Walking the Tightrope: When to Consider Capacity Applications in Litigation

Introduction

The decision in M -v- P [No 3] [2024] WASC 123 provides guidance on the approach courts take when considering applications regarding a litigant's capacity.

Justice Lundberg's judgment illuminates the delicate balance courts must strike between protecting potentially vulnerable litigants and respecting individual autonomy. This decision carries particular significance for practitioners faced with opposing self-represented litigants whose capacity may be questionable, offering a roadmap for appropriate procedural steps while highlighting the evidentiary threshold required for such applications.

The case reinforces the Court's protective jurisdiction while demonstrating judicial reluctance to make declarations of incapacity without proper evidence. It establishes an intermediate pathway through referral to the Public Advocate that practitioners should note when contemplating similar applications.

Background of Relevant Case Law

The principles applicable to applications under Order 70 of the Rules of the Supreme Court 1971 (WA) ('RSC') have been developed through several key decisions.

In A v City of Swan [No 5] [2010] WASC 204, Murphy JA provided a detailed analysis of the Court's parens patriae jurisdiction and the principles governing determinations of capacity. His Honour emphasised that capacity is not a fixed standard but fluctuates according to the legal character, complexity, and significance of the matter in question.

More recently in Snook v Magistrate Trevor Darge [No 2] [2024] WASC 91, Seaward J summarised the applicable principles, noting that proof of complete incapacity is not required, and that a person can lack mental capacity to participate in legal proceedings whilst still being capable of performing the usual activities of daily life.

The Court in Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264 established a procedural framework for seeking assistance from the Public Advocate in determining questions of capacity, which Justice Lundberg adopted in the present case.

Facts of the Case

M -v- P [No 3] concerned a defamation action brought by an unrepresented plaintiff against the defendant, both of whom were medical practitioners (at [1]). The action, which had been on foot for over a year, involved allegations of defamation through "several oral and written communications allegedly published by the defendant" with "around 18 publications identified in the pleadings" (at [1]).

The plaintiff was engaged in multiple disputes across various courts and tribunals, all whilst self-represented (at [1]-[2]).

The defendant applied for an order that the plaintiff be declared a person under a disability by reason of mental illness, defect or infirmity, within the meaning of paragraph (c) of the definition of 'person under disability' in Order 70 rule 1 of the RSC (at [3]).

Order 70 RSC relates to the Court's parens patriae jurisdiction, which derives from "the inherent obligation of the Crown to care for those who are unable to care for themselves" and is expressly conferred by s 16(1)(d) and s 23 of the Supreme Court Act 1935 (WA) (at [5]).

Significantly, the defendant did not present any medical evidence in support of the application (at [14]) but rather invited the Court to draw inferences about the plaintiff's capacity from the plaintiff's conduct, communications, and court documents.

The defendant presented an alternative pathway in the event the Court was not prepared to make an immediate declaration, proposing orders that would request the Public Advocate investigate and report on whether the plaintiff had the ability to make reasonable judgments about the conduct of the proceedings (at [7]-[8]).

The plaintiff strongly opposed the application, filing multiple submissions totalling 87 pages and a 156-page affidavit (at [15]).

Analysis of the Court's Reasoning

Justice Lundberg commenced his analysis by acknowledging the serious nature of the application and the Court's duty to consider whether a person has the requisite capacity when put on notice (at [19]). His Honour emphasised the risk that any final determination of the action could later be challenged as irregular if the plaintiff were subsequently found to be under a disability (at [20]).

The Court accepted the following principles from Snook v Magistrate Trevor Darge [No 2] (at [21]):

1. There is no fixed standard of mental capacity required at law

2. The standard fluctuates according to the legal character, complexity and significance of the matter

3. Proof of complete incapacity is not required

4. A person can lack capacity for legal proceedings while still managing daily activities

5. The Court must consider whether the person can understand the case, make decisions, and give instructions

6. Self-represented litigants are held to a higher standard of capacity than those with legal representation

Justice Lundberg stressed the serious consequence of a declaration under Order 70 RSC - namely, that it would "preclude the individual exercising their right to prosecute, compromise or participate in the specific litigation in their own name" (at [22]).

Rather than determining the application on the material before the Court, His Honour opted for the alternative pathway of seeking assistance from the Public Advocate (at [24]), but only after satisfying himself that the application had a "reasonable basis of succeeding" (at [24]).

The Court found that the defendant had raised the issue in a "legitimate manner" and that there was material capable of supporting the declaration sought (at [25]). This conclusion was reached after considering:

1. The material in the plaintiff's submissions and affidavit

2. The Court's own observations of the plaintiff in several appearances since early 2023

3. The "volume of the material adduced by the plaintiff and the nature of the serious allegations he raises"

4. The manner in which the plaintiff articulated allegations, which "goes well beyond the ordinary language of a passionate or zealous litigant in person" (at [26])

Of particular note, Justice Lundberg observed that the plaintiff's affidavit material contained "lengthy personal accounts of the plaintiff's life, his family and background, personal photographs one would not expect to be adduced in evidence in this action, and personal and intimate WhatsApp and text messages, as well as records of voicemail messages" - all deemed irrelevant to both the application and the proceeding (at [27]).

The Court also highlighted the plaintiff's "intense focus on those who stand against him" and "the belief that there is a network of people coordinating actions against him" (at [28]).

Justice Lundberg considered the complexity of defamation actions and the significant decisions a plaintiff would ordinarily need to make regarding pleadings, evidence, and responses to defences (at [29]).

Ultimately, the Court decided to request assistance from the Public Advocate under s 97(1)(c) of the Guardianship and Administration Act 1990 (WA) (at [30]-[31]), with specific orders structured to facilitate this assistance while preserving procedural fairness (at [37]).

Quantification and Assessment Aspects

Justice Lundberg's judgment provides valuable guidance on how courts assess a litigant's capacity in the absence of direct medical evidence. The Court identified several quantifiable factors that may indicate capacity concerns:

1. The volume of material produced by a litigant (the plaintiff filed 87 pages of submissions and a 156-page affidavit)

2. The relevance of material to the proceedings (substantial irrelevant personal content was noted)

3. The nature and manner of allegations made (references to "criminal networks" and conspiracies)

4. The complexity of the underlying proceedings (defamation involving multiple publications)

5. The litigant's conduct in court proceedings over time

The Court acknowledged that drawing inferences about capacity from these factors is "legitimate" (at [14]) but also that "the absence of direct medical evidence renders an applicant's task of discharging its burden of proof more onerous" (at [14]).

The judgment establishes that the threshold for referring the matter to the Public Advocate is that "the application has a reasonable basis of succeeding" (at [24]), which is evidently lower than the threshold for making the declaration itself.

Worked Example: Practical Application

Consider a solicitor representing a defendant in a complex commercial dispute where the unrepresented plaintiff exhibits concerning behaviours:

Scenario: The plaintiff has filed multiple, excessively lengthy submissions containing irrelevant personal information, makes allegations of widespread conspiracy against various institutions, demonstrates an inability to focus on relevant legal issues despite judicial guidance, and produces volumes of irrelevant evidence.

Step 1: Document all instances of concerning conduct or communications

• Compile court transcripts showing the plaintiff's inability to follow judicial directions

• Collate all written communications demonstrating disorganised thinking or paranoid ideation

• Catalogue filed documents showing irrelevant content or inability to address legal issues

Step 2: Assess whether the conduct crosses the threshold from merely vexatious to suggesting incapacity

• Compare to established case law (e.g., M -v- P [No 3], A v City of Swan [No 5])

• Consider the complexity of the particular proceedings and demands on the litigant

• Evaluate whether the conduct suggests an inability to understand the proceedings or make reasonable judgments

Step 3: Consider the ethical implications and proportionality

• Is the application genuinely in the interests of justice, or merely tactical?

• Are there less intrusive alternatives available?

• What impact would the application have on the proceedings and the plaintiff?

Step 4: Frame the application with appropriate sensitivity

• Propose the "alternative pathway" approach rather than seeking an immediate declaration

• Structure orders similar to those in M -v- P [No 3] requesting Public Advocate assistance

• Ensure all evidence presented is objective and factual, avoiding speculation

Step-by-Step Guidance for Practitioners

When faced with a potentially incapacitated opposing party, practitioners should:

1. Maintain detailed records of all interactions with the opposing party, particularly noting:

   • Inability to understand or engage with legal concepts

   • Persistent irrelevant submissions or evidence

   • Paranoid or delusional thinking in correspondence or submissions

   • Inability to follow court directions or understand procedural requirements

2. Consult the relevant procedural rules governing capacity in your jurisdiction (e.g., Order 70 RSC in Western Australia)

3. Consider whether the threshold for intervention is met:

   • Is there a genuine basis for concern beyond mere frustration with a difficult litigant?

   • Does the conduct go "well beyond the ordinary language of a passionate or zealous litigant in person"?

   • Is the nature of the proceedings sufficiently complex to require a higher standard of capacity?

4. Explore alternative pathways:

   • Consider whether a less intrusive approach might assist the opposing party

   • Identify relevant support services or authorities (e.g., Public Advocate) that might provide assistance

5. Frame the application appropriately:

   • Seek preliminary assistance from appropriate authorities before requesting declarations

   • Structure proposed orders to allow for investigation before determination

   • Request the court's guidance on procedure

6. Prepare for procedural delays:

   • Advise clients that such applications may extend timeframes

   • Consider whether interim arrangements are necessary

7. Maintain proportionality:

   • Ensure the scope of any application is confined to the specific proceedings

   • Avoid unnecessarily broad declarations that might impact the opposing party's autonomy in other matters

Evidence and Arguments for Each Side

For the Applicant (Party Questioning Capacity)

Evidence:

• Court documents containing irrelevant, excessive, or disorganised content

• Transcripts demonstrating inability to follow judicial guidance or respond to questions

• Correspondence showing paranoid ideation or delusional thinking

• Witness evidence of behaviour in court or mediation settings

• Expert evidence (if available) regarding the cognitive demands of the specific proceedings

Arguments:

• The Court has a duty to ensure parties can meaningfully participate in proceedings

• Allowing proceedings to continue risks injustice to both parties

• The complexity of the proceedings requires a certain level of capacity

• The Court's parens patriae jurisdiction is protective, not punitive

• The alternative pathway approach provides appropriate procedural safeguards

For the Respondent (Party Whose Capacity is Questioned)

Evidence:

• Evidence of capacity to manage other aspects of life

• Examples of logical and coherent submissions or correspondence

• Evidence of previous successful litigation management

• Character evidence from professional colleagues or associates

• Expert evidence (if available) supporting capacity

Arguments:

• The presumption of capacity must be respected

• Passionate or unusual advocacy is not equivalent to incapacity

• The application represents an attempt to impede access to justice

• Less restrictive alternatives have not been explored

• The absence of medical evidence is fatal to the application

• The serious consequences for civil rights require a high evidentiary threshold

Key Takeaways for Legal Practice

1. Evidence threshold: While medical evidence is not strictly required for capacity applications, its absence significantly increases the burden of proof on the applicant.

2. Alternative pathways: Courts may prefer a staged approach involving investigative assistance from authorities such as the Public Advocate before making declarations.

3. Contextual assessment: Capacity requirements fluctuate according to the nature and complexity of the proceedings - defamation actions, with their complexity, demand a higher standard.

4. Preserving autonomy: Courts remain conscious of the serious impact of declarations on individual autonomy and will only intervene where genuinely necessary.

5. Tactical considerations: Practitioners must ensure capacity applications are genuinely motivated by legitimate concerns rather than tactical advantage.

6. Self-representation factor: Courts recognise that self-represented litigants require a higher standard of capacity than those with legal representation.

7. Documentation importance: Systematic documentation of concerning conduct or communications is essential for establishing sufficient grounds for investigation.

Conclusion

M -v- P [No 3] offers a nuanced approach to the challenging intersection of mental capacity and litigation rights. The judgment reinforces the Court's protective role while establishing procedural safeguards that respect individual autonomy. By adopting the "alternative pathway" of seeking Public Advocate assistance, Justice Lundberg has demonstrated a balanced approach that other courts may follow.

For practitioners, the case underscores the need for careful consideration before initiating capacity applications, the importance of thorough documentation, and the value of structured, proportionate approaches that prioritise investigation before declaration.

The decision ultimately serves as a reminder that while the legal system must protect vulnerable individuals, it must do so with appropriate restraint and procedural fairness, recognising that declarations of incapacity represent a significant limitation on fundamental rights of access to justice.

The Significance of Apologies in Defamation Proceedings: Analysis of Wright v de Kauwe

1. Introduction

The Western Australian Court of Appeal's decision in Wright v de Kauwe [2024] WASCA 51 provides guidance on the significance of apologies in defamation proceedings, particularly in the context of settlement offers.

The case illuminates how courts assess the adequacy of apologies when determining whether a plaintiff's rejection of a settlement offer was reasonable for costs purposes.

The Court's analysis offers insights into the relative importance of monetary and non-monetary elements in defamation settlements, emphasising that vindication of reputation through an appropriate apology can be as significant as financial compensation.

This decision is noteworthy for its detailed consideration of how courts should approach the adequacy of proffered apologies when exercising costs discretion following a plaintiff's rejection of Calderbank offers. It provides authoritative guidance on a previously underdeveloped area of law concerning the intersection of apologies, settlement offers, and costs consequences in defamation proceedings.

2. Background of Relevant Preceding Case Law

The Role of Apologies in Defamation Law

Apologies have long held a special place in defamation law, serving multiple purposes:

1. Statutory recognition: Section 38(1)(a) of the Defamation Act 2005 (WA) specifically recognises that an apology is evidence in mitigation of damages. Section 20 protects apologies from being admissible in determining fault or liability.

2. Vindication of reputation: As noted in Cassell & Co Ltd v Broome [1972] AC 1027, an apology can serve to vindicate a plaintiff's reputation where monetary compensation alone may be insufficient.

3. Settlement context: In Ford Motor Co of Australia Ltd v Lo Presti [2009] WASCA 115, the Court established principles for assessing Calderbank offers, including "the extent of the compromise offered" as a relevant factor.

4. Costs consequences: In Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96, the Court emphasised that in determining whether rejection of an offer was unreasonable, "all relevant facts and circumstances must be considered" including the extent of compromise offered.

Prior to Wright v de Kauwe, there was limited guidance on how courts should weigh the adequacy of apologies when assessing whether rejection of a settlement offer was reasonable for costs purposes.

3. Detailed Facts of the Case

The Defamatory Publications

Dr Brendan de Kauwe brought a defamation action against Mr Matthew Wright, five director defendants (Mr Cohen, Mr Saad, Ms Shenhar, Mr Gilboa, and Mr Karasik) and Mr Pamensky. Dr de Kauwe and the director defendants were directors of eSense Lab Ltd, and Mr Pamensky was its company secretary [96].

The trial judge found that Dr de Kauwe had been defamed by imputations in four publications:

1. A letter from three director defendants to Dr de Kauwe on 5 February 2018 [97(1)]

2. A letter from Mr Cohen to Dr de Kauwe on 15 February 2018 [97(2)]

3. An announcement by eSense to the ASX on 13 March 2018 (First ASX Announcement) [97(3)]

4. An announcement by eSense to the ASX on 21 March 2018 (Second ASX Announcement) [97(4)]

The defamatory imputations included that Dr de Kauwe was not fit to be a director, was a blackmailer and extortionist, and had engaged in conduct warranting investigation [136-137].

Settlement Offers and Proposed Apologies

The defendants made several Calderbank offers:

1. 17 August 2020: $500,000 plus costs and an apology [289-290]

2. 14 October 2020: $650,000 plus costs and an apology [289-290]

3. 26 January 2021: $750,000 plus costs and an apology [289-290]

4. 27 January 2021: $850,000 plus costs and an apology [289-290]

5. 28 January 2021: $850,000 plus costs and an apology [289-290]

The proposed apology in each offer was identical and stated:

"We the undersigned (Haim Cohen, Ilan Saad, Galit Shenhar, Eran Gilboa, Benjamin Karasik and Ian Pamensky) each accept that we variously published or caused to be published 2 ASX announcements released to the market and to other parties by eSense-Lab Ltd in 2018. In the ASX announcements various allegations were made concerning Dr de Kauwe, which we accept were defamatory of him.

We sincerely and unreservedly apologise for the damage, hurt, distress and embarrassment that we have caused to Dr de Kauwe and we fully and unreservedly retract the defamatory allegations we made.

We hereby undertake to refrain from making any further such statements regarding Dr de Kauwe in the future." [290]

Notably, Mr Wright was not a signatory to the proposed apology.

