Shane Heal v Sydney Flames Basketball Pty Ltd

1. [1]

   HIS HONOUR: The first defendant, Sydney Flames Basketball Pty Ltd, together with the other five defendants, move the Court to strike out the Statement of Claim and dismiss the proceedings against them. The Statement of Claim by Shane Heal, a former famous Australian basketball player, Olympian and coach of the Sydney Flames, sues the six defendants for damages arising from an allegedly defamatory publication.

2. [2]

   The Sydney Flames is a corporation which conducts a basketball team in the Women’s National Basketball League and is the publisher and operator of a webpage under the name Sydney Flames; content hosted on X with the handle @Sydney Flames; a Facebook account under the name Sydney Flames; and content hosted on Instagram under the account Sydney Flames.

3. [3]

   The second defendant, Hoops Capital Pty Ltd, is the owner and operator of Sydney Flames and is alleged to be in the same position relating to social media and content as the Sydney Flames.

4. [4]

   The third defendant, Paul Smith, is alleged to be the founder and effective controller through Hoops Capital of the Sydney Flames. He is the individual who signed and delivered a letter of suspension to the plaintiff on or about 16 January 2023 and issued, approved and/or authorised the publication regarding the plaintiff on or around 14 February 2023.

5. [5]

   The fourth defendant, Robyn Denholm, is a director, officer and shareholder of Wollemi Capital Group which acquired a significant minority holding in Hoops Capital in 2022; is alleged to be an agent of Sydney Flames and Hoops Capital; was instrumental in the appointment of her daughter, the fifth defendant, as the President of the first defendant; and also a person who issued, approved and/or authorised the publication regarding the plaintiff on or around 14 February 2023.

6. [6]

   The fifth defendant, Victoria Denholm, is, as earlier stated, the daughter of the fourth defendant; the President and/or an agent of Sydney Flames; and an individual who, with others, issued, approved and/or authorised the publication regarding the plaintiff on or around 14 February 2023.

7. [7]

   The sixth defendant, Julian O’Brien, is an employee and/or agent of Sydney Flames; an employee and/or agent of Hoops Capital; the director of communications and media for the Sydney Flames; and another individual who issued, approved and/or authorised the publication regarding the plaintiff on or around 14 February 2023.

8. [8]

   As may be gleaned from the foregoing, the publication on 14 February 2023 was, it is alleged, a publication defamatory of the plaintiff. The details of the Statement of Claim are less relevant to these motions than would ordinarily be the case. Concerns Notices have been served and serious harm has been pleaded. The issue on the motions is the question of estoppel and/or abuse of process.

9. [9]

   In order to understand the issue, it is necessary to trace some history of previous litigation involving the plaintiff. Before doing so, it is appropriate that the alleged imputations arising from the material published be recited. Those imputations are that:

10. [10]

    On 12 March 2021, the plaintiff commenced employment under a fixed term employment agreement which was agreed to expire on 11 March 2024. Complaints were received, it is alleged, by the Sydney Flames from several players on or around 9 January 2023, and on 16 January 2023, the plaintiff was suspended from his employment, on pay, pending the outcome of an external investigation into the complaints.

11. [11]

    On 3 February 2023, a workplace investigation report prepared by lawyers was provided to Sydney Flames. The report detailed the complaints and a conclusion that, in the investigator’s opinion, the complaints were, at least in part, substantiated.

12. [12]

    On the same date, namely 3 February 2023, Sydney Flames advised and/or confirmed to the plaintiff the outcome of the workplace investigation and the content of the investigation report. On 4 February 2023, Sydney Flames delivered to the plaintiff a “show cause letter” seeking to have the plaintiff show cause as to why his employment should not be terminated.

13. [13]

    On 7 February 2024, the plaintiff commenced proceedings in the Fair Work Division of the Federal Court of Australia (hereinafter “the Federal Court Proceedings”), the defendants and/or respondents to which were Sydney Flames (the first defendant herein), Victoria Denholm (the fifth defendant herein) and Paul Smith (the third defendant herein).

14. [14]

    The originating application of 7 February 2024 which commenced the Federal Court Proceedings sought declarations and orders under ss 545 and s 550 of the Fair Work Act 2009 (Cth) for injunctive relief and penalties against each of the respondents in the Federal Court Proceedings.

