the correspondence, including these personal insults, as well as the way in which they were phrased, suggests that the solicitor who authored them had a lack of independence from, or objectivity about, the litigation.

18. [35]

    I do not know if Universal Law has any affiliation with Universal Medicine. It may well be a coincidence that their names are similar. The motto of Universal Law is “integritate et luce” which translates from the Latin to “integrity and light”. These precise words, or an English incantation of them, do not appear in any obvious logo or in the work of Universal Medicine to the extent that I can discern. Regardless of this, there may well be a public perception that somehow Universal Law has an affiliation or direct association with Universal Medicine. Whilst Universal Medicine was not a named party to these proceedings, it was entirely evident from the beginning that the plaintiff’s paramount role in Universal Medicine and its activities was a matter that would be the subject of considerable evidence in the proceedings.

19. [36]

    My concerns regarding, in particular, this piece of correspondence, emailed to the defendant on the day of her father’s funeral, has led me to the view that I should take submissions from the parties as to whether I should make a referral of the author of the letter to the Office of the Legal Services Commissioner for investigation for breach of professional conduct requirements.

20. [37]

    Returning to considerations directly relevant to s 40(1)(a), Mr Olson acknowledged that there was a very acrimonious relationship between the parties, “mostly coming from one side” although not specifying to which side he referred, but as Mr Olson correctly submitted, he is not required to defend any acrimonious conduct, except to emphasise that the material set out in the defendant’s affidavits does not establish that the conduct hindered the resolution of the proceedings in any material way.

21. [38]

    I accept Mr Olson’s submissions at that level of generality, however I conclude that early resolution of the proceedings was hindered, and in fact made impossible, by the attitude of the plaintiff to settlement offers.

22. [39]

    I am of the view that the plaintiff’s failure to accept the settlement proposal set out in the defendant’s solicitor’s letter of 2 February 2016 was unreasonable.

23. [40]

    First, the defendant’s offer was made responsibly and at an early stage of the litigation when there had not yet been a significant incurring of legal costs.

24. [41]

    Second, the proposal was made against a background letter which set out with clarity the proposed defences and their parameters, (the 21 December 2015 letter), combined with a sensible apology and proposal of retraction, and an undertaking not to publish anything the same or substantially similar to the matters complained of. Whilst the first offer made on 21 December 2015 provided an insufficient period for acceptance (only three days in the lead up to Christmas Eve), the contents of that letter should and would have been read together with the proposal set out in the 2 February 2016 letter, and formed part of the ongoing negotiations at that time.

25. [42]

    Third, whilst a formal Defence had not yet been filed, the parameters of the defences to be argued were set out in the December 2015 letter. The Defence was filed very shortly after, on 29 February 2016, and it is common ground that the defendant’s offer remained open for acceptance.

26. [43]

    Fourth, the responses of the plaintiff on 24 December 2015 and 8 February 2016, made it very clear that only an outcome that publicly demeaned the defendant and her motivations would be acceptable. The Universal Law letter of 24 December 2016 indicated that the plaintiff would give consideration to a settlement of the proceedings on terms that the defendant, amongst other things, “admitted that she fabricated each of the pleaded imputations sexually vilifying him.”

27. [44]

    The 8 February 2016 letter expressed this in more extreme terms. There is merit in the submission made by Mr Molomby SC that it was apparent from the demands set out in that letter, that the intention of the plaintiff in bringing the proceedings was to coerce the defendant into falsely incriminating herself, and to censor further exposure and criticism of his controversial activities, rather than for the purpose of truly remedying asserted damage to his reputation.

28. [45]

    Fifth, the initial proposal of 21 December 2015 sets out with clarity the identified hurdles for the plaintiff in maintaining proceedings in defamation when there had been extensive publication of a considerable body of negative reviews about him and Universal Medicine, as well as the likely prospect of success of the defence of truth and qualified privilege that had clearly been raised as defences that would be pursued. There was a cogent and reasonable analysis of the potential for public humiliation for the plaintiff that would necessarily be associated with the defences, as well as appropriate reference to the significant costs that would be associated with the trial estimated to last between four to eight weeks.

29. [46]

    The fact than an offer was made, expressed in reasonable terms, at a time early in the proceedings, with an apparently genuine view to compromise and resolution, does not of itself mean that the failure to accept it should be considered to be an unreasonable failure to accept as required by s 40(2).