4. Analysis of the Court's Reasoning

The Trial Judge's Approach to Apologies in Settlement Offers

The trial judge found that Dr de Kauwe's rejection of the Calderbank offers was not unreasonable, in part because the proposed apology was inadequate. The trial judge identified several limitations in the apology:

1. It referred only to the ASX Announcements and not to the defamatory letters [304]

2. The defendants made no offer to publish it to a wider audience [305]

3. It did not identify the specific allegations being retracted [306]

4. The settlement was "without any admission of liability" which detracted from the apology's value [307]

The trial judge stated that "in settlement of defamation claims the offer and terms of an apology is of paramount importance" [319] and concluded that "the inadequacy of the apology... is of itself a sufficient reason to make Dr de Kauwe's failure to accept the offer not unreasonable" [320].

The Court of Appeal's Analysis

Mitchell JA (with whom Buss P and Lundberg J agreed) concluded that the trial judge did not make an error of principle in his approach to the significance of the apology. The Court held:

1. Weight versus error of principle: The director defendants' complaint that the trial judge placed "excessive weight" on the terms of the apology did not disclose a proper basis for appellate intervention [324].

2. Significance of apologies in defamation: It is open to a trial court to give significant weight to the adequacy or inadequacy of an apology proffered as part of a settlement offer when assessing whether rejection was unreasonable [325].

3. Statutory context: The Court noted the significance of apologies in the Defamation Act, including their role as evidence in mitigation of damages under s 38(1)(a) and in offers to make amends under s 18 [325].

4. Holistic approach: Mitchell JA emphasised that the trial judge had considered all the circumstances, with the apology being only one factor (albeit an important one) [326].

5. Vindication versus compensation: The Court recognised that "the publication of a judgment of the court provides for its own vindication of a plaintiff's reputation. Where a private settlement is offered, there will ordinarily be no public vindication of the plaintiff's reputation except to the extent that a public apology is offered by the defendant" [328].

The Court rejected the argument that the trial judge had erred in principle by elevating the significance of the apology, finding that the judge had properly considered all relevant circumstances.

5. Quantification and Assessment Aspects

Balancing Monetary and Non-Monetary Elements

The Court's approach demonstrates the need to balance monetary and non-monetary elements when assessing the adequacy of settlement offers in defamation cases:

1. Comparing monetary value: The trial judge compared the settlement sum offered ($650,000-$850,000) with the judgment eventually obtained ($530,880 plus interest of $72,262.82, totalling $603,142.82) [297-302].

2. Costs considerations: The difference between costs taxed on a special costs order basis versus party/party costs was taken into account when comparing the offers to the judgment [300-301].

3. Vindication value: The Court recognised that an apology offers vindication that monetary compensation alone cannot provide, particularly where a private settlement precludes the vindication provided by a judgment [328].

4. Timing factors: The timing of offers and time allowed for consideration were relevant factors, with the Court noting that some offers were open for unreasonably short periods close to trial [312-315].

The Court's analysis reinforces that quantifying the adequacy of settlement offers in defamation cases requires consideration of both the monetary value and the qualitative aspects of proposed apologies.

6. Worked Example of Practical Application

Perspective A: Plaintiff's Counsel

Scenario: Your client has been defamed by publications alleging professional misconduct. The defendant has offered $200,000, costs on a party/party basis, and an apology.

Application of Wright v de Kauwe principles:

1. Assess apology adequacy:

   • Does it address all defamatory publications or only some?

   • Does it clearly identify and retract the defamatory imputations?

   • Is it offered without qualification or undermined by denial of liability?

   • Will it be published to reach the same audience as the defamation?

2. Monetary assessment:

   • Compare offer amount to likely damages plus interest

   • Consider difference between party/party costs and potential special costs order

   • Calculate overall difference between offer and potential judgment value

3. Timing considerations:

   • Is sufficient time allowed for proper consideration of the offer?

   • Is the offer made close to trial when preparation costs are high?

4. Advise client: "While the monetary offer of $200,000 appears reasonable, the apology is inadequate because it doesn't clearly identify the imputations being retracted and wouldn't reach the same audience as the original publication. Based on Wright v de Kauwe, rejection would likely not be considered unreasonable for costs purposes."

Perspective B: Defendant's Counsel

Scenario: Your client has published material that may be defamatory. You are preparing a Calderbank offer.

Application of Wright v de Kauwe principles:

1. Design comprehensive apology:

   • Address all potentially defamatory publications

   • Specifically identify the imputations being retracted

   • Provide for publication to reach similar audience as the defamation

   • Consider whether unqualified acceptance of defamatory nature is possible

2. Structure monetary component:

   • Ensure offer covers likely damages plus reasonable interest

   • Consider offering costs on a more generous basis than party/party

   • Calculate potential value difference if special costs order were made

3. Timing strategy:

   • Allow reasonable time for consideration (at least 14-21 days)

   • Make offer well before trial preparation intensifies

4. Advise client: "To maximize costs protection, your apology should address both publications, specifically acknowledge the false imputations, and be published on your website. The monetary offer should exceed your counsel's assessment of likely damages by at least 20% to account for interest and costs differentials. We should allow at least 21 days for consideration to avoid the timing issues identified in Wright v de Kauwe."

7. Step-by-Step Guidance for Practitioners

Advising Plaintiffs on Settlement Offers

1. Assess the apology's adequacy:

   • Does it address all defamatory publications?

   • Does it specifically identify and retract the defamatory imputations?

   • Is the publication method appropriate to reach the original audience?

   • Is the apology undermined by qualifications or denials?

2. Evaluate monetary compensation:

   • Compare offer to realistic assessment of general and special damages

   • Add pre-judgment interest likely to accrue

   • Consider difference between party/party costs and indemnity costs

   • Assess total package value against likely judgment value

3. Consider timing factors:

   • Is sufficient time provided to consider the offer?

   • At what stage of proceedings is the offer made?

   • What costs have already been incurred?

4. Document reasons for rejection:

   • Record specific deficiencies in the apology

   • Note any valuation issues in monetary component

   • Consider counter-offering with adequate apology terms

Advising Defendants on Formulating Offers

1. Craft a comprehensive apology:

   • Address all defamatory publications specifically

   • Clearly identify the imputations being retracted

   • Propose appropriate publication method(s)

   • Avoid qualifying language that undermines sincerity

2. Structure monetary component strategically:

   • Offer should exceed realistic damages assessment

   • Include allowance for pre-judgment interest

   • Consider offering costs on more favorable basis than party/party

   • Ensure total package exceeds likely judgment value

3. Time the offer appropriately:

   • Allow reasonable time for consideration (minimum 14-21 days)

   • Make offer sufficiently early in proceedings

   • Avoid timing close to hearing dates or when plaintiff is preparing for trial

4. Clear communication:

   • Specify all terms clearly without ambiguity

   • Explicitly state costs consequences if rejected

   • Ensure settlement deed terms (if applicable) are provided with offer

8. Specific Evidence and Arguments

For Plaintiffs

1. Inadequacy of apology:

   • Evidence of all defamatory publications not addressed in the apology

   • Analysis of audience reached by original publication versus proposed apology

   • Expert evidence on reputational harm requiring specific vindication

   • Evidence of continuing harm due to inadequate vindication

2. Monetary considerations:

   • Evidence of special damages incurred

   • Comparable awards in similar defamation cases

   • Documentation of actual legal costs exceeding party/party costs

   • Evidence of aggravating factors justifying higher damages

3. Procedural arguments:

   • Evidence of unreasonable time pressure to consider offer

   • Documentation of proximity to trial and preparation costs already incurred

   • Evidence of ambiguity or uncertainty in offer terms

For Defendants

1. Adequacy of apology:

   • Evidence that apology would reach similar audience to original publication

   • Precedents showing similar apologies accepted as adequate

   • Evidence that apology addresses core reputational concerns

   • Documentation of attempts to refine apology terms

2. Monetary considerations:

   • Comparative analysis showing offer exceeded likely judgment

   • Expert evidence on appropriate quantum

   • Calculations showing offer's value considering interest and costs

   • Evidence of mitigating factors justifying lower damages

3. Procedural arguments:

   • Evidence that timeframe for considering offer was reasonable

   • Documentation of early timing in proceedings

   • Evidence of clarity and certainty in offer terms

9. Key Takeaways for Legal Practice

1. Apology design is critical: Courts recognize that apologies serve a distinct purpose in defamation that monetary compensation cannot provide. Apologies should address all defamatory publications, specifically identify the imputations being retracted, and propose appropriate publication methods.

2. Holistic assessment: When assessing settlement offers, courts take a holistic approach considering the monetary component, adequacy of apology, timing, and procedural aspects. No single factor is determinative.

3. Vindication value: Courts acknowledge that vindication of reputation through an appropriate apology is a core purpose of defamation proceedings, and private settlements lacking adequate vindication may reasonably be rejected despite generous monetary offers.

4. Cost protection strategy: To maximize costs protection, defendants should ensure apologies are comprehensive, specific, and published appropriately, while monetary offers should clearly exceed likely judgment values accounting for interest and costs differentials.

5. Timing matters: Offers should allow reasonable time for consideration and be made sufficiently early in proceedings to avoid being compromised by proximity to trial.

6. Documentation importance: Both parties should document their reasoning regarding offer adequacy or inadequacy to support later costs applications.

10. Conclusion on Broader Significance

Wright v de Kauwe represents an important development in defamation jurisprudence by providing guidance on the significance of apologies in settlement offers. The decision reinforces that defamation law serves purposes beyond mere compensation, with vindication of reputation being a central objective that apologies specifically address.

The Court's approach acknowledges the unique nature of reputational harm and the limited capacity of monetary compensation alone to remedy such harm. This recognition has significant implications for defamation practice, emphasizing that crafting appropriate apologies is not merely a peripheral element of settlement strategy but central to it.

The decision also brings welcome clarity to the application of Calderbank principles in the defamation context, providing a structured framework for assessing whether rejection of settlement offers was reasonable. This guidance will likely influence settlement practices in defamation proceedings by encouraging more carefully crafted apologies and more realistic assessment of non-monetary elements.

As defamation continues to evolve in the digital age, where reputational harm can spread rapidly and persistently, the significance of appropriately tailored apologies is only likely to increase. Wright v de Kauwe provides a foundation for this evolving area of law, emphasizing that effective vindication requires attention to the qualitative aspects of apologies rather than merely their existence.

Understanding Advance Health Directives in WA: Legal Analysis of CK [2025] WASAT 27

Introduction

The decision in CK [2025] WASAT 27 provides significant guidance on the requirements for valid Advance Health Directives (AHDs) in Western Australia, particularly regarding the capacity necessary to execute such instruments.

The case is notable for its detailed examination of the 'full legal capacity' test under the Guardianship and Administration Act 1990 (WA) ('GA Act') and its application to persons with cognitive impairments.

This decision clarifies the standards that must be met for an AHD to be legally enforceable, especially concerning consent to medical research—an area that has seen legislative development in recent years following the COVID-19 pandemic.

The case has substantial implications for legal practitioners advising clients on AHDs, medical practitioners assessing capacity, and substitute decision-makers navigating complex healthcare decisions. It also addresses the critical intersection between autonomy in healthcare decision-making and protection of vulnerable individuals.

Detailed Facts of the Case

Background and Initial Orders

CK, a 63-year-old man, was diagnosed with Autism Spectrum Disorder (ASD) at age 61 after being found dehydrated and wandering the streets following his mother's sudden death in late 2022 (at [1]). The Tribunal initially appointed the Office of the Public Advocate as CK's guardian in early 2023 to make decisions about services (the '2023 Orders') (at [1]).

Execution of Legal Documents

In late 2023, CK signed several legal documents, including:

• A will

• An enduring power of attorney appointing his younger sister EK as attorney

• An advance health directive recording consent to participate in medical research ('CK AHD') (at [2])

Deterioration and Further Applications

In August 2024, CK was admitted to hospital following a significant decline in his mental health. He had stopped taking medication after hearing voices that instructed him to do so. He was subsequently diagnosed with schizophrenia (at [3]). During this admission, concerns arose about financial transactions, with allegations that CK had given significant sums to EK to pay her mortgage and purchase diamonds (at [3]). This prompted the Hospital to seek review of the 2023 Orders and appointment of an administrator (at [3]). The Tribunal appointed the Public Trustee as emergency administrator (at [3]).

The Advance Health Directive Issue

At the October 2024 hearing, CK expressed that he did not want to participate in medical research where he would receive a placebo, yet this was precisely what he had agreed to in the CK AHD (at [4]). The Tribunal accepted an oral application from CK to determine the validity of the CK AHD (at [4]).

Final Orders

At the November 2024 hearing, the Tribunal appointed the Public Trustee as CK's administrator and reappointed the Public Advocate as his guardian. Critically, the Tribunal revoked the enduring power of attorney and declared the CK AHD invalid (at [5]).

Analysis of the Tribunal's Reasoning

Legal Framework for Advance Health Directives

The Tribunal's analysis begins with the fundamental legal requirements for creating a valid AHD under Part 9B of the GA Act. Section 110P provides that a person who has reached 18 years of age and who has "full legal capacity" may make an AHD containing treatment decisions for future treatment (at [16]).

Notably, the GA Act does not define 'full legal capacity'. The Tribunal referred to the Western Australian Department of Health's guidance, which describes this standard as requiring that a person:

• Understands information or advice relevant to decisions in the AHD

• Understands the likely effects of decisions on future treatment

• Can weigh potential pros and cons of decisions

• Can communicate decisions about future treatment (at [16])

Medical Research Consent Provisions

The Tribunal considered the 2020 amendments to the GA Act introducing Part 9E, which created mechanisms for substitute decision-makers to consent to medical research for people lacking capacity (at [17]). The Tribunal noted that in August 2022, the prescribed AHD form was expanded to include a section allowing consent to participate in medical research (at [18]).

Assessment of CK's Capacity

The Tribunal employed a multi-faceted approach to determine whether CK lacked capacity at the time of executing the AHD:

1. Evidence of Mental Disability: The Tribunal found that CK's diagnoses of ASD, schizophrenia, and cognitive impairment constituted a 'mental disability' within the meaning of the GA Act (at [31]).

2. Capacity for Financial Decisions: Extensive evidence demonstrated CK could not manage day-to-day finances without assistance, including inability to calculate necessary expenditure, identify financial implications of decisions, or implement problem-solving strategies for financial issues (at [47]).

3. Capacity for Personal Decisions: Medical evidence indicated CK lacked capacity to make medical treatment decisions due to impaired understanding of illness and treatment requirements (at [55]). He also showed limited ability to make accommodation decisions or identify service needs (at [56-57]).

4. Understanding of the AHD Terms: The Tribunal found a crucial disconnect between CK's expressed wishes and the content of the AHD. While CK clearly articulated not wanting to receive a placebo in research, the AHD he signed explicitly consented to this (at [24]). This demonstrated he did not understand the nature or consequences of the treatment decisions in the document when he signed it.

The Tribunal concluded that CK lacked the "full legal capacity" required under s 110P of the GA Act at the time the AHD was executed (at [58]). This finding formed the basis for declaring the AHD invalid under s 110W (at [82]).

Practical Application: A Doctor's Guide to Capacity Assessment for AHDs

When assessing capacity for an AHD, medical practitioners should follow this structured approach based on the CK decision:

Step 1: Assess Understanding of General Information

• Does the person understand what an AHD is?

• Can they explain the purpose of the document in their own words?