15. [15]

    The declaration sought against the first respondent was that it had contravened s 340 of the Fair Work Act in each of the following ways: by issuing its letter of 16 January 2023; by requiring that the applicant not attend the workplace, nor undertake any duties or contact team members and employees pending completion of the investigation; by commencing and undertaking the investigation against the applicant; by making findings of misconduct against the applicant in its letter of 3 February 2023 despite various unanswered requests by the applicant for information and concerns raised by the applicant; and by proposing to terminate the employment of the applicant by its show cause letter of 4 February 2023. It was said that the foregoing was “adverse action” prohibited by s 340 of the Fair Work Act. The declarations sought against the second and third respondents were that they were involved in the contraventions of the first respondent as described by s 550 of the Fair Work Act.

16. [16]

    The Fair Work Act defines adverse action and a workplace right. The terms of ss 340, 341 and 342 are:

17. [17]

    On 7 February 2023, the Federal Court granted expedition of the hearing of the application including mediation on 9 February 2023. The orders of 7 February 2023 also restrained Sydney Flames from terminating the employment prior to the close of business on 15 February 2023, on which date the matter was returnable before the Duty Judge in the Federal Court. The mediation was unsuccessful.

18. [18]

    On 15 February 2023, the first respondent, Sydney Flames, undertook to the Court not to terminate the plaintiff’s employment before 5pm on the last day of the final hearing as to liability in the proceedings. The matter proceeded by way of pleadings and the plaintiff filed a Statement of Claim on 31 March 2023.

19. [19]

    The Federal Court Statement of Claim described the issuing of the publication on 14 February 2023 as the Tenth Incident of Adverse Action, seemingly on the basis that the plaintiff had been directed not to refer directly or indirectly to the existence of the investigation or the matters that were the subject of the investigation. The Statement of Claim claimed loss and damage, being loss of income, including annual leave entitlements which were required to be utilised during the course of the suspension; loss of opportunities to pursue additional employment opportunities; and harm to reputation, hurt, humiliation and injury suffered by reason of the unlawful adverse conduct engaged in by the respondents.

20. [20]

    Further, as already stated, a declaration was sought pursuant to the terms of s 545 of the Fair Work Act that the issuing of the media statement publicly discussing the “Allegations and Investigation” against the plaintiff was adverse action against the plaintiff.

21. [21]

    The application was opposed and the respondents to the Federal Court proceedings filed their defences.

22. [22]

    It is sufficient to summarise part of the defence filed on behalf of Sydney Flames insofar as is directly relevant to the issues before the Court in these proceedings. Sydney Flames admitted that it issued a media statement which referred to allegations of bullying by the plaintiff, the investigation into the plaintiff’s conduct and the Federal Court Proceedings. It did not otherwise admit paragraph 54, being the relevant paragraph in the Statement of Claim, but alleged that by the date of the publication, the matters that were the subject of the media statement were already the subject of media articles, which were not the result of any action taken by Sydney Flames or its officers, agents or employees.

23. [23]

    The defence also pleaded that the Federal Court Proceedings had been commenced by 14 February 2023 (the date of the media statement); the Federal Court had informed the parties that it had received requests from the media for access and that access was to be granted at least to the originating application; and the originating application disclosed the investigation against the plaintiff, the findings of misconduct in the Investigation Report, and that the Sydney Flames were proposing to terminate the applicant’s employment; and, in so doing, the statement of 14 February was factually accurate and did not disclose matters that were not already the subject of media articles or available to the media by means of access to the Originating Application.

24. [24]

    The defence filed by other respondents to the Federal Court Proceedings, while differing as to responsibility for the publication of the 14 February statement, did not do other than adopt the response of the Sydney Flames.

25. [25]

    On 19 April 2024, Halley J of the Federal Court issued judgment, the matter having been listed over seven days from 30 June to 7 August 2023.

26. [26]

    In the course of his reasons for judgment, the learned judge said:

27. [27]

    Essentially, the defendants in these proceedings submit that the plaintiff is estopped from proceeding for damages under the cause of action in defamation as a consequence of the Federal Court Proceedings, on the basis of issue estoppel, Anshun estoppel and/or abuse of process.

The principles on estoppel

1. [28]

   It is unnecessary for the Court to deal with all species of estoppel known to the law. That which is relevant is estoppel, including abuse of process, arising from prior litigation. Thus, the equitable remedies associated with estoppel are, for present purposes, irrelevant. It is also unnecessary to deal with the doctrines of “merger” or “res judicata”.