30. [47]

    However, when viewed in the context of the response of 8 February 2016, the failure to accept the defendant’s offer was unreasonable. The unreasonableness of the plaintiff’s refusal to accept the offer is illustrated by the apparent appetite for public humiliation of the defendant that is evidenced by the terms of the “apology” required by the counterproposal expressed to be “…the basis (and the only basis) on which this matter can settle, being orders made in open court…” (Emphasis added). That appetite diverted the plaintiff from proper assessment of and response to the defendant’s offer.

31. [48]

    As stated by McClellan CJ at CL in Davis, the plaintiff had an obligation to take a reasonable approach to negotiations for the settlement of the proceedings. He did not do so. The interests of justice do not require any order to the contrary and so I order that the plaintiff pay the defendant’s costs of and incidental to the proceedings on an indemnity basis.

Application for leave to use discovered material

1. [49]

   The defendant has made an application for leave to use some categories of the discovered documents that were not admitted into evidence, namely:

2. [50]

   Rule 21.7 of the UCPR prohibits the use of documents discovered in proceedings except by leave of the court, unless the document has been received into evidence in open court:

3. [51]

   Mr Molomby SC submitted that whilst it is true that the defendant has no special standing in relation to an entitlement to use the documents, she is in an unusual situation because she has devoted considerable time and research to examining the activities of Universal Medicine. He submitted that the proceedings have shown that this is an organisation which engages in disturbing activities that prey on the vulnerable and ill and deserve scrutiny both generally and by appropriate authorities.

4. [52]

   Mr Molomby SC submitted that there was a concern that regulatory bodies had not been quick off the mark or easy to persuade in terms of the need to investigate. There are particular concerns relating to the involvement of children in inappropriate sexualised sessions as well as dangerous and bogus healing claims and practices which are all matters of public significance and public interest.

5. [53]

   Also cited in support of the application was the evidence tendered in the proceedings that there had been significant and persistent opposition to attempts to expose the bogus healing claims and practices, often involving personal and professional attacks on any critics. There were repeated attempts to undermine the defendant. There are problems associated with the plaintiff’s ongoing zealous support, including from health professionals who evidence a lack of insight into the dangers of Universal Medicine activities, the deceptive conduct engaged in by the plaintiff and Universal Medicine, and the risk that the plaintiff poses to vulnerable people.

6. [54]

   The plaintiff opposed the application. As stated in Harman v Secretary of State for the Home Department [1983] AC 280 at 308-309 per Lord Keith of Kinkel, the process of discovery entails a very serious invasion of the privacy and confidentiality of a litigant’s affairs, which is only permitted because of the public interest in ensuring that justice is done between the parties. Because of this there is an obligation not to use documents obtained through that process for collateral purposes. Balancing of interests in obtaining documents by compulsion for legal process must be made with the competing public (and private) interest in the maintenance of privacy.

7. [55]

   Whilst it is clear that UCPR r 21.7 provides me with a discretion, the authorities referred to by Mr Olson indicate that special circumstances would need to apply (Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 37 per Brennan J).

8. [56]

   There is no doubt the defendant seeks to be released from her obligations so that she can use the material for the collateral purpose of making complaints to regulatory authorities about the plaintiff and Universal Medicine as well as lobbying for legislative action.

9. [57]

   These are no doubt worthy and important matters, however it is correct, as Mr Olson submitted, that the defendant, as a private individual, has no special standing to make such complaints. There is no recognisable legal interest of hers involved in the proposed uses.

10. [58]

    I accept the submission made by Mr Olson that the purposes for which the defendant seeks to use the discovered material do not amount to special circumstances. I also accept the submission that the material admitted into evidence is easily sufficient to prompt and/or pursue regulatory authorities to investigate and if appropriate, take action against the activities of the plaintiff and Universal Medicine.

11. [59]

    Accordingly, I decline to make an order permitting disclosure of the documents identified that were not tendered in the proceedings. In respect of this part of the application, each party is to pay its own costs.

    1. (1)

       The plaintiff is to pay the defendant’s costs of and incidental to the proceedings on an indemnity basis;

    2. (2)

       The defendant’s application for leave for collateral use of the documents identified in paragraph [49] of this judgment is dismissed, each party to pay its own costs of that application; and

    3. (3)

       The matter is listed at 9:30am on Wednesday 6 March 2019 (or other such date and time as agreed by the parties, and notified to my Associate), for submissions to be made as to why I should not refer Universal Law to the Office of the Legal Services Commissioner for investigation in respect of the conduct raised in paragraphs [29] to [36] of this judgment.