• Do they understand when the AHD would take effect? (i.e., when they can no longer make decisions)

Step 2: Evaluate Comprehension of Specific Treatment Decisions

• Ask the person to explain each treatment decision included in the AHD

• For medical research consent, determine if they understand:

  • The difference between treatment and research

  • The concept of placebos and control groups

  • That research may not improve their condition

  • The specific types of research they are consenting to

Step 3: Test Ability to Weigh Consequences

• Ask the person to explain potential benefits and risks of each decision

• Determine if they can articulate why they are making specific choices

• Assess if they can explain how the decisions align with their values and preferences

Step 4: Identify Red Flags from the CK Case

• Discrepancy between verbal statements and written consent (as with CK's placebo consent)

• Evidence of influence from family members or others

• Demonstrated deficits in managing other aspects of life (financial matters, healthcare)

• Recent significant medical or psychiatric diagnoses

• Evidence of cognitive fluctuations or decline

Step 5: Document the Assessment Process

• Record specific questions asked and responses received

• Document the person's explanation of treatment decisions in their own words

• Note any concerns about capacity and how these were explored

• Consider obtaining a specialist psychiatric or geriatric assessment if concerns arise

Step 6: Reassess When Necessary

• If the person's condition fluctuates, consider reassessment when they are at their best

• For progressive conditions, earlier documentation is advisable

Guidance for Legal Practitioners

Initial Client Assessment

1. Preliminary Capacity Screening

   • Observe client's ability to maintain focus during consultation

   • Ask open-ended questions about the purpose of the AHD

   • Assess consistency of instructions across multiple meetings

   • Document observations contemporaneously

2. Client Interview Strategy

   • Meet with the client alone initially

   • Use clear, simple language avoiding legal jargon

   • Break down complex concepts into manageable parts

   • Allow sufficient time for questions and clarification

3. Red Flags Requiring Further Investigation

   • Recent significant diagnoses (as with CK's late-life ASD diagnosis)

   • Family members providing instructions or answering for the client

   • Pronounced memory difficulties or confusion

   • Inconsistent instructions or significant changes to previous arrangements

Documentation and Professional Collaboration

1. Medical Evidence

   • Obtain specific medical opinion on capacity for AHD purposes

   • Ensure medical report addresses the elements of full legal capacity

   • Consider specialist assessment for clients with cognitive impairments

   • Document attempts to obtain medical evidence

2. Drafting Considerations

   • Use clear, simple language in the AHD

   • Include explanatory notes for complex decisions (particularly research consent)

   • Document discussions about the consequences of specific decisions

   • Consider video recording the execution and explanation process

3. Execution Process

   • Allow sufficient time for final review and questions

   • Ask the client to explain key decisions in their own words

   • Document the client's explanations

   • Consider involving an independent witness beyond statutory requirements

Post-Execution Practice

1. Regular Reviews

   • Recommend periodic review of the AHD, especially after significant health changes

   • Document client's continued understanding at each review

   • Update the AHD when necessary to reflect changed circumstances or wishes

2. Record Keeping

   • Maintain detailed file notes of capacity assessment process

   • Preserve all drafts and records of client instructions

   • Document reasons for proceeding despite any concerns

Evidence and Arguments

Evidence Supporting AHD Validity

1. Medical Evidence

   • Reports showing stable cognitive function at time of execution

   • Specialist assessments confirming decision-making capacity

   • Documentation of client explaining treatment decisions consistently

2. Procedural Evidence

   • Contemporaneous file notes showing thorough explanation process

   • Evidence that medical terminology was explained in plain language

   • Documentation showing client initiated the AHD process independently

   • Witnesses attesting to apparent understanding

3. Arguments for Validity

   • Diagnosis alone (e.g., ASD as in CK's case) does not automatically negate capacity

   • A person may have capacity for some decisions but not others

   • The right to make unwise decisions is preserved if understanding is present

   • Fluctuating capacity may include periods of valid decision-making

Evidence Supporting AHD Invalidity

1. Medical Evidence

   • Diagnoses affecting cognition or decision-making (as with CK's schizophrenia)

   • Clinical observations of confusion or limited understanding

   • Documentation of inability to manage other aspects of life (as with CK's finances)

2. Contradictory Statements

   • Documented statements contradicting the AHD terms (as with CK's placebo objection)

   • Inconsistent explanations of treatment decisions

   • Inability to explain consequences of decisions when questioned

3. Arguments for Invalidity

   • Failure to meet any element of the "full legal capacity" test is sufficient

   • The complexity of medical research consent requires sophisticated understanding

   • Evidence of influence or pressure from family members

   • Protection of vulnerable persons is a primary consideration

Key Takeaways for Legal Practice

1. Capacity Assessment is Multi-Dimensional

   • Capacity must be assessed specifically for the decision at hand

   • Evidence from multiple domains (financial, personal, healthcare) may be relevant

   • Medical diagnosis alone is insufficient—functional assessment is crucial

2. Medical Research Consent Requires Special Attention

   • The CK decision highlights particular vulnerability in research consent

   • Specific explanation of concepts like placebos and experimental treatments is essential

   • Practitioners should consider additional safeguards for research consent provisions

3. Documentation is Critical

   • Thorough contemporaneous records of the capacity assessment process

   • Documentation of explanations provided and client's demonstrated understanding

   • Evidence of steps taken to enhance understanding (plain language, visual aids)

4. Collaborative Approach

   • Engage with medical practitioners early in the process

   • Consider involving allied health professionals (psychologists, occupational therapists)

   • Multi-disciplinary assessment may strengthen the validity of the AHD

5. Risk Management

   • Identify high-risk clients who may require additional safeguards

   • Consider declining to act if capacity concerns cannot be resolved

   • Be prepared to justify the basis for proceeding despite potential concerns

Conclusion

The CK decision provides valuable guidance on the standards for valid AHDs in Western Australia, particularly regarding the capacity required for medical research consent. The case emphasises the importance of a person's functional understanding of treatment decisions rather than merely focusing on diagnostic criteria.

For legal practitioners, the decision underscores the need for thorough capacity assessment processes, meticulous documentation, and careful explanation of complex medical concepts. It highlights the tension between respecting autonomy in healthcare decision-making and protecting vulnerable individuals from consenting to procedures they do not fully comprehend.

The broader significance of this case extends beyond AHDs to inform practice in other areas requiring capacity assessment, including enduring powers of attorney and wills. As medical research continues to advance and legal instruments become increasingly complex, practitioners must develop robust methods for ensuring clients genuinely understand the documents they are executing.

The CK decision serves as a reminder that valid execution of legal documents requires more than mere formal compliance with signing requirements—it demands genuine understanding of content and consequences, particularly for vulnerable clients with cognitive impairments.

Apportionment of Costs in Defamation Proceedings: Greenwich v Latham (No 3)

Introduction

The Federal Court of Australia's decision in Greenwich v Latham (No 3) [2025] FCA 312 explains the principles governing costs orders in defamation proceedings where a plaintiff achieves partial success. This case represents a contribution to the jurisprudence on costs apportionment in defamation matters, particularly when dealing with multiple publications and imputations. Justice O'Callaghan's reasoning offers practical guidance on when costs should follow the event despite a plaintiff's partial success, and when indemnity costs might be warranted following the rejection of a settlement offer.

Background: Costs Principles in Defamation Proceedings

The apportionment of costs in defamation proceedings has evolved considerably in recent years, with courts increasingly willing to divide costs to reflect the parties' respective successes and failures. The legal framework for costs orders in the Federal Court includes s 43 of the Federal Court of Australia Act 1976 (Cth), which vests a wide discretion in the Court with respect to costs.

As summarised by White J in Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 (Hockey (No 2)), the relevant principles include:

1. The wide discretion must be exercised judicially (Hockey (No 2) at 134 [37]);

2. Ordinarily, costs follow the event, with a successful litigant receiving costs absent special circumstances (Hockey (No 2) at 134 [37]);

3. Courts are increasingly prepared to apportion costs where a party succeeds on only some claims (Hockey (No 2) at 143 [88]);

4. A litigant succeeding on only part of their claim may reasonably bear the expense of litigating unsuccessful portions (Hockey (No 2) at 134 [37]); and

5. Apportionment may be appropriate where issues on which the plaintiff failed were "clearly dominant or separable" (Hockey (No 2) at 142 [87]).

Facts of the Case

Greenwich v Latham (No 3) concerned the costs determination following Justice O'Callaghan's judgment in Greenwich v Latham [2024] FCA 1050 (the primary judgment). The defamation proceeding was brought by Alexander Greenwich, member for Sydney in the NSW Legislative Assembly, against Mark Latham, an independent member of the NSW Legislative Council, regarding two publications: the "primary tweet" and the "DT quotes" (at [2]-[3]).

At trial, Mr Greenwich contended that each publication conveyed two defamatory imputations and claimed damages for non-economic loss, aggravated damages, and injunctive relief (at [3]).

Regarding the primary tweet, Justice O'Callaghan found that:

• The imputation that Mr Greenwich "engages in disgusting sexual activities" was conveyed and was defamatory (at [5], [9]);

• The imputation that Mr Greenwich "is not a fit and proper person to be a member of the NSW Parliament because he engages in disgusting sexual activities" was not conveyed (at [6]).

Regarding the DT quotes, Justice O'Callaghan found that:

• Neither pleaded imputation was conveyed (at [8]).

Justice O'Callaghan awarded Mr Greenwich $100,000 in damages for non-economic loss and $40,000 in aggravated damages (at [12]). A subsequent application for injunctive relief was dismissed in Greenwich v Latham (No 2) [2025] FCA 131 (at [13]).

The Court's Reasoning on Costs

Apportionment of Costs

Mr Latham submitted that each party should pay its own costs or, alternatively, that he should only be ordered to pay one quarter of Mr Greenwich's costs on a party-party basis (at [22]-[24]). This submission was based on Mr Latham's claim that he succeeded on a "preponderance of the issues" - specifically, the second pleaded imputation regarding the primary tweet and the entirety of the claim regarding the DT quotes (at [24]).

In contrast, Mr Greenwich argued he should be awarded the whole of his costs because he was successful in his claim and there was no reason costs should not follow the event (at [25]). Mr Greenwich's counsel, Dr Collins AM KC, submitted that it was misconceived to rely on a numerical comparison of issues (at [26]).

Dr Collins advanced five key reasons why the case would have been run in exactly the same way even if Mr Greenwich had sued only in respect of the primary tweet (at [27]):

1. The affidavit evidence relied upon would have been identical, covering necessary background, context, and damages (at [27(1)]);

2. All the same witnesses would have been called (at [27(2)]);

3. The DT quotes case was not severable from the primary tweet case due to "an unbroken chain of causation" between the publications (at [27(3)]);

4. The second pleaded imputation regarding the primary tweet involved only brief legal argument with no additional evidence (at [27(4)]); and

5. All evidence about serious harm would still have been necessary (at [27(5)]).

Justice O'Callaghan found these submissions "irresistible" and accepted that Mr Greenwich should recover his costs of the proceeding (at [29]). His Honour noted that while Mr Greenwich was unsuccessful in his application for injunctive relief, this was offset by delays and expenses caused by Mr Latham's insistence that Mr Greenwich provide sworn evidence about his sources of funding for the proceeding (at [30]).

Indemnity Costs

Mr Greenwich submitted that costs should be paid on an indemnity basis, principally because Mr Latham unreasonably rejected an offer to settle contained in a concerns notice dated 19 April 2023 (at [32]). The offer included terms requiring:

• A public apology and retraction;

• Permanent disabling of comments on the apology;

• Undertakings not to publish similar imputations in future;

• Payment of Mr Greenwich's reasonable expenses; and

• Payment of $20,000 compensation (at [33]).

After reviewing the principles governing indemnity costs following rejected settlement offers from CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 and Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40, Justice O'Callaghan was not persuaded that Mr Latham's rejection of the offer was unreasonable (at [44]).

His Honour reasoned that:

• The DT quotes were not defamatory, yet formed a significant part of the concerns notice (at [44]);

• The undertakings sought were "very broad and unlimited in time" (at [44]);

• The proposed terms would have imposed "onerous obligations to monitor social media that may have posed difficulties in enforcement" (at [44]).

Consequently, Justice O'Callaghan declined to award costs on an indemnity basis (at [46]).

Practical Application: A Worked Example

Consider the following hypothetical scenario:

Plaintiff X sues Defendant Y for defamation regarding three separate publications (A, B, and C). Each publication has two pleaded imputations. At trial, X succeeds on both imputations for publication A, one imputation for publication B, and fails entirely on publication C. X is awarded $150,000 in damages.

Applying the principles from Greenwich v Latham (No 3):

1. Consider whether the successful and unsuccessful claims are truly separable or whether they form part of an interconnected narrative;

2. Determine whether the same evidence would have been necessary even if only the successful claims had been pursued;

3. Assess whether the unsuccessful publications or imputations added significant complexity or length to the proceedings.

If the evidence and witnesses would have been largely the same regardless of whether publications B and C were included, a court would likely award X their full costs despite the partial success. However, if publication C required distinct evidence and significantly extended the proceedings, the court might reduce X's recoverable costs to reflect this unnecessary expenditure.

Guidance for Practitioners

When advising clients on costs in defamation proceedings with partial success, practitioners should:

1. Assess Practical Severability

• Consider whether the successful and unsuccessful claims share common evidentiary foundations

• Determine if the same witnesses would have been required even without the unsuccessful claims

• Evaluate whether preparation would have been substantially different if only successful claims were pursued

2. Evaluate the Relative Significance of Claims

• Consider whether the unsuccessful claims were peripheral or central to the overall case

• Assess the proportion of court time and evidence devoted to unsuccessful claims

• Determine whether unsuccessful claims significantly extended proceedings

3. Consider Settlement Offers

• Ensure settlement offers are reasonable and proportionate

• Make offers that acknowledge the strength and weaknesses of the case

• For defendants, consider the potential for indemnity costs when evaluating settlement offers

4. Prepare Detailed Records

• Document time spent on different aspects of the case

• Keep records that differentiate between work on distinct publications or imputations

• Be prepared to demonstrate how time and resources would have been allocated if only successful claims were pursued

Arguments and Evidence for Each Side

For Plaintiffs Seeking Full Costs

1. Evidence that the same witnesses would have been called regardless of unsuccessful claims

2. Documentation showing that preparation for successful and unsuccessful claims overlapped significantly

3. Evidence that the defendant's conduct necessitated pursuit of all claims together

4. Argument that unsuccessful claims formed part of a single narrative requiring comprehensive treatment

For Defendants Seeking Apportionment

1. Evidence that unsuccessful claims significantly extended proceedings

2. Documentation of distinct evidence pertaining solely to unsuccessful claims

3. Argument that unsuccessful claims were clearly separable and dominant parts of the case

4. Time records showing disproportionate resources devoted to unsuccessful claims

Key Takeaways for Legal Practice

1. Severability is Practical, Not Theoretical: The test for apportionment turns on practical considerations of how the case would have been run, not merely the numerical proportion of successful claims.

2. Evidence Overlap is Crucial: Where the same evidence would have been necessary even if only successful claims were pursued, courts are unlikely to apportion costs.

3. Careful Offer Construction: Settlement offers should be carefully constructed to make rejection unreasonable. Broad undertakings and coverage of ultimately unsuccessful claims may undermine arguments for indemnity costs.

4. Document Resource Allocation: Practitioners should document how resources are allocated between different aspects of a case to support or defend against apportionment applications.

5. Look Beyond Numbers: Courts will not merely count successful versus unsuccessful imputations but will assess their relative significance and the resources devoted to them.

Conclusion

Greenwich v Latham (No 3) represents a significant contribution to the evolving jurisprudence on costs in defamation proceedings. Justice O'Callaghan's decision reinforces that courts will take a practical approach to costs apportionment, looking beyond mere numerical success to consider how the case would actually have been conducted if only the successful claims had been pursued.

The decision also highlights the challenges plaintiffs can face in securing indemnity costs following rejected settlement offers, particularly where those offers encompass ultimately unsuccessful claims or contain broad undertakings that may be difficult to enforce.

Adequacy of Judicial Reasons

1 Introduction and Principles

The obligation to provide adequate reasons is a fundamental aspect of the judicial function and a key component of procedural fairness. Adequate reasons serve multiple purposes: they demonstrate that the decision-maker has properly considered the issues; they allow parties to understand why they have won or lost; they enable effective appellate review; and they contribute to transparency and public confidence in the administration of justice.

As the High Court observed in DL v The Queen (2018) 266 CLR 1 at [32], the "content and detail of reasons 'will vary...'" according to the jurisdiction of the court and the subject matter being considered. However, the usual baseline for adequacy is that reasons "identify the principles of law applied by the judge and the main factual findings on which the judge relied."

2 The Public Interest Immunity Context: Chief Commissioner of Police v Crupi

The 2024 High Court decision in Chief Commissioner of Police v Crupi [2024] HCA 34 provides important guidance on the adequacy of reasons, particularly in the context of public interest immunity claims. The case illustrates that even in sensitive matters, courts must articulate their reasoning process with sufficient clarity to demonstrate that the required evaluative exercise has been properly undertaken.

Background

The first respondent, Vincenzo Crupi, was charged with the murder of Giuseppe "Pino" Acquaro, a solicitor who had provided information to police and was shot dead in March 2016. The Chief Commissioner of Police had disclosed substantial documentation to Crupi but sought to resist disclosure of approximately 600 pages of additional material ("the PII material") on the ground of public interest immunity. The basis for the claim was that disclosure might reveal the identity of an informer ("Informer Z") or enable that identity to be ascertained, with serious risk to the informer's safety.

The primary judge dismissed the application to resist disclosure in a decision comprising only five paragraphs. The substantive reasoning was limited to observations that information concerning Informer Z would be "likely to be of substantial assistance to the defence" and that the Chief Commissioner had "not made good his claim."

The High Court's Analysis

The High Court found the primary judge's reasons to be "extremely brief" and inadequate. They did not disclose any process of weighing the competing public interests for and against production as required by s 130(1) of the Evidence Act 2008 (Vic), and they did not justify the order for production that was made.

The Court emphasized several key deficiencies:

1. The reasons did not reveal whether the primary judge had "evaluate[d] the respective public interests and determine[d] whether on balance the public interest which calls for non-disclosure outweighs the public interest in the administration of justice that requires that the parties be given a fair trial on all the relevant and material evidence" (citing Sankey v Whitlam (1978) 142 CLR 1 at 95-96).

2. There was no evidence to suggest the primary judge engaged in the balancing exercise at the appropriate level for each individual document or class of document.