2. [29]

   Rather, the Court is required to deal with that which operates as a rule of law to prevent or preclude the assertion of a right or obligation or the raising of an issue of fact or law. [2]

3. [30]

   In Tomlinson, the High Court described three forms of estoppel that have been recognised by the common law of Australia arising from a final judgment in proceedings. The majority in Tomlinson said: [3]

4. [31]

   Notwithstanding the earlier comments that res judicata was not relevant to the objections raised by the defendants in these proceedings, it is necessary to understand the distinction between res judicata and issue estoppel in order to understand the breadth and limitations on issue estoppel. The classic clarification was contained in the reasons for judgment of Dixon J in Blair v Curran [4] in which his Honour said:

5. [32]

   The foregoing principles inform the determination of the issues between the parties. Fundamentally, the issue is whether the cause of action in defamation, or an aspect of it relating to the damage caused by the publication, was necessarily resolved as a step in reaching the determination made in the Federal Court Proceedings. Are the controversies or some aspect of it that is essential to each of them substantially the same in each of the controversies? The answer to that question is not altogether straightforward.

The defendants’ submissions

1. [33]

   It is necessary to briefly outline the defendants’ submissions. As one would expect, the submissions of the fourth and fifth defendants and the submissions of the first, second, third and sixth defendants are to a similar effect. Essentially, each submits that the plaintiff alleged that the media statement by the Sydney Flames constituted adverse action taken against him by the respondents, who are some of the defendants in the proceedings.

2. [34]

   The claim in the Federal Court Proceedings, as is clear from the foregoing summary, agitated that the plaintiff had suffered “harm to reputation, hurt, humiliation and injury” as a result of the unlawful adverse conduct, which included the publication of the media statement. The plaintiff sought compensation for that unlawful adverse conduct which resulted in the “harm to reputation, hurt, humiliation and injury”.

3. [35]

   The fourth and fifth defendants submit that implicit in the reasons for judgment of Halley J that the statement did not disclose anything not already in the public arena is that the publication of the media statement did not prejudice the plaintiff. In the sense there used, the fourth and fifth defendants submit that the plaintiff could not have been worse off after its publication than he was before and that, therefore, the plaintiff’s reputation had not been harmed.

4. [36]

   Further, the fourth and fifth defendants submit that, even if the Court was not convinced that the effect of the judgment of the Federal Court was as submitted by them, the principle that the plaintiff should have taken and ought reasonably to have taken the defamation proceedings in the earlier Federal Court Proceedings, results in the plaintiff being prevented from taking them now, under the principles applying to Anshun estoppel.

5. [37]

   Over and above the foregoing, the fourth and fifth defendants submit that the present proceedings are “unjustifiably vexatious and oppressive to the fourth and fifth defendants” because it will inevitably lead to a repeat of the same evidence and the agitation of the same issues that have previously been determined in the Federal Court Proceedings.

6. [38]

   The submissions of the first, second, third and sixth defendants are to like effect, the necessary changes being made. The said defendants rely upon the same principles, although more obviously on Anshun estoppel than cause of action estoppel, and point out that the Federal Court Proceedings involved a claim for economic loss as well as harm to reputation, hurt, humiliation and injury, which damage was sought and is sought in each of the proceedings.

7. [39]

   Apart from relying upon Anshun estoppel, the first, second, third and sixth defendants rely upon abuse of process (as to a lesser degree do the fourth and fifth defendants) and upon the principles already recited to which the High Court referred in Tomlinson.

8. [40]

   The first, second, third and sixth defendants also rely upon issue estoppel in relation to whether harm has been occasioned and the level of damage caused. In doing so, the said defendants refer to the conclusion of Halley J that “no harm” had been occasioned and rely on the highlighted passage, recited above, at [295] of his Honour’s judgment.

The plaintiff’s submissions

1. [41]

   Essentially, the plaintiff submits that the claim in the Federal Court Proceedings was a claim in “industrial law” and the findings relate not to defamation, but to civil remedies associated with adverse action in the employment context and confined to that context.

2. [42]

   In terms of Anshun estoppel, the plaintiff submits that given the very specialised nature of the proceedings before the Federal Court, it was not reasonable to expand the proceedings to include a claim for defamation, which would require different legal representatives and an enlargement and expansion of the matters that were before the Federal Court in a way that would undermine the urgency and expedition that had otherwise been granted.