3. The reasons failed to address how competing interests were balanced, particularly given the "potential for serious harm to be occasioned to Informer Z should disclosure be ordered, and the impact on the provision of criminal intelligence by other informers."

4. The reasons did not explain key considerations such as whether refusing production would deny the first respondent a fair trial, or whether there were alternative means of disclosing parts of documents without revealing the informer's identity.

3 Principles for Ensuring Adequacy of Reasons

Drawing from Crupi and other authorities, the following principles should guide judicial officers in delivering adequate reasons:

(a) Articulation of the Legal Framework

Reasons must identify the relevant legal principles and statutory provisions being applied. This provides the framework within which the factual findings and evaluative judgments operate.

Worked Example 1:

Inadequate approach: "Having considered the evidence and submissions, I find that the plaintiff has established a cause of action."

Adequate approach: "This application requires consideration of s 130(1) of the Evidence Act, which provides that if the public interest in admitting evidence is outweighed by the public interest in preserving secrecy or confidentiality, the court may direct that the information not be adduced. Section 130(5) requires consideration of several factors including [list relevant factors]. I must undertake a balancing exercise, weighing the competing public interests for each document or class of documents."

(b) Identification of Key Facts and Findings

Reasons should identify the material facts found by the court and explain, at least briefly, the basis for those findings.

Worked Example 2:

Inadequate approach: "Having reviewed the affidavits, I accept the plaintiff's evidence."

Adequate approach: "The critical factual dispute concerns when the defendant became aware of the defect. On this point, I accept Ms. Smith's evidence, corroborated by the contemporaneous email dated 15 March 2023 (Exhibit P3), that she notified the defendant on that date. I reject the defendant's claim of having no knowledge until April, finding this inconsistent with both the documentary evidence and the testimony of the independent witness, Mr. Johnson."

(c) Demonstration of the Evaluative Process

Where a decision involves balancing competing considerations or interests, the reasons must demonstrate that this evaluative process has occurred, even if necessarily expressed in general terms.

Worked Example 3:

Inadequate approach: "Having considered all factors, I find that an injunction should be granted."

Adequate approach: "In considering whether to grant the interlocutory injunction, I must weigh the balance of convenience and the risk of injustice to either party. If I refuse the injunction and the plaintiff ultimately succeeds, they will suffer the following prejudice: [details]. Conversely, if I grant the injunction and the defendant ultimately succeeds, they will suffer harm through: [details]. Having weighed these considerations, I find the balance favors granting the injunction because [reasoning]."

(d) Document-Specific Analysis Where Required

In cases involving multiple documents or pieces of evidence that require individual assessment (such as claims of privilege or public interest immunity), reasons should demonstrate consideration at the appropriate level of specificity.

Worked Example 4:

Inadequate approach: "Having reviewed all the documents, I find they should be disclosed."

Adequate approach: "I have reviewed each category of documents claimed to be subject to public interest immunity. For Category A (operational methods), I find the public interest in non-disclosure outweighs the interest in disclosure because [reasons]. For Category B (informant information), I must consider each document individually. Documents 1-5 contain information that would identify the informant and, given the evidence of serious risk to their safety, the public interest favors non-disclosure. However, Documents 6-10 can be partially disclosed with appropriate redactions because they contain factual information potentially crucial to the defense while redactions can adequately protect the informant's identity."

(e) Justification of Orders Made

Reasons must explain how the findings and evaluative process lead to the specific orders made.

Worked Example 5:

Inadequate approach: "For these reasons, the application is allowed."

Adequate approach: "Having found that Documents 1-5 should not be disclosed but Documents 6-10 should be partially disclosed with redactions, I make the following orders: (1) The application for public interest immunity is upheld in respect of Documents 1-5; (2) Documents 6-10 shall be produced with redactions to paragraphs [specific paragraphs] to protect the identity of the informant while providing the defendant with the factual information relevant to their defense; (3) The redacted documents shall be disclosed within 14 days."

4 Special Considerations for Sensitive Matters

As demonstrated in Crupi, cases involving sensitive matters such as public interest immunity, legal professional privilege, or confidential information present particular challenges. In such cases:

1. Balance between transparency and protection: While the content of what can be disclosed publicly may be limited, the reasoning process itself must still be visible.

2. Consideration of alternative measures: Reasons should address whether alternative measures (such as redactions, summaries, or agreed facts) might satisfy the needs of justice while protecting sensitive information.

3. Specific consideration of harm: Where disclosure may cause specific harm (as with the risk to Informer Z in Crupi), the reasons must demonstrate how this potential harm has been evaluated against the interests favoring disclosure.

5 Adoption of Submissions

While adoption of a party's submissions may sometimes be sufficient to provide adequate reasons, Crupi demonstrates the limitations of this approach. The Court noted that even if the primary judge's adoption of the amici curiae's submissions sufficiently explained the forensic utility of the PII material, it did not address the balancing exercise required by s 130(1).

Worked Example 6:

Inadequate adoption: "I adopt the plaintiff's submissions on this point."

Adequate adoption: "I accept and adopt the plaintiff's submissions on the interpretation of clause 5.2 of the contract, as set out at paragraphs 15-27 of their written submissions. Those submissions correctly identify that the natural and ordinary meaning of 'reasonable endeavors' in this commercial context does not require the defendant to take steps that would be commercially disadvantageous. I would add that this interpretation is consistent with the authorities cited, particularly Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [41]-[43]."

6 Adequacy in Interlocutory Decisions

Crupi highlights that even interlocutory decisions require adequate reasons, particularly where significant consequences may flow from the decision. While interlocutory reasons may be more concise than final judgments, they must still demonstrate proper consideration of the relevant issues.

This is particularly important where:

• The decision may have significant practical consequences for the parties

• The decision involves a complex evaluative exercise

• The decision may effectively determine substantive rights

• The decision involves competing interests of substantial weight

7 Practical Guidance

To ensure reasons are adequate, particularly in complex or sensitive cases, consider these guidelines:

1. Structured approach: Adopt a structured approach that identifies the legal framework, key factual findings, and reasoning process.

2. Checklist for evaluative exercises: Where balancing competing considerations (as in Crupi), consider creating a checklist of factors to address.

3. Document management: Where multiple documents require individual consideration, develop a systematic approach (such as categories or a schedule) to demonstrate that appropriate consideration has been given to each.

4. Transparency about constraints: Where the sensitivity of information limits what can be included in public reasons, acknowledge this constraint while still demonstrating that the required reasoning process has occurred.

5. Review for comprehensibility: Consider whether a party reading the reasons would understand why they succeeded or failed, and whether an appellate court could effectively review the decision.

8 Conclusion

The adequacy of judicial reasons is not merely a formal requirement but a substantive aspect of the proper administration of justice. As Crupi demonstrates, even in sensitive contexts involving competing public interests, courts must articulate their reasoning with sufficient clarity to demonstrate that the required evaluative process has been undertaken and to justify the orders made. Failure to do so may result in appealable error, even where the ultimate decision might have been correct.

Two Decisions, One Principle: How Pentelow and Birketu Together Reshape Law Firm Litigation Strategy

Introduction

The landscape of costs recovery in Australian litigation has undergone a significant transformation with two landmark High Court decisions: Bell Lawyers Pty Ltd v Pentelow (2019) 269 CLR 333 and Birketu Pty Ltd v Atanaskovic [2025] HCA 2. Together, these decisions establish a coherent framework based on the principle of equality before the law, while maintaining important distinctions that have practical implications for law firms engaged in litigation. This article examines how these decisions collectively reshape the ability of legal practitioners to recover costs when representing themselves or their firms, and the practical implications for litigation strategy.

Background: Bell Lawyers v Pentelow

In Bell Lawyers v Pentelow, the High Court abolished the so-called "Chorley exception" to the general rule that self-represented litigants cannot recover professional costs. This long-standing exception had permitted self-represented solicitors, uniquely among all professions, to recover costs for their own time spent in litigation.

The High Court held that the Chorley exception was an "affront to the fundamental value of equality of all persons before the law" and thus had no place in the common law of Australia. However, the Court made clear that its decision did not disturb the "well-established understanding" that where an in-house solicitor appears in proceedings to represent their employer, the employer remains entitled to recover costs.

The decision left open a critical question: could a law firm recover costs for work done by its employed solicitors (as distinct from partners) when the firm itself was a party to the proceedings?

Facts of Birketu v Atanaskovic

The Birketu case directly addressed this unresolved question. Atanaskovic Hartnell, an unincorporated legal practice, had commenced proceedings in the Supreme Court of New South Wales against former clients Birketu Pty Ltd and WIN Corporation Pty Ltd to recover legal fees. Mr. Atanaskovic, a partner of the firm, was the solicitor on the record throughout.

The firm was successful in the litigation, and Hammerschlag J ordered that Birketu pay Atanaskovic Hartnell's costs. When Atanaskovic Hartnell sought to recover costs, it claimed $305,463 for professional fees for work done by its employed solicitors, while making no claim for work done by Mr. Atanaskovic or any other partner.

Birketu objected, arguing that following Bell Lawyers, the firm could not recover costs for work done by its own employed solicitors. This question proceeded through the courts, with Brereton JA at first instance ruling that the firm could not recover such costs, the Court of Appeal (by majority) overturning that decision, and finally the High Court dismissing Birketu's appeal, thereby affirming the Court of Appeal's decision and allowing recovery of costs for employed solicitors.

Legal Reasoning in Birketu

The High Court's decision featured both majority and minority opinions.

The majority (Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ) held that "an order for costs in favour of an unincorporated law firm entitles the firm to obtain recompense for legal work performed by an employed solicitor of the firm." They reasoned that the general common law principle applies to a litigant solicitor or unincorporated law firm in the same way as it applies to other litigants. Like any other litigant, the solicitor or firm cannot obtain recompense for their own legal work. But also like any other litigant, the solicitor or firm can obtain recompense for legal work done by their employees.

The majority distinguished this situation from the Chorley exception by emphasising that the expenses of salaries and overheads associated with having legal work done by employees constitute professional legal costs actually incurred by the solicitor or firm. The recompense is to the solicitor or firm for professional legal costs thereby actually incurred.

Justice Steward dissented, arguing that allowing recovery would "make a mockery of what was decided in Bell Lawyers, and would, in substance, resurrect the Chorley exception." He reasoned that when employed solicitors work under the supervision of a firm, that is the work of the firm itself. The time of employed solicitors is the firm's time, and when those solicitors work on the firm's own litigation, the firm loses the value of those hours which might otherwise have been profitably utilised for clients.

Justice Jagot also wrote separately, siding with Justice Steward's position.

Quantification of Recoverable Costs

The High Court in Birketu provided important guidance on the quantification of recoverable costs for employed solicitors. The Court addressed this in paragraphs 31-36 of the judgment, under the heading "Quantification."

The majority noted that concerns about law firms potentially profiting from litigation through employed solicitors relate not to "the availability of such recompense by way of an order for costs but to its quantification by way of assessment" (para 31). This is an important distinction—the principle of recoverability is separate from the method of quantification.

The Court explained the traditional approach in paragraph 33:

"The plurality in Bell Lawyers noted that 'the traditional approach has been to award costs on a basis comparable to the costs which would have been incurred and allowed ... had an independent solicitor been engaged' on the 'assumption', or more accurately the 'sensible and reasonable presumption', that application of the approach will not ordinarily result in an employer-litigant obtaining more than an indemnity for expenses actually incurred."

Critically, paragraph 34 establishes that this presumption is rebuttable:

"The presumption on which the traditional approach is founded has never been treated as more than a presumption of fact, it being open to an objecting party to show that application of the approach in a particular case would in fact result in the employer-litigant receiving more than an indemnity for expenses actually incurred."

The Court further noted in paragraph 35 that in assessment proceedings, while an assessor might investigate whether the principle of indemnity would be infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors of a litigant law firm is not sufficient to trigger such an investigation.

The judgment also mentioned in paragraph 36 that there might be an alternative approach involving a different conception of "indemnity" which could affect quantification differently, though this was not fully developed as it wasn't necessary for resolving the case.

The Combined Impact of Both Decisions

Read together, Bell Lawyers and Birketu establish a framework for costs recovery that can be summarised as follows:

1. The general rule is that self-represented litigants cannot recover professional costs for their own time spent in litigation.

2. This rule applies equally to solicitors and law firms that represent themselves (the Chorley exception is abolished).

3. A law firm can recover costs for work done by its employed solicitors when the firm is a party to the proceedings.

4. The "in-house solicitor rule" remains intact: when a government department, corporation, or other entity is represented by its employed solicitor, that entity can recover costs.

5. In quantifying recoverable costs, courts will generally use the traditional approach of comparing the costs to those that would have been incurred had an independent solicitor been engaged, but this is subject to the presumption not resulting in the litigant obtaining more than an indemnity.

This framework has significant implications for litigation strategy for law firms that become involved in litigation themselves.

A Worked Example

Consider a hypothetical scenario from a former client's perspective:

Acme Corporation is sued by its former solicitors, Smith & Jones LLP, for unpaid fees totalling $500,000. Smith & Jones succeeds in the litigation, with Ms. Smith (a partner) acting as the solicitor on the record and the firm's employed solicitors performing most of the legal work. The court orders Acme to pay Smith & Jones' costs.

Smith & Jones submits a bill claiming $140,000 for work done by its employed solicitors, calculated at rates comparable to what would have been charged by independent solicitors. Acme, hoping to reduce this amount, considers challenging the quantification.

Following Birketu, Acme understands that while Smith & Jones can recover costs for work done by employed solicitors, the High Court emphasised that these costs should represent a true indemnity. Importantly, the Court noted (at paragraph 35) that although a costs assessor might investigate whether the principle of indemnity is being infringed, "this task is not one which should be undertaken without a good and sufficient cause." The mere fact that costs are being sought for work done by employed solicitors is not sufficient to trigger such an investigation.

To challenge the quantification of costs, Acme faces a multi-step task to establish that the assessment should be limited to a true indemnity rather than market rates:

Step 1: Understand what constitutes a "true indemnity"
A true indemnity in this context means the actual expense incurred by Smith & Jones in having employed solicitors work on the litigation. This comprises primarily:

• Salary costs: The portion of the employed solicitors' annual salaries attributable to the time spent on this matter (e.g., if a solicitor earning $60,000 annually spent 10% of their working time on the matter, the salary component would be $6,000)

• Overheads: The additional costs necessarily incurred in employing the solicitors, including office space, equipment, administrative support, professional indemnity insurance, and other practice costs that would not have been incurred but for the employment of these solicitors

• Opportunity costs: Though more controversial, potentially the value of other billable work the employed solicitors could have undertaken for paying clients during the time spent on this litigation. Arguments for including opportunity costs suggest they represent real economic loss to the firm and are consistent with the High Court's recognition in Birketu that firms incur actual costs when deploying employed solicitors on their own litigation. Arguments against contend that opportunity costs are speculative, difficult to quantify, and their inclusion might reintroduce the profit element that Bell Lawyers sought to eliminate from self-representation.

Step 2: Establish a prima facie case of "good and sufficient cause"
Acme must identify specific grounds suggesting that Smith & Jones' claimed costs substantially exceed a true indemnity. This requires more than mere assertion—Acme needs evidence suggesting a significant disparity.

Step 3: Gather available evidence
Without access to internal firm records, Acme must rely on indirect evidence such as market knowledge, prior dealings with Smith & Jones, and expert testimony about typical employment costs for comparable firms.

The critical challenge for Acme is meeting the threshold of "good and sufficient cause" with limited information, as the High Court has intentionally set a high bar to avoid routine investigations into firms' internal cost structures.

As a former client with limited insight into Smith & Jones' internal operations, Acme considers what might constitute "good and sufficient cause" and what evidence it could realistically obtain:

1. Evidence of profitability disparity: Acme could argue that allowing recovery at standard market rates would provide Smith & Jones with a significant profit rather than mere indemnity:

   • Publicly available financial information showing the firm's profit margin and ratio of revenue to salary costs

   • Evidence that the firm's business model relies on large markups between employed solicitor costs and billing rates

   • Comparison between the firm's published charge-out rates to clients (which include profit components) and the rates claimed in costs recovery

2. Alternative fee arrangements and discounting practices: Acme could demonstrate:

   • That Smith & Jones routinely offers substantial discounts from their standard rates to clients

   • Evidence the firm uses fixed fee arrangements that effectively discount hourly rates

   • Marketing materials where the firm promotes itself as cost-effective or offering competitive rates

3. Internal versus external rate disparities: Acme could seek to establish:

   • Different rates being charged to different clients for identical work by the same employed solicitors

   • Evidence from recruitment advertisements showing salary ranges that, even with overhead allocations, would result in costs substantially below claimed rates

4. Historical client relationship evidence: Acme could leverage its former relationship:

   • Prior invoices showing the firm's actual billing rates for the same employed solicitors

   • Records of fee discussions where the firm provided cost estimates at rates lower than now claimed

   • Evidence of how the firm described its fee structure during the client relationship

   • Contemporaneous records of which employed solicitors worked on Acme matters and their experience levels

5. Firm structure and staffing patterns: Acme could argue:

   • The firm's high leverage ratio (number of employed solicitors per partner) indicates a business model reliant on marking up junior solicitor time

   • That work claimed at senior solicitor rates was likely performed by junior staff under limited supervision

   • The firm has re-graded fee earners as more senior for costs recovery than how they were presented to clients

The key for Acme is establishing that quantification based on standard market rates would amount to providing Smith & Jones with a profit rather than a true indemnity for costs actually incurred. This aligns with the High Court's emphasis in Birketu that costs awards should provide indemnity for expenses actually incurred by the law firm, not a vehicle for profit from self-representation.