Consideration

1. [43]

   The Fair Work Act is necessarily confined by the constitutional limits of the Australian Parliament. The legislation in question was enacted under the incidental powers in s 51(xxxix) of The Constitution, being matters largely incidental to laws with respect to foreign, trading or financial corporations from within the limits of the Commonwealth (s 51(xx) of The Constitution).

2. [44]

   The foregoing is not intended to suggest that there are relevant limitations on the operation of the Fair Work Act, only that the Fair Work Act does not deal with defamation or damages arising from defamation. Rather, it deals relevantly with protection to employees from adverse action taken by their employer.

3. [45]

   The protection to employees is a protection to the employee in her or his capacity as an employee. Action taken against a person in that person’s capacity as a consumer, for example, even if taken by the person’s employer, who may also sell goods, is not covered by adverse action, unless, somewhat unusually, it may have been motivated by the consumer’s position as an employee and, therefore, taken as adverse action against the person in their capacity as an employee.

4. [46]

   The publication of defamatory material which contains imputations against a person who happens to be an employee is not, in and of itself, adverse action. Ordinarily, the commencement and processing of proceedings against a person’s employer for adverse action and protection of rights under the Fair Work Act would not form a basis for stopping the person, in a different capacity, from proceedings in tort, including defamation.

5. [47]

   I do not consider it reasonable for the plaintiff to have expanded the proceedings before the Federal Court to include defamation proceedings, particularly in circumstances where the defamatory material was published at a point in time after the commencement of the Federal Court Proceedings. However, this does not answer the objection taken by the defendants.

6. [48]

   While there is much merit in the submission of the plaintiff, particularly having regard to the comments of Halley J as to how his Honour found damages or the lack thereof, there is one fundamental difficulty with the plaintiff’s submission. What would have happened if Halley J had found that there was damage in the nature of adverse action occasioned by the publication of the material that is defamatory material in the proceedings now before this Court?

7. [49]

   If that hypothetical were to have been the case, the damages arising from the publication would have been the subject of compensation. It cannot seriously be suggested, in such a circumstance, that the plaintiff in these proceedings would be entitled to further damages arising from the same publication. Such a course would be inconsistent with fundamental rules associated with the awarding of damages once only for that which has occurred.

8. [50]

   The foregoing hypothetical still does not totally answer the problem. The Federal Court judgment did not quantify the damages because the Federal Court held that there was no adverse action.

9. [51]

   However, one of the bases for the finding that no adverse action occurred was that the allegedly defamatory matter did not damage the plaintiff. Thus, the Federal Court has reached a conclusion, which was a necessary aspect of the proceedings, that deals with a fundamental aspect of the proceedings now before this Court. As earlier remarked, estoppel arising from prior litigation precludes the raising in subsequent proceedings of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the earlier judgment.

10. [52]

    Once one reaches the conclusion as to the finding of Halley J on the absence of damage arising from the impugned publication, the answer to the foregoing hypothetical gives the answer to the objection made by the defendants. The plaintiff, in his capacity as the applicant in the Federal Court Proceedings, sought from the Federal Court damages from the publication of the defamatory material. He claimed those damages in his capacity as an employee because it was said to be adverse action which was protected by the Fair Work Act. However, the damages are identical.

11. [53]

    The fundamental difficulty is that the Federal Court dismissed the proceedings on liability. The reasons for judgment of Halley J made clear that the Federal Court considered there was no “adverse action” and therefore, that which under the Fair Work Act is called compensation was not available.

12. [54]

    However, the Federal Court determined that it was not adverse action because no damage was caused by the publication. If damage were to have been caused, then compensation would have been available which would have been the equivalent to damages for the publication of defamatory material. Estoppel cannot depend on the result of the necessary finding. It depends upon the necessity for the finding.

13. [55]

    On that basis, to seek damages for defamation is an abuse of process and the abuse of process applies to prevent the proceedings being taken against any of the defendants, even those for whom no issue estoppel or cause of action estoppel would run.

14. [56]

    For these reasons, the Court makes the following orders:

    1. (1)

       Judgment on the motions for the defendants;

    2. (2)

       Proceedings dismissed;

    3. (3)

       The plaintiff shall pay the defendants’ costs of and incidental to the proceedings.