If Acme succeeds in establishing "good and sufficient cause," the costs assessor might then investigate whether the claimed $140,000 genuinely represents an indemnity for costs incurred by Smith & Jones. The costs assessor could potentially reduce the recoverable amount to more closely reflect the firm's actual expenditure on employed solicitors for the litigation.

However, without establishing such "good and sufficient cause," Acme would likely be required to pay costs based on the traditional approach—what would have been incurred had independent solicitors been engaged—even if this exceeds Smith & Jones' actual employment costs.

Key Takeaways

1. Partner/employee distinction matters: Law firms cannot recover costs for work done by partners representing the firm, but can recover costs for work done by their employed solicitors.

2. Quantification follows indemnity principle: The principle of indemnity governs quantification, with a rebuttable presumption that costs comparable to engaging independent solicitors is appropriate.

3. Burden on objecting party: The burden is on the objecting party to demonstrate that the assessed costs would exceed a true indemnity, and costs assessors should not investigate this issue without good cause.

4. Structure enables strategic choices: Different structural arrangements for legal representation provide strategic options for law firms involved in litigation, particularly regarding the allocation of work between partners and employed solicitors.

5. Balance of principles retained: The decisions balance the principle of equality before the law with the principle that costs orders should provide indemnity for expenses actually incurred.

Conclusion

The combined effect of Bell Lawyers and Birketu represents a nuanced approach to costs recovery for legal practitioners. While abolishing the special privilege that solicitors historically enjoyed to recover costs for their own time, the High Court has maintained the principle that litigants—including law firms—should be indemnified for actual expenses incurred, including those relating to employed solicitors.

For law firms, these decisions require thoughtful consideration of how to structure their representation when they themselves are parties to proceedings. While the costs associated with partner time remain non-recoverable, the ability to recover costs for employed solicitors provides significant strategic flexibility.

The decisions also highlight the importance of proper cost recording and allocation, as challenges to quantification may arise where the assessed amount would exceed a true indemnity. Law firms should ensure they maintain clear records that demonstrate the actual costs incurred through the deployment of employed solicitors on their own litigation matters.

The Judicial Reluctance to Engage in Hypothetical Merits Assessment for Costs Determination: An Examination of Lygina and the Ex parte Lai Qin Principles

Introduction

In litigation that concludes without a trial on the merits, the question of costs allocation frequently emerges as a contentious issue. The courts have consistently demonstrated reluctance to engage in hypothetical assessments of how a matter might have been determined had it proceeded to trial. This principle, articulated in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 ("Ex parte Lai Qin"), has been reaffirmed and applied in the recent decision of Lygina v Lawley Legal [2025] WASC 68. This article examines the tension between the presumption that successful parties should receive costs and the judicial reluctance to conduct hypothetical merits assessments when proceedings conclude without substantive adjudication.

The Lygina Decision: Facts and Context

In Lygina v Lawley Legal [2025] WASC 68, the plaintiff, Ms. Lygina, a former client of the defendant law firm, commenced proceedings in June 2022 seeking orders under s 288(2) of the Legal Profession Act 2008 (WA) to set aside costs agreements and requiring Lawley Legal to re-issue bills based on the relevant costs scale. Ms. Lygina's statement of claim alleged various failures by Lawley Legal to comply with obligations under the Legal Profession Act.

Significantly, Lawley Legal did not file a defence. Instead, on 10 November 2022, Registrar Whitbread made orders setting aside the costs agreements and requiring Lawley Legal to re-issue bills drawn on the relevant costs scale. These orders were made in terms proposed by Lawley Legal, which notably did not admit the allegations made in the statement of claim.

After securing these substantive orders, Ms. Lygina sought costs on an indemnity basis, arguing that the defendant's non-compliance with cost disclosure obligations was severe, that Lawley Legal had maintained an untenable defence, and that its conduct fell below professional standards.

Justice Palmer was therefore confronted with a costs application following proceedings that concluded without trial by virtue of the defendant effectively capitulating to the primary relief sought, while expressly not admitting the factual allegations that would ordinarily justify such relief.

The Ex parte Lai Qin Principles and Their Application in Lygina

In Ex parte Lai Qin, McHugh J articulated the fundamental challenge in determining costs where proceedings have been resolved without trial:

"When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order."

McHugh J distinguished between two categories of cases:

1. Cases where "one party, after litigating for some time, effectively surrenders to the other"; and

2. Cases where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs."

Justice Palmer in Lygina determined that the case fell into the first category, finding that "Lawley Legal's decision to agree to the substantive orders sought by Ms. Lygina involved a capitulation by Lawley Legal that establishes that Ms. Lygina was the successful party in these proceedings."

However, Justice Palmer declined to order indemnity costs, stating:

"Determination of whether Lawley Legal engaged in 'severe' non-compliance with its obligations, could not defend the proceedings because of that non-compliance, or engaged in unprofessional conduct as claimed by Ms. Lygina, would require the determination of the principal disputed matters of fact in these proceedings. I am not satisfied that it would be possible to properly determine these matters on the basis of the evidence presently available to the court."

Justice Palmer relied upon Basten JA's observation in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 that an order for costs should only be made "where that judgement is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon."

The Tension: Success Without Trial vs. Avoiding Hypothetical Adjudication

The Lygina decision exemplifies the tension courts face: on one hand, recognising that a party who secures the relief sought should ordinarily receive costs; on the other hand, refusing to engage in what would amount to a "trial on the papers" solely for costs purposes.

Justice Palmer resolved this tension by:

1. Determining that Ms. Lygina was the successful party based on Lawley Legal's capitulation to the primary relief sought;

2. Ordering costs on a party/party basis, reflecting her success; but

3. Rejecting indemnity costs, which would have required judicial determination of disputed factual matters central to the substantive case.

This approach honours both the principle that successful parties should receive costs and the principle that courts should not conduct hypothetical merit assessments of untried cases.

A Worked Example: Application of the Principles

Consider a hypothetical scenario involving Smith v Jones Professional Services:

Smith is employed by Jones Professional Services as an accountant. Their employment agreement contains a restraint of trade clause. When Smith subsequently leaves Jones and begins servicing former clients, Jones commences proceedings alleging breach of the restraint clause and seeking an injunction and damages.

After discovery reveals potentially problematic drafting in the restraint clause, Jones agrees to consent orders discontinuing the proceedings, with the orders expressly stating that Jones does not admit any of Smith's defences or counterclaims.

Smith then seeks indemnity costs, arguing that:

1. Jones knew the restraint was unenforceable when proceedings commenced;

2. Jones engaged in intimidatory conduct; and

3. Jones deliberately pursued unmeritorious litigation for an improper purpose.

Applying the Lygina principles, the court would likely:

1. Identify that Jones' agreement to discontinue constituted a capitulation, making Smith the successful party;

2. Award Smith costs on a party/party basis reflecting this success; but

3. Decline to award indemnity costs, as determining whether Jones knew the restraint was unenforceable or had improper purposes would require the very trial the consent orders avoided.

Key Takeaways

1. Capitulation vs. Settlement Distinction: Courts distinguish between a party's capitulation (which will normally result in costs following the event) and settlement due to supervening circumstances (which may result in no order as to costs).

2. Evidence Required for Indemnity Costs: Mere allegations of unreasonable conduct, improper purpose, or untenable defence will not suffice for indemnity costs if these allegations remain untested and disputed. Courts will not conduct a "hypothetical trial" solely for costs purposes.

3. Strategic Implications for Consent Orders: Parties agreeing to consent orders should carefully consider the costs implications. A non-admission clause will not shield a party from ordinary costs if the court characterises the consent as effective capitulation.

4. Threshold for Determining "Special Circumstances": Courts require clear, undisputed evidence of "special or unusual features" to award indemnity costs in matters resolved without trial. This evidence must be "manifest by reference to known circumstances, not in dispute."

5. Documentation of Conduct: Parties seeking indemnity costs should document the opposing party's conduct contemporaneously and seek to have unreasonable conduct acknowledged in correspondence or court proceedings, rather than relying solely on contested allegations.

Conclusion

The Lygina decision reinforces the courts' adherence to the Ex parte Lai Qin principles, demonstrating judicial reluctance to engage in hypothetical merits assessments solely for costs determination. While courts will identify "successful parties" based on practical outcomes (including capitulation through consent orders), they will not delve into contested factual matrices to determine whether conduct warrants special costs orders unless those facts are manifest and undisputed.

This approach balances efficiency with fairness: successful parties receive their costs without courts having to conduct "paper trials" of factual disputes that the parties themselves chose not to litigate to conclusion. Practitioners should therefore be mindful that while non-admission clauses in consent orders may protect against substantive liability findings, they will not shield a capitulating party from normal costs consequences.

Malice in Defamation: Meaning, Role, and Proof in Western Australian Law

1. Introduction

Significance of Malice

The concept of 'malice' occupies a pivotal position within Australian defamation law. While not an element of the cause of action itself, malice becomes critically relevant when a defendant seeks to rely upon certain defences, most notably qualified privilege (both statutory and common law) and honest opinion (or its common law precursor, fair comment). Proof that a defamatory publication was actuated by malice—essentially, made with an improper motive or state of mind—can negate these defences, stripping the defendant of legal protection that might otherwise be available (Roberts v Bass (2002) 212 CLR 1 at [62]-[65] per Gaudron, McHugh and Gummow JJ).

Purpose and Scope

This section provides guidance on the definition, role, proof, and procedural handling of malice in defamation proceedings. It focuses on the application of malice under the Defamation Act 2005 (WA) ('the Act') and the relevant common law principles preserved by the Act. The aim is to offer practical assistance, grounded in established jurisprudence, particularly from the High Court of Australia and relevant appellate courts, with specific reference to Western Australian provisions and case law where feasible.

Structure Overview

This analysis will proceed by:

• Defining malice as understood in Australian common law, which informs its application under the Act.

• Explaining the specific role of malice in defeating the statutory defences of qualified privilege (s 30) and honest opinion (s 31) under the WA Act, as well as analogous common law defences.

• Detailing the requirements for pleading and proving malice, including the burden and standard of proof, and the types of evidence typically relied upon.

• Illustrating the principles through analysis of key case law examples where malice was successfully or unsuccessfully argued.

• Providing practical guidance, including considerations for assessing evidence and directing juries on the issue of malice.

Context: Balancing Interests

Defamation law operates at the intersection of competing fundamental values: the right of an individual to protection of their reputation and the right to freedom of expression, particularly concerning matters of public interest (Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 568). The defences available in defamation, and the concept of malice which qualifies some of those defences, represent mechanisms by which the law attempts to strike a balance between these competing interests. Malice serves as a threshold, ensuring that defences designed to protect legitimate communication are not abused for improper ends.

2. Defining Malice in Australian Defamation Law

Common Law Foundation

The Defamation Act 2005 (WA), consistent with uniform defamation legislation across Australia, does not provide a statutory definition of 'malice.' Section 6(2) of the Act expressly states that the Act does not affect the operation of the general law in relation to the tort of defamation except to the extent the Act provides otherwise. Consequently, the meaning of malice, particularly where it is relevant to defeating statutory defences like qualified privilege under section 30(4), is derived from established common law principles. The general law continues to apply to determine whether a publication was actuated by malice when such a finding may defeat a defence.

Core Concepts: Improper Purpose

At its core, malice in defamation law signifies the misuse of an occasion or defence for an improper purpose. Where a defence like qualified privilege exists, it is granted by law to serve a particular public or private interest (e.g., the performance of a duty, the protection of a common interest). Malice arises when the defendant uses that occasion not for its intended purpose, but for some ulterior or foreign motive (Roberts v Bass (2002) 212 CLR 1 at [75]-[76] per Gaudron, McHugh and Gummow JJ).

The seminal articulation of this principle comes from Lord Diplock in Horrocks v Lowe [1975] AC 135 at 149, who stated that qualified privilege is lost if the defendant "misused the occasion for some purpose other than that for which the privilege is accorded by the law." The privilege attaches to the occasion, but it can be defeated if the defendant abuses that occasion. Examples of such improper purposes include publishing out of personal spite, ill will, vindictiveness, or a desire to injure the plaintiff that is unconnected to the duty or interest protected by the privilege (Horrocks v Lowe [1975] AC 135 at 149).

The legal definition of malice thus focuses sharply on the defendant's subjective dominant purpose at the time of publication. This makes it distinct from objective assessments of reasonableness or negligence, although such factors can be relevant evidence from which the subjective purpose might be inferred (Roberts v Bass (2002) 212 CLR 1 at [75]-[76]). This subjective focus is critical: proving, for instance, that a defendant's conduct was objectively unreasonable for the purposes of establishing statutory qualified privilege under section 30(1)(c) of the WA Act is a different exercise from proving the subjective improper purpose required for malice under section 30(4).

The 'Dominant Purpose' Test

Crucially, for malice to be established, the plaintiff must prove that the improper purpose was the dominant or actuating motive for the publication (Roberts v Bass (2002) 212 CLR 1 at [76]). As the High Court affirmed, malice requires proof that the improper motive was the substantial or driving reason for the publication. The mere co-existence of some ill will or secondary improper motive alongside a genuine and dominant proper purpose (i.e., fulfilling the duty or protecting the interest relevant to the privilege) is generally insufficient to establish malice (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 50-51). The improper purpose must be the primary driver.

Knowledge of Falsity and Reckless Indifference

A defendant's state of mind regarding the truth or falsity of the defamatory matter is highly relevant to determining their purpose.

• Knowledge of Falsity: Publishing defamatory matter knowing it to be false is generally regarded as almost conclusive evidence of malice (Horrocks v Lowe [1975] AC 135 at 150). If a defendant knowingly publishes falsehoods, it is difficult to conceive that they are acting for a purpose protected by the law; such conduct inherently points to an improper motive.

• Reckless Indifference: Publishing defamatory matter with reckless indifference as to its truth or falsity—that is, publishing without caring whether it is true or false—is treated by the law as equivalent to knowledge of falsity (Horrocks v Lowe [1975] AC 135 at 150). Such recklessness demonstrates a lack of honest belief and is strong evidence from which malice (an improper dominant purpose) can be inferred.

While knowledge of falsity or recklessness are often described as forms of malice, it is perhaps more accurate to understand them as powerful evidence from which the core element of malice—the improper dominant purpose—can be inferred. As discussed in Roberts v Bass (2002) 212 CLR 1 at [78], the absence of a positive, honest belief in the truth of the statement is a significant factor pointing towards potential malice, but it is the underlying improper purpose, often evidenced by such recklessness or knowledge, that constitutes malice itself. This suggests a potential two-stage analysis for the fact-finder: first, assessing the defendant's state of knowledge or belief (e.g., knew it was false, was reckless, honestly believed it true), and second, inferring whether this state of mind, combined with other evidence, reveals a dominant purpose foreign to the privilege.

Distinguishing Malice from Other Conduct

It is essential to distinguish malice from other states of mind or conduct that do not necessarily defeat a defence:

• Carelessness or Negligence: Malice is not established by mere carelessness, negligence, impulsiveness, irrationality, prejudice, drawing conclusions from insufficient evidence, or failing to verify facts, unless such conduct is so gross as to warrant an inference of reckless indifference to the truth (Horrocks v Lowe [1975] AC 135 at 150). As established in Horrocks v Lowe, honest belief, even if formed carelessly or based on prejudice, can negate malice if the occasion was used for its proper purpose.

• Strong Language: The use of strong, vehement, or exaggerated language does not, in itself, constitute malice (Horrocks v Lowe [1975] AC 135 at 151). Particularly in contexts such as political debate or a response to an attack, a degree of latitude is allowed. However, language that is utterly disproportionate to the facts or the occasion can be evidence from which an inference of malice might be drawn (Adam v Ward [1917] AC 309 at 339 per Lord Atkinson).

• Honest Belief: A genuine, positive belief in the truth of the defamatory statement is generally inconsistent with malice, even if that belief is mistaken, prejudiced, or unreasonable, provided the dominant purpose of the publication was proper to the occasion (Horrocks v Lowe [1975] AC 135 at 150). However, the High Court in Roberts v Bass indicated that the absence of an honest belief, while not malice per se, is significant evidence pointing towards it ((2002) 212 CLR 1 at [78]).

• Political Motive: In the context of political communication, particularly during election campaigns, an intention to cause political damage to an opponent does not, by itself, constitute an improper motive amounting to malice (Roberts v Bass (2002) 212 CLR 1 at [104]-[105]). This principle reflects the constitutional protection afforded to political communication following Lange v Australian Broadcasting Corporation (1997) 189 CLR 520.

3. The Role of Malice in Defeating Defences

General Principle

The rationale for malice defeating defences like qualified privilege and honest opinion lies in the purpose of these defences. They are designed to protect communications made in good faith for legitimate societal or individual purposes (e.g., fulfilling a duty, sharing information on matters of common interest, expressing genuine opinions on public matters). Proof of malice demonstrates that the defendant has abused the protection afforded by the defence, using the occasion or the expression of opinion as a pretext for pursuing an improper objective, such as venting personal spite or knowingly spreading falsehoods (Roberts v Bass (2002) 212 CLR 1 at [62]-[65]).

Statutory Qualified Privilege (s 30 Defamation Act 2005 (WA))

Section 30 of the Act provides a statutory defence of qualified privilege. To establish this defence, the defendant must prove:

• The recipient had an interest or apparent interest (defined in s 30(2)) in having information on some subject (s 30(1)(a)).

• The matter was published to the recipient in the course of giving information on that subject (s 30(1)(b)).

• The conduct of the defendant in publishing the matter was reasonable in the circumstances (s 30(1)(c)). Section 30(3) lists non-exhaustive factors a court may consider in assessing reasonableness, such as the seriousness of the imputation, steps taken to verify, whether the plaintiff's side was sought, and the public interest nature of the matter (Austin v Mirror Newspapers Ltd (1985) 3 NSWLR 354).

However, section 30(4) explicitly states: "For the avoidance of doubt, a defence of qualified privilege under subsection (1) is defeated if the plaintiff proves that the publication of the defamatory matter was actuated by malice."

The requirement of 'reasonable conduct' in s 30(1)(c) and the 'malice' defeater in s 30(4) are distinct concepts. A defendant's conduct might be found unreasonable based on the objective factors in s 30(3) (e.g., failing to verify information adequately) without necessarily rising to the level of subjective malice (Harbour Radio Pty Ltd v Trad (2012) 247 CLR 31 at [33]). Conversely, while less likely, it is theoretically possible for conduct to appear reasonable on its face but still be driven by a dominant improper motive (malice). In practice, however, factors strongly indicating malice, such as knowledge of falsity or reckless indifference, would almost certainly render the publishing conduct unreasonable under s 30(1)(c).

This structure creates a potential two-stage inquiry for statutory qualified privilege. The defendant must first satisfy the court that their conduct was objectively reasonable. Even if they succeed, the plaintiff has a second opportunity to defeat the defence by proving subjective malice. This contrasts with traditional common law qualified privilege, which primarily required the defendant to establish the privileged occasion (duty/interest reciprocity), immediately shifting the onus to the plaintiff to prove malice without a separate 'reasonableness' hurdle for the defendant (Roberts v Bass (2002) 212 CLR 1). Consequently, the statutory defence under section 30 may, in some circumstances, offer less robust protection to publishers than its common law counterpart, a point noted by the High Court in Aktas v Westpac Banking Corporation Ltd (2010) 241 CLR 79.

Honest Opinion (s 31 Defamation Act 2005 (WA))

Section 31 provides a defence for the publication of honest opinion. The core elements require the defendant to prove:

• The matter was an expression of opinion rather than a statement of fact (s 31(1)(a)).

• The opinion related to a matter of public interest (s 31(1)(b)).

• The opinion was based on proper material, meaning material that is substantially true, or published on an occasion of absolute or qualified privilege, or protected by other specified defences (ss 31(5), 31(6)) (Fairfax Media Publications Pty Ltd v Voller (2021) 271 CLR 34).

The defence applies to opinions expressed by the defendant personally (s 31(1)), an employee or agent (s 31(2)), or a third-party commentator whose opinion the defendant publishes (s 31(3)).

The defence under section 31 is defeated if the plaintiff proves the specific state of mind set out in section 31(4). This subsection provides that the defence fails if the plaintiff proves that:

• (For the defendant's own opinion under s 31(1)): "the opinion was not honestly held by the defendant at the time the defamatory matter was published" (s 31(4)(a)).

• (For an employee/agent's opinion under s 31(2)): "the defendant did not believe that the opinion was honestly held by the employee or agent at the time the defamatory matter was published" (s 31(4)(b)).

• (For a commentator's opinion under s 31(3)): "the defendant had reasonable grounds to believe that the opinion was not honestly held by the commentator at the time the defamatory matter was published" (s 31(4)(c)).

While section 31(4) uses the phrase "not honestly held" rather than "actuated by malice," the concepts are functionally very similar in this context (Channel Seven Adelaide Pty Ltd v Manock (2007) 232 CLR 245 at [3] per Gleeson CJ). Proving that an opinion was not genuinely held by the person expressing it effectively establishes an improper purpose—the defence is intended to protect genuine expressions of opinion, not statements dishonestly presented as opinion. The focus is squarely on the subjective belief (or lack thereof) of the relevant opinion holder at the time of publication.

The distinct terminology used in the Act—"actuated by malice" for qualified privilege (s 30(4)) versus "opinion was not honestly held" for honest opinion (s 31(4))—is noteworthy. While both require proof of an improper subjective state, this linguistic variation might influence how arguments are framed. For section 30, arguments might encompass a broader range of improper motives potentially extraneous to the truth of the statement itself. For section 31, the argument is more tightly focused on whether the opinion expressed was genuinely believed by the relevant person.

Common Law Defences

Section 24 of the Act preserves defences available under the general law, except to the extent the Act provides otherwise. Malice remains relevant to defeating key common law defences:

• Common Law Qualified Privilege: This defence arises in situations involving a reciprocity of duty and interest between publisher and recipient, or where a statement is made in reply to an attack (Toogood v Spyring (1834) 1 CM & R 181; 149 ER 1044). It is defeated if the plaintiff proves the publication was actuated by malice, understood as an improper or foreign purpose, applying the principles from Horrocks and Roberts (Bashford v Information Australia (Newsletters) Pty Ltd (2004) 218 CLR 366).

• Common Law Fair Comment: This defence protects expressions of opinion on matters of public interest based on true facts (Silkin v Beaverbrook Newspapers Ltd [1958] 1 WLR 743). It is defeated by proof of malice, typically established by showing the comment did not represent the defendant's genuine opinion or was motivated by an improper purpose (London Artists Ltd v Littler [1969] 2 QB 375 at 392-393). While largely superseded by the statutory defence in s 31, the common law defence remains available (Manock v Channel Seven Adelaide Pty Ltd [2006] SASC 192).

4. Proving Malice

Burden and Standard of Proof

The legal burden of proving that a publication was actuated by malice rests squarely and solely on the plaintiff (Horrocks v Lowe [1975] AC 135 at 149-150). Once the defendant establishes the factual basis for a defence capable of being defeated by malice (e.g., the existence of a privileged occasion or the elements of honest opinion), the onus shifts to the plaintiff to prove, on the balance of probabilities, that the defendant acted with the requisite malice (Roberts v Bass (2002) 212 CLR 1 at [76]). The evidence adduced by the plaintiff must be "credible, substantial evidence and not a surmise or a minimal amount of evidence" sufficient to support a positive finding of malice (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 51).

Pleading Requirements

A plaintiff who intends to allege malice to defeat a defence must plead it specifically. It is not sufficient merely to deny the defence in the statement of claim or rely on an implied joinder of issue. Malice must be raised affirmatively in a Reply to the defendant's Defence (Clyne v The New South Wales Bar Association (1960) 104 CLR 186 at 203).

Furthermore, the pleading must contain full particulars of the facts, matters, and circumstances relied upon by the plaintiff to establish the allegation of malice (Bailey v Australian Broadcasting Corporation [1995] Aust Torts Reports ¶81-336). General allegations or boilerplate assertions of malice are insufficient and liable to be struck out. In Western Australia, Order 20, rule 13(1) of the Rules of the Supreme Court 1971 (WA) requires that particulars be given of any pleading alleging a condition of mind, such as malice. Order 20, rule 8 also requires specific pleading of matters which might otherwise take the opposing party by surprise.

The requirement for detailed particulars is not merely procedural; it serves a crucial function in defining the scope of the factual dispute regarding the defendant's state of mind. It compels the plaintiff to articulate the specific basis for the malice allegation at an early stage, enabling the defendant to understand the case they must meet and preventing trial by ambush (Bailey v Australian Broadcasting Corporation [1995] Aust Torts Reports ¶81-336). The plaintiff will generally be confined at trial to proving malice based on the particulars pleaded.

Evidence of Malice

Since malice pertains to the defendant's subjective state of mind or dominant purpose, direct evidence is often unavailable. Consequently, malice must usually be inferred from circumstantial evidence (Roberts v Bass (2002) 212 CLR 1 at [79]). This evidence can be broadly categorised as intrinsic (arising from the publication itself) and extrinsic (arising from circumstances outside the publication).

• Intrinsic Evidence:

  • Language: The tone and terms of the publication. Language that is excessive, vitriolic, sensationalised, or clearly disproportionate to the facts or the occasion may suggest an improper motive (Horrocks v Lowe [1975] AC 135 at 151). However, caution is required, as strong or prejudiced language alone does not equate to malice, especially in certain contexts (Adam v Ward [1917] AC 309 at 339-340).

  • Mode and Extent of Publication: Publishing the defamatory matter more widely than the privileged occasion warrants can indicate malice (Roberts v Bass (2002) 212 CLR 1 at [104]). For example, broadcasting allegations to the public when the duty/interest relationship only exists with a specific individual.

  • Inclusion of Irrelevant Matter: Including defamatory statements that are clearly irrelevant to the purpose of the privileged occasion may suggest the occasion is being used as a cloak for malice (Adam v Ward [1917] AC 309 at 334).

  • Lack of Factual Basis: A complete absence of any foundation for the defamatory statement within the publication itself might support an inference of recklessness or improper motive (Webb v Bloch (1928) 41 CLR 331 at 363-364).

  • Internal Evidence of Falsity: The publication itself might contain information known to the defendant that contradicts the defamatory imputation (Turner v Metro-Goldwyn-Mayer Pictures Ltd [1950] 1 All ER 449 at 461).

• Extrinsic Evidence:

  • Defendant's Knowledge or Belief: Evidence that the defendant knew the statement was false, or had no positive belief in its truth, or was recklessly indifferent (Horrocks v Lowe [1975] AC 135 at 150).

  • Defendant's Conduct: Evidence of prior hostility, arguments, disputes, threats, or expressions of ill will between the defendant and the plaintiff can indicate an underlying improper motive (Thomas v Mowbray [1935] 2 KB 113 at 120).

  • Sources and Verification: Evidence that the defendant relied on sources known to be unreliable, deliberately avoided obvious sources of information, or failed to make reasonable inquiries or attempts to verify the defamatory allegations, particularly when serious and easily checkable, can point to reckless indifference (Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 51-52 per Brennan J).

  • Response to Contradiction/Apology: Evidence that the defendant refused to listen to or publish an explanation or contradiction offered by the plaintiff, or unreasonably refused to apologise or retract the statement after its falsity was demonstrated, can be relevant (Wakley v Cooke (1849) 4 Ex 511 at 515-516; 154 ER 1315 at 1317).

  • Repetition: Unjustified repetition of the defamatory statement, especially after its falsity has been pointed out, may indicate malice (Clark v Molyneux (1877) 3 QBD 237 at 247).

  • Evidence of Plan or Conspiracy: Evidence showing the publication was part of a deliberate plan or conspiracy to injure the plaintiff (Angel v H H Bushell & Co Ltd (1968) 1 QB 813 at 831-832).

  • Attempts to Mislead or Conceal: Evidence that the defendant attempted to mislead the court or conceal relevant facts about their state of mind or sources (Gouldsmith v Carruthers (1798) 1 Camp 121; 170 ER 906).

Inferring Malice

The task for the court or jury is to consider the whole of the evidence—both intrinsic and extrinsic—and determine whether, on the balance of probabilities, it supports an inference that the defendant's dominant purpose in publishing the defamatory matter was improper and foreign to the occasion or defence relied upon (Roberts v Bass (2002) 212 CLR 1 at [75]-[79]). The inference drawn must be a reasonable and definite one based on the evidence, not mere speculation or conjecture (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 51-52).

The inherent difficulty in proving a subjective state of mind means that establishing malice can be challenging for plaintiffs (Horrocks v Lowe [1975] AC 135 at 149-151). The reliance on circumstantial evidence and inference makes the assessment highly fact-sensitive and potentially less predictable than proving objective elements.

5. Case Law Illustrations (Worked Examples)

Examining specific cases helps illustrate how the principles of malice are applied in practice.

Malice Established

• Roberts v Bass (2002) 212 CLR 1 (Regarding Appellant Roberts):

  • Facts: During a South Australian election campaign, Mr Roberts authorised the publication of three documents targeting the incumbent, Mr Bass. These included a mocking postcard implying a taxpayer-funded holiday, a pamphlet containing a forged Ansett Frequent Flyer statement suggesting misuse of travel entitlements, and a 'how-to-vote' card with various untrue allegations concerning Mr Bass's policies and activities (e.g., junkets, secret hospital deals, gun rights stance).

  • Finding on Malice (Roberts): Although the High Court majority ultimately allowed Roberts' appeal based on the application of Lange privilege principles, the lower courts and dissenting/concurring judgments in the High Court provide insight into evidence supporting malice. The trial judge found Roberts' dominant purpose went beyond mere political damage to intending to lower Bass's reputation generally, and that he published allegations recklessly, without caring if they were true (Roberts v Bass (2002) 212 CLR 1 at [39]-[42] per Gleeson CJ). The use of a forged document was particularly indicative of an improper motive. Gleeson CJ and Hayne J in the High Court found Roberts acted with malice due to recklessness regarding truth or falsity ((2002) 212 CLR 1 at [216]-[219] per Hayne J). Callinan J also found recklessness ((2002) 212 CLR 1 at [248]).

  • Relevance: This case demonstrates how actions like forgery and the dissemination of serious allegations known to be untrue or made with reckless indifference can constitute strong evidence of malice, potentially overcoming the latitude given to political speech. It underscores the fact-intensive nature of the inquiry into the publisher's dominant motive.

• Smith v Stevens [2022] WASC 116 (Western Australia):

  • Facts: A director (Stevens) of a WA Aboriginal Corporation emailed a document containing defamatory allegations (mismanagement, dishonesty, breach of duty) about two fellow directors (Smith, Camille) to the other board members.

  • Finding of Malice: The WA Supreme Court found that although the communication occurred on an occasion of qualified privilege (directors sharing a common interest in corporate governance), the defence under both common law and s 30 of the Act was defeated because Stevens was actuated by malice (Smith v Stevens [2022] WASC 116 at [328]-[334]). Key evidence supporting this finding included: (1) Stevens' own admission that he prepared the document partly out of a desire to retaliate against perceived attacks from Camille; (2) Stevens' failure to make sufficient inquiries to verify many of the serious allegations, indicating recklessness as to their truth; and (3) Stevens' poor attendance at board meetings, which undermined his claim to be acting solely out of genuine concern for the Corporation's governance.

  • Relevance: This WA authority provides a clear example of how extrinsic evidence (admission of retaliatory motive, poor attendance) combined with intrinsic factors (unverified serious allegations) can establish a dominant improper purpose (malice), thereby defeating qualified privilege even where a legitimate common interest exists between publisher and recipient.

Malice Not Established / Defence Upheld

• Roberts v Bass (2002) 212 CLR 1 (Regarding Appellant Case):

  • Facts: The second appellant, Mr Case, distributed the 'Orange Pamphlet' (the how-to-vote card containing untrue statements about Bass) at a polling booth for several hours on election day. The pamphlet had been prepared and authorised by Mr Roberts.

  • Finding on Malice (Case): The High Court majority held that malice had not been established against Mr Case (Roberts v Bass (2002) 212 CLR 1 at [80]-[82]). Although the material was defamatory and published on a privileged occasion (political communication), the evidence did not demonstrate that Case himself possessed an improper motive. He was merely distributing material prepared by Roberts, and there was insufficient evidence to show he shared Roberts' recklessness or improper purpose, or that he acted for any dominant purpose other than participating in the election campaign.

  • Relevance: This illustrates the important principle that malice must generally be proven against each individual joint publisher (unless vicarious liability applies) (Egger v Viscount Chelmsford [1965] 1 QB 248 at 263). The malice of the author (Roberts) was not automatically imputed to the distributor (Case). It also reinforces that a motive to participate in political campaigning, even if aimed at damaging an opponent, is not, in itself, malice.

• Aktas v Westpac Banking Corporation (2010) 241 CLR 79:

  • Facts: A bank mistakenly applied a court order to the wrong account, leading it to dishonour cheques drawn on that account with the notation "Refer to drawer," which was held to be defamatory.

  • Finding on Malice: The court held that the bank's communication ("Refer to drawer") was made on an occasion of qualified privilege (a communication made in the conduct of its affairs where its interest was concerned). Crucially, the court found that the bank's mistake in applying the order did not, by itself, constitute malice or destroy the privilege. The plaintiff needed to prove actual malice—an improper motive beyond the error—on the part of the bank, which was not established on the facts.

  • Relevance: This case reinforces that negligence or error, even if leading to a defamatory publication on a privileged occasion, does not automatically equate to malice. Malice requires proof of a specific, subjective improper state of mind, such as knowledge of falsity, reckless indifference, or an intention to injure, separate from the mere fact of the mistake (Horrocks v Lowe [1975] AC 135 at 149).

Comparing these cases underscores that findings of malice turn heavily on the specific evidence available regarding the defendant's state of mind and dominant motive at the time of publication. General ill will or the publication of defamatory material on a privileged occasion is insufficient; the plaintiff must adduce specific evidence, whether intrinsic or extrinsic, pointing clearly to an improper purpose that actuated that particular defendant's publication.

6. Practical Guidance (WA Focus)

Assessing Evidence of Malice

Judicial officers and practitioners assessing potential malice should consider:

• Cumulative Effect: Evaluate the combined weight of all evidence suggesting malice. Individual pieces might be weak, but together they may paint a compelling picture of improper motive (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 51).

• Context: The context of the publication is crucial. Greater latitude may be afforded to political speech or statements made in reply to attack compared to unsolicited private communications (Roberts v Bass (2002) 212 CLR 1 at [104]-[105]).

• Failure to Apologise/Retract: While relevant extrinsic evidence, a refusal to apologise or retract should be assessed cautiously, considering the reasons given (if any) and the overall circumstances. It is not determinative of malice (Loveday v Sun Newspapers Ltd (1938) 59 CLR 503 at 515-516).

• Verification Efforts: Close attention should be paid to the nature of the allegations, the defendant's sources, and the steps taken (or not taken) to verify the information, particularly in relation to the factors listed for reasonableness under s 30(3) of the WA Act. A cavalier approach to truth-checking serious allegations can support an inference of reckless indifference (Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 51-52 per Brennan J).

Pleading and Particulars

Practitioners must ensure malice is pleaded in a Reply with full and precise particulars, complying with Order 20, rules 8 and 13 of the Rules of the Supreme Court 1971 (WA). Failure to do so risks the pleading being struck out or the plaintiff being unable to lead evidence on malice at trial. Defendants should scrutinise the particulars provided and consider seeking further and better particulars if they are inadequate (Bailey v Australian Broadcasting Corporation [1995] Aust Torts Reports ¶81-336).

Guidance on Judicial Directions to Juries on Malice (WA Context)

Given that section 21 of the Defamation Act 2005 (WA) permits parties to elect for trial by jury on liability issues (including malice), clear and accurate judicial directions are paramount in Western Australia. Section 22 outlines the respective roles of the judicial officer and jury.

• Threshold Question for Judge: The trial judge must first determine if there is any evidence adduced by the plaintiff that is reasonably capable of supporting a finding of malice. If there is no such evidence, the issue of malice should be withdrawn from the jury, and the defence (if otherwise established) will succeed (Adam v Ward [1917] AC 309 at 348 per Lord Sumner).

• Content of Jury Directions: Where there is sufficient evidence, the judge's directions on malice should cover the following points:

  1. Identify the specific defence(s) raised (e.g., statutory qualified privilege under s 30, honest opinion under s 31) to which malice is relevant.

  2. Explain that if the jury finds the elements of the defence established by the defendant, the defence succeeds unless the plaintiff proves malice (or lack of honest belief for s 31) (Horrocks v Lowe [1975] AC 135 at 149).

  3. Clearly state that the burden of proving malice rests solely on the plaintiff (Horrocks v Lowe [1975] AC 135 at 149).

  4. Explain the standard of proof: the plaintiff must prove malice on the balance of probabilities (Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-171).

  5. Define malice: the use of the occasion for a dominant purpose or motive foreign to the purpose for which the law grants the protection (e.g., spite, ill will, intention to injure unrelated to the duty/interest) (Roberts v Bass (2002) 212 CLR 1 at [75]-[76]).

  6. Explain the relevance of the defendant's state of mind regarding truth: publishing knowing the matter is false, or with reckless indifference to its truth or falsity (not caring if it is true or false), is strong evidence from which malice may be inferred (Horrocks v Lowe [1975] AC 135 at 150).

  7. Distinguish malice from conduct that does not constitute malice: mere carelessness, error, negligence, impulsiveness, prejudice, irrationality, or strong language, unless these factors demonstrate reckless indifference or an improper dominant purpose (Horrocks v Lowe [1975] AC 135 at 150-151).

  8. For the s 31 honest opinion defence, direct the jury specifically on the test in s 31(4): whether the plaintiff has proved, on the balance of probabilities, that the opinion was not honestly held by the relevant person (defendant, employee/agent, or commentator, as applicable) (Channel Seven Adelaide Pty Ltd v Manock (2007) 232 CLR 245 at [3] per Gleeson CJ).

  9. Instruct the jury to consider all the relevant evidence, both intrinsic (e.g., language of the publication) and extrinsic (e.g., defendant's conduct, knowledge, inquiries), in deciding whether malice has been proven (Roberts v Bass (2002) 212 CLR 1 at [78]-[79]).

  10. If there are multiple defendants, direct the jury that malice must be considered and proven individually against each defendant against whom it is alleged (unless vicarious liability is applicable) (Egger v Viscount Chelmsford [1965] 1 QB 248 at 263). Reference should be made to the specific WA Act sections (ss 21, 22, 30(4), 31(4)).

The availability of jury trials for liability in WA places a significant onus on judges to ensure these complex concepts are conveyed accurately and understandably to lay jurors (Abram v Channon [1934] WAR 90 at 92-93). The nuances differentiating malice from carelessness, recklessness as evidence versus malice itself, and the specific test for honest opinion require careful formulation.

Furthermore, the principle that malice must be proven individually against joint publishers carries significant practical weight in multi-defendant cases common in media litigation (e.g., involving author, editor, and publishing company) (Egger v Viscount Chelmsford [1965] 1 QB 248 at 263). Pleadings, evidence, and jury directions must meticulously differentiate between defendants, as a finding of malice against one does not automatically defeat the defence for others who lacked the requisite improper state of mind (absent vicarious liability).

Summary Disposal

While malice is typically a question of fact best determined at trial after hearing all the evidence (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 51), a defendant faced with a Reply pleading malice may consider a strike out application if the particulars pleaded are manifestly insufficient to support a finding of malice. However, courts are generally cautious about determining issues involving state of mind summarily (Spencer v Commonwealth of Australia (2010) 241 CLR 118).

7. Conclusion

Malice remains a crucial, albeit complex, concept in Western Australian defamation law. Defined by common law principles focusing on the defendant's dominant improper purpose at the time of publication, it serves as a vital control mechanism, ensuring that defences designed to protect freedom of expression and facilitate necessary communications are not abused. Proof of malice, which rests entirely with the plaintiff, can defeat the significant defences of statutory qualified privilege (s 30) and honest opinion (s 31), as well as their common law counterparts.

Establishing malice requires more than demonstrating error, carelessness, or strong language; it necessitates credible, substantial evidence, often circumstantial, pointing to a subjective state of mind involving knowledge of falsity, reckless indifference to the truth, or a dominant motive foreign to the purpose of the defence, such as personal spite or vindictiveness. The case law, including decisions like Horrocks v Lowe, Roberts v Bass, and the WA case Smith v Stevens, provides essential guidance on the types of conduct and evidence from which malice may be inferred.

For judges and practitioners in Western Australia, a thorough understanding of the common law definition of malice, its specific application under sections 30(4) and 31(4) of the Defamation Act 2005 (WA), the strict pleading requirements, the burden and standard of proof, and the nuances of directing juries on this issue is indispensable for the proper conduct and determination of defamation proceedings. Ultimately, the careful application of the principles surrounding malice helps maintain the delicate balance between protecting individual reputation and safeguarding freedom of speech within the state.

Injurious Falsehood: Proof of Actual Damage

I. Introduction: The Tort of Injurious Falsehood

A. Definition and Essential Elements in Australia

Injurious falsehood, alternatively termed malicious falsehood, is an action established at common law. It serves to protect plaintiffs against provable economic loss resulting from false and malicious statements made by a defendant concerning the plaintiff's business, property, or goods. This focus on economic or commercial interests distinguishes it fundamentally from defamation, which primarily protects personal reputation.

The essential elements of the tort of injurious falsehood in Australia were authoritatively stated by Gummow J in the High Court decision of Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388, drawing upon established common law principles. To succeed, a plaintiff must establish the following four elements:

1. A false statement of or concerning the plaintiff's goods or business.

2. Publication of that statement by the defendant to a third person.

3. Malice on the part of the defendant.

4. Proof by the plaintiff of actual damage suffered as a direct and natural result of the statement. (Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at [9])

Crucially, the plaintiff bears the onus of proving each of these elements, including the falsity of the statement, the existence of malice, and the occurrence of actual damage. This contrasts sharply with defamation, where damage to reputation is often presumed (subject to applicable statutory thresholds such as 'serious harm'), and the falsity of the defamatory statement is presumed unless the defendant proves otherwise through the defence of justification.

The considerable burden placed on the plaintiff, particularly the requirements to prove malice and actual damage, contributes to injurious falsehood being a less frequently litigated cause of action compared to defamation. Nevertheless, its significance has arguably increased following the introduction of uniform defamation legislation across Australia (see, for example, the Defamation Act 2005 (WA)). Section 9 of this legislation restricts the ability of most corporations, particularly those trading for profit or employing 10 or more persons, to sue for defamation. Consequently, for such corporations seeking redress for malicious falsehoods causing economic harm, injurious falsehood often represents the primary, if not the only, available cause of action.

The tort directly addresses the harm—economic loss stemming from malicious lies about a business or its offerings—that these corporations may suffer. Furthermore, unlike defamation, claims in injurious falsehood are not constrained by the 'single meaning' rule, potentially allowing for greater flexibility in pleading the harmful implications of a statement. Thus, despite the acknowledged difficulties in proof, injurious falsehood occupies a necessary space in the legal landscape, providing a remedy tailored to the protection of commercial interests against specific forms of malicious attack.

B. Distinguishing Injurious Falsehood from Defamation (Focus on Malice and Damage)

While both torts involve harm arising from published statements, the distinctions between injurious falsehood and defamation are critical.

Malice: Malice is an essential ingredient of injurious falsehood. It signifies more than mere negligence or carelessness; it requires proof that the defendant published the falsehood with an improper motive, such as an intent to injure the plaintiff without just cause or excuse. Malice can be established by showing the defendant knew the statement was false, acted with reckless indifference as to its truth or falsity (amounting to willful blindness), or was actuated by some dishonest or improper purpose. An honest belief in the truth of the statement, even if negligently formed, will generally negate malice (Seafolly Pty Ltd v Madden [2012] FCA 1346). In contrast, malice is generally not required to establish liability in defamation, although it may defeat certain defenses (like qualified privilege or honest opinion) and can be relevant to the assessment of aggravated damages.

Damage: This is the central focus of this article. Injurious falsehood is actionable only upon proof of actual damage, meaning quantifiable economic or pecuniary loss. The damage is the "gist of the action" (Ratcliffe v Evans [1892] 2 QB 524). Defamation, historically, is actionable per se (without proof of damage), as harm to reputation is presumed upon publication of defamatory matter. However, this common law position has been modified in jurisdictions that have adopted a 'serious harm' threshold as an element of the cause of action for defamation.

Falsity: In injurious falsehood, the plaintiff must plead and prove that the defendant's statement was false. In defamation, the law presumes the defamatory statement is false; the burden falls on the defendant to prove the truth of the imputation(s) via the defense of justification.

Standing (Corporations): As noted earlier, corporations that are precluded from suing in defamation by statute (typically for-profit corporations or those with 10 or more employees) may still bring an action for injurious falsehood if they can prove the requisite elements, including actual damage.

Limitation Period: The limitation period for injurious falsehood, as an action on the case, is generally six years. This contrasts with the shorter one-year limitation period (subject to potential extension) applicable to defamation actions under the uniform Defamation Acts.

II. The Requirement of Actual Damage

A. Nature of 'Actual Damage': Provable Economic Loss

The cornerstone of a successful claim in injurious falsehood is the proof of "actual damage." This term signifies demonstrable financial or pecuniary loss suffered by the plaintiff as a consequence of the defendant's malicious falsehood. As Bowen LJ stated in the seminal case of Ratcliffe v Evans [1892] 2 QB 524, actual damage is the very "gist of the action."

The loss must be capable of estimation in monetary terms. Unlike defamation, where damages can compensate for intangible harm like hurt feelings or damage to personal standing, injurious falsehood does not provide a remedy for mere injury to feelings or reputation in the absence of consequent economic loss.

Historically, there was some ambiguity regarding the scope of recoverable damage, with references sometimes made to "special damage." "Special damage" in tort law often carries a specific meaning, referring to pecuniary losses that have accrued up to the date of trial and which must be specifically pleaded and proved with particularity. However, the High Court's formulation in Palmer Bruyn, employing the term "actual damage" (Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at [9]), suggests a broader compass consistent with the language in Ratcliffe. It indicates that the tort compensates for the full measure of the economic detriment flowing as a natural and probable consequence of the falsehood, encompassing not only past losses but also provable future economic losses. This aligns the assessment of damages in injurious falsehood more closely with general tort principles, which aim to compensate the plaintiff for all foreseeable consequences of the wrongful act, subject to the specific rules of causation and remoteness applicable to intentional torts. Therefore, plaintiffs are entitled to claim for demonstrable ongoing business detriment or the loss of future commercial opportunities directly caused by the defendant's malicious statement, provided such losses can be adequately proven.

B. Onus and Standard of Proof

The plaintiff carries the legal burden of proving, on the balance of probabilities, both the existence of actual damage and the causal link between that damage and the defendant's malicious publication.

The standard of proof required was articulated in Ratcliffe v Evans [1892] 2 QB 524 at 533: "As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable having regard to the circumstances and to the nature of the acts themselves by which the damage is done." This requires plaintiffs to present the best evidence reasonably available to demonstrate their loss. While absolute mathematical precision may not always be attainable, particularly when proving a general loss of business, a plaintiff must provide sufficient evidence to allow the court to quantify the loss with a reasonable degree of confidence.

This evidentiary requirement represents a significant practical hurdle for plaintiffs. Proving that a specific, quantifiable economic loss was directly caused by the defendant's statement, rather than by other market forces, competitor actions, or internal business factors, can be exceptionally challenging. The difficulty lies in isolating the impact of the falsehood amidst the complexities of commerce. This often necessitates sophisticated analysis, potentially involving forensic accountants or market experts, to dissect financial data, model counterfactual scenarios ('but for' the falsehood), and attribute loss specifically to the defendant's conduct. The failure to adduce "concrete evidence" demonstrating both the fact of damage and its causal connection to the defendant's statement was fatal to the plaintiff's claim in Seafolly Pty Ltd v Madden [2012] FCA 1346, highlighting the critical importance and difficulty of meeting this evidentiary burden. This inherent difficulty is a primary reason why injurious falsehood is considered a challenging and relatively infrequently pursued action.

C. Exception: Injunctive Relief and Probable Damage

An important qualification to the requirement of proving suffered actual damage arises in the context of injunctive relief. Where a plaintiff acts promptly to seek an interlocutory injunction to restrain the publication or further publication of an injurious falsehood, and the injunction is granted, the claim may potentially be maintained even if quantifiable damage has not yet fully accrued.

In Mahon v Mach 1 Financial Services Pty Ltd (No 2) [2013] NSWSC 10, the Supreme Court of New South Wales held that injurious falsehood could be maintained without proof of actual damage where an early interlocutory injunction had prevented the very damage that might otherwise have ensued. In such circumstances, when deciding whether to grant interlocutory relief (and potentially final relief if damage was imminent but averted), the court may focus on whether actual damage is the reasonably probable consequence of the defendant's publication if allowed to continue unrestrained. This provides a crucial mechanism for preventative justice, allowing courts to intervene before the full economic harm materializes, a particularly relevant consideration given the speed and reach with which falsehoods can spread in the digital age.

III. Types of Recoverable Actual Damage

Actual damage in injurious falsehood can manifest in several forms. The key is that the loss must be economic or pecuniary in nature and causally linked to the defendant's statement.

A. Loss of Identifiable Customers or Sales

The most direct and often easiest form of actual damage to prove is the loss of specific, identifiable custom or transactions. This occurs where the plaintiff can point to particular customers who ceased dealing with the plaintiff, or specific contracts or sales that were lost, directly because of the defendant's falsehood.

Evidence to support such a claim typically involves:

• Testimony from the former customer(s) confirming that they withdrew their custom or cancelled an order due to the defendant's statement.

• Documentary evidence, such as emails or letters from customers explicitly referencing the falsehood as the reason for terminating a relationship or cancelling a contract.

• Business records (e.g., order books, client lists) demonstrating the cessation of business from specific sources immediately following the publication of the falsehood.

Worked Example: A defendant maliciously and falsely publishes that a specific batch of the plaintiff baker's bread contained glass shards. The plaintiff can prove actual damage by adducing evidence from a regular wholesale customer (e.g., a local café) who provides testimony and confirms in writing that they cancelled their standing order for that batch and subsequent orders due to safety concerns arising directly from reading the defendant's publication. The value of the cancelled orders constitutes provable actual damage.

B. General Loss of Business or Custom

1. The Principle in Ratcliffe v Evans [1892] 2 QB 524

Not all damage resulting from an injurious falsehood can be traced to specific lost customers. Where the falsehood is of a nature "calculated in the ordinary course of things to produce, and where they do produce, actual damage" in the form of a general decline in business, the law permits recovery for this general loss. The landmark decision in Ratcliffe established that in such circumstances, evidence of a general diminution of business is admissible and sufficient to prove actual damage, without the plaintiff needing to identify and call every customer who was deterred.

This principle applies particularly where the falsehood is likely to deter potential customers generally, rather than specific individuals known to the plaintiff. Examples include falsely stating that a business has ceased trading (as in Ratcliffe itself), disparaging the quality or safety of goods sold widely to the public, or impugning the title to property offered for general sale.

2. Evidentiary Requirements for Proving General Loss

While Ratcliffe provides flexibility, proving a general loss of business still requires rigorous evidence demonstrating both a decline in trade following the publication and a causal connection between the decline and the defendant's falsehood. Simply showing a downturn after the publication is insufficient; the plaintiff must provide evidence supporting the inference that the falsehood was, on the balance of probabilities, a material cause of that downturn.

Evidence commonly adduced includes:

• Financial Records: Detailed financial statements (profit and loss, balance sheets), sales reports, customer data, budgets, and forecasts, comparing the period after the publication with historical performance, industry benchmarks, or prior projections.

• Operational Data: Evidence of reduced customer inquiries, website traffic, footfall (for physical businesses), or order volumes.

• Market Analysis: Evidence comparing the plaintiff's business performance against relevant market trends or competitor performance to demonstrate that the plaintiff's decline is anomalous and likely attributable to the falsehood rather than general market conditions.

• Expert Evidence: Reports from forensic accountants or economists are often crucial. Experts can analyze complex financial data, perform statistical analyses, model the likely performance of the business 'but for' the falsehood, discount for other contributing factors (e.g., economic climate, competition, internal issues), and provide a quantified estimate of the loss attributable to the falsehood.

• Evidence of Impact: Surveys, evidence of negative online sentiment, or increased customer complaints referencing the falsehood can help establish the connection.

The plaintiff must satisfy the court that the general loss claimed is a natural and probable consequence of the defendant's statement and not primarily due to other unrelated factors.

The principle established in Ratcliffe remains vital, acknowledging the difficulty of tracing every lost sale when a falsehood has a widespread impact. However, the methods available for proving such loss have evolved significantly since 1892. While Ratcliffe allows proof of general loss, contemporary practice demands that plaintiffs utilize available data and analytical tools to provide the court with the most robust and particular evidence reasonably possible. Modern courts, accustomed to sophisticated financial analysis in commercial litigation, will likely expect more than a simple 'before and after' comparison of turnover, particularly where other factors could plausibly explain a decline. Failure to provide persuasive evidence linking the general decline specifically to the falsehood, potentially through expert analysis ruling out alternative causes, risks the claim failing for lack of proof of damage, as underscored by the outcome in Seafolly. The standard remains one of reasonable particularity, but what is considered 'reasonable' evolves with the available means of proof.

Worked Example: A defendant competitor maliciously publishes false technical specifications suggesting the plaintiff's widely sold electronic component is unreliable under certain conditions. The plaintiff cannot identify every potential customer deterred but provides: (i) Verified sales data showing a significant and sustained drop in sales volume commencing shortly after the publication, contrasting sharply with prior stable sales and the positive performance of competitors selling similar components. (ii) A detailed forensic accounting report analyzing the sales data, market conditions, and the plaintiff's marketing efforts, concluding that, after accounting for other variables, the publication caused a specific percentage drop in sales volume, and quantifying the resulting lost profit. (iii) Evidence from distributors reporting increased customer concerns about reliability following the publication. This collective evidence could satisfy the court of a general loss of business caused by the falsehood, consistent with Ratcliffe.

C. Expenses Reasonably Incurred in Counteracting the Falsehood

A plaintiff may recover as actual damage the reasonable expenses they have incurred in taking steps to counteract the negative effects of the defendant's injurious falsehood. This head of damage recognizes that mitigating the harm caused by a malicious publication often requires proactive expenditure.

Examples of potentially recoverable expenses include:

• Costs associated with corrective advertising campaigns.

• Fees paid to public relations consultants to manage the fallout from the falsehood.

• Costs of communicating directly with customers, suppliers, or distributors to reassure them and correct the false information.

• Expenses related to obtaining independent verification or reports to refute the falsehood (e.g., safety audits, technical assessments).

To be recoverable, the expenditure must satisfy several criteria:

1. It must have been actually incurred.

2. It must have been incurred as a direct consequence of the defendant's falsehood.

3. It must have been a reasonable and proportionate response to the publication and its likely impact.

Evidence required would typically include invoices, receipts, contracts for services, and potentially expert opinion on the reasonableness and necessity of the expenditure in the circumstances.

Worked Example: Following a defendant's malicious and false publication questioning the structural integrity of the plaintiff developer's new apartment building, the plaintiff commissions an urgent independent engineering report to verify the building's safety. The plaintiff then distributes a summary of the positive report to all potential purchasers and existing contract holders and places advertisements in local media highlighting the findings. The documented costs of the engineering report and the reasonable costs of the targeted communications and advertising aimed at counteracting the specific falsehood are potentially recoverable as actual damage.

IV. Causation: Linking the Falsehood to the Loss

A. Establishing the Causal Nexus

Proof of actual damage alone is insufficient; the plaintiff must also establish a causal link between the damage suffered and the defendant's tortious conduct – specifically, the malicious publication of the falsehood. The court must be satisfied, on the balance of probabilities, that the defendant's statement was a material cause of the plaintiff's loss. A mere temporal correlation – loss occurring after publication – does not automatically equate to causation.

B. The 'Natural and Probable Consequence' Test

The test for remoteness of damage in injurious falsehood requires the plaintiff to show that the actual damage suffered was the "direct and natural result" or the "natural and probable consequence" of the defendant's publication. This principle, affirmed by Gummow J in Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at [9], citing Ratcliffe, governs the extent of loss for which the defendant will be held liable. As injurious falsehood is an intentional tort (requiring malice), this test may permit recovery for consequences that might be considered too remote under the 'reasonable foreseeability' test typically applied in negligence actions. The focus is on the consequences naturally flowing from the intentional wrongdoing.

C. Analysis of Causation in Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388

The High Court's decision in Palmer Bruyn provides critical guidance on causation in injurious falsehood. The appellant (Palmer Bruyn, a surveyor) suffered the loss of a retainer with McDonald's after a newspaper published an article reporting on a "bogus letter." This letter, containing false statements about the appellant, had been created and initially published maliciously by the respondent (Parsons) to a small group, intending ridicule.

The central issue was whether the appellant's loss (the termination of the McDonald's contract) was caused by Parsons' original malicious publication of the forged letter. The High Court (by majority) held that it was not. The Court found that the damage resulted from the publication of the newspaper report, which was a separate act by a third party and differed in its nature and impact from Parsons' initial, limited publication. Parsons was not legally responsible for the newspaper's republication. Therefore, the necessary causal connection between Parsons' actionable publication (the initial limited one) and the damage suffered was broken.

The significance of Palmer Bruyn lies in its emphasis on linking the proven damage directly to the specific publication for which the defendant is legally responsible and which constitutes the tort. The 'natural and probable consequence' test must be applied to that specific tortious act. Subsequent republications or actions by third parties, even if foreseeable in a general sense, may constitute intervening acts (novus actus interveniens) that sever the chain of causation leading back to the defendant's original malicious statement, unless the defendant intended or authorized the republication, or it was the natural and probable result of the original publication in circumstances where the third party was likely to repeat it. This requires careful identification of the precise tortious publication relied upon by the plaintiff and rigorous proof that the claimed loss flowed naturally and probably from that specific publication.

D. Difficulties in Proving Causation: Seafolly Pty Ltd v Madden [2012] FCA 1346

The practical challenge of establishing causation is well illustrated by the Seafolly case. Ms Madden published statements on Facebook and via email falsely alleging that Seafolly, a swimwear company, had copied her designs. Seafolly brought proceedings alleging, among other things, injurious falsehood.

Despite findings that Madden's statements were false and arguably made with reckless indifference amounting to malice, the injurious falsehood claim ultimately failed. The primary reason for the dismissal was Seafolly's inability to adduce sufficient "concrete evidence" to prove, on the balance of probabilities, that Madden's specific statements had actually caused it to suffer quantifiable economic loss.

Seafolly underscores the difficulty plaintiffs face in isolating the impact of specific statements (particularly those made online) within a dynamic commercial environment. Proving that a decline in sales, or loss of specific opportunities, was directly attributable to the defendant's falsehood, rather than myriad other factors like competition, changing trends, pricing, or general market conditions, requires persuasive and specific evidence that was found lacking in that case.

V. Quantification of Damages and Evidentiary Matters

A. Principles of Assessment

Once liability is established (including proof of actual damage caused by the falsehood), the court must quantify the damages award. The fundamental principle is compensatory: damages aim to restore the plaintiff, so far as money can, to the economic position they would have occupied had the tortious publication not occurred. This involves assessing the monetary value of the actual economic loss proven to have been caused by the falsehood.

Unlike general damages in defamation, which are awarded 'at large' to compensate for presumed reputational harm and associated distress, damages in injurious falsehood are tied to the specific or general economic loss demonstrated by the evidence.

Because injurious falsehood requires proof of malice as an element of the tort itself, the defendant's state of mind is already central to liability. While the primary focus of damages is compensation for economic loss, the intentional nature of the tort means that aggravated damages (compensating for additional injury or distress caused by the manner of the defendant's conduct) and exemplary or punitive damages (intended to punish the defendant and deter similar conduct) may potentially be available in appropriate, egregious cases. This contrasts with the position under the uniform defamation legislation, which typically caps damages for non-economic loss and often prohibits or restricts awards of exemplary damages.

B. Methods of Quantification

Several methods may be employed, often with the assistance of expert evidence, to quantify the plaintiff's economic loss:

• Lost Profits Calculation: This involves estimating the revenue lost due to sales diverted or prevented by the falsehood, and then deducting the expenses that were saved as a result of not making those sales (e.g., variable costs of goods sold, potentially some saved fixed costs if operations were significantly curtailed). Projecting the 'but for' revenue scenario often involves analyzing historical trends, budgets, and market conditions.

• Market Share Analysis: This method compares the plaintiff's actual market share after the publication with the share it likely would have held 'but for' the falsehood. Expert analysis may be needed to attribute changes in market share specifically to the defendant's conduct, accounting for broader market dynamics.

• Business Valuation Diminution: In cases where the falsehood has caused long-term damage to the plaintiff's business or goodwill, damages may be assessed based on the reduction in the overall capital value of the business. This typically requires expert valuation evidence comparing the business's value before and after the impact of the falsehood.

• Specific Costs: Quantifying the actual, reasonable, and necessary expenses incurred in counteracting the falsehood (as discussed in Part III.C) by summing the relevant documented expenditures.

The appropriate method(s) will depend on the nature of the plaintiff's business, the type of loss suffered, and the available evidence.

C. Types of Evidence Required

Robust evidence is essential for both proving the fact of damage and supporting its quantification. Key categories include:

• Financial Records: Comprehensive and reliable accounting records are fundamental. This includes profit and loss statements, balance sheets, detailed sales data (by product, region, customer, etc.), customer relationship management (CRM) data, budgets, and financial forecasts. These establish baseline performance and demonstrate any post-publication changes.

• Expert Evidence: Forensic accountants are frequently engaged to analyze financial records, apply quantification methodologies (like lost profits calculations), assess causation by isolating the falsehood's impact, and prepare expert reports for the court. Market analysts or industry experts can provide crucial context regarding market conditions, competition, and the likely impact of the falsehood within the specific industry.

• Witness Testimony: Evidence from company management regarding business operations, strategy, and the observed impact of the falsehood. Testimony from specific lost customers (if applicable). Evidence from expert witnesses.

• Supporting Documentation: Copies of lost contracts or orders, correspondence from customers or suppliers referencing the falsehood, invoices and receipts for counteracting expenses, marketing plans, and business records generally.

• Market Data: Independent industry reports, competitor performance data, market research, and analysis of online sentiment or media coverage related to the falsehood can help contextualize the plaintiff's performance and support causation arguments.

VI. Conclusion

The tort of injurious falsehood serves a distinct and important function in protecting economic and commercial interests from harm caused by malicious, false statements. It requires the plaintiff to discharge a significant evidentiary burden, proving not only the falsity of the statement and the defendant's malice, but also that the statement caused actual, quantifiable economic loss.

Actual damage is the cornerstone of the action, encompassing provable pecuniary detriment, including general loss of business and reasonable counteracting expenses. While the principle from Ratcliffe v Evans allows for proof of general loss without identifying specific lost customers, demonstrating causation and quantifying such loss requires robust evidence, often involving detailed financial analysis and expert testimony. The High Court's decision in Palmer Bruyn & Parker Pty Ltd v Parsons highlights the critical need to establish a direct causal link between the specific publication attributable to the defendant and the loss claimed. The potential availability of injunctive relief based on probable damage offers a crucial preventative remedy.

Despite the challenges inherent in proving malice and actual damage, injurious falsehood remains a vital cause of action, particularly for corporations limited in their ability to sue for defamation. It provides a necessary, albeit demanding, pathway for redress against intentional and damaging falsehoods targeting commercial activities.

Proving Publication in Social Media Defamation: Lessons from Munro v Wheeler

Introduction

The recent decision of Munro v Wheeler (No 3) [2025] NSWDC 3 highlights the fundamental challenges that can arise in proving publication in defamation cases, particularly those involving social media.

The case involved two plaintiffs (a veterinarian and her friend) who sued two defendants (a dog owner and a "pet detective") over Facebook posts alleging they had stolen a puppy named Teddy.

The plaintiffs claimed they merely found the wandering puppy and were trying to help, while the defendants posted material suggesting more nefarious motives.

Despite the considerable volume of material before the court, the plaintiffs' claim failed at the critical first hurdle—proving that the allegedly defamatory material was actually published in the form claimed.

The Fundamental Requirement of Publication

Publication is an essential element of any defamation action. It requires more than just showing that defamatory words were made available—it requires proof that at least one third party actually downloaded and comprehended the material.

As Justice Gibson noted in Munro v Wheeler:

"The plaintiffs must establish that the matters complained of were read by a person who downloaded the matter complained of, not merely a part of it." (at [123]). (NOTE: However, contrast this with a finding of a platform of facts from which it could be inferred publication had occurred).

The bilateral nature of publication was emphasized in the defendants' pleadings, which acknowledged that they had "made available for publication" the material, but did not admit that any third party had actually read the entire publications as pleaded. Making material available is only "the first step of a two-step process" (at [143]). Without evidence that someone actually downloaded and read the publication in the form alleged, the publication element failed.

Special Challenges of Social Media Publications

Social media platforms present unique challenges for proving publication in defamation cases. Unlike traditional media with fixed content, social media is characterized by:

1. Fluidity and impermanence: Posts and comments appear and disappear, making reconstruction difficult.

2. Non-sequential reading: Users rarely read entire threads in the exact order presented.

3. Personalization: What appears on one user's feed may differ from another's due to algorithms and privacy settings.

4. Post-publication editing: Content can be modified after initial publication.

5. Variable presentation: Different devices and settings may display content differently.

As noted in the English case Stocker v Stocker [2020] AC 593, social media is consumed differently from traditional publications. Courts must adapt to the "conversational and impressionistic" nature of social media, where readers:

"...do not pore over the literal meaning of each word or the grammar of each phrase or sentence... they scroll through messages relatively quickly and move on." (cited in Bazzi v Dutton (2022) 289 FCR 1 at [29])

The Perils of "Constructed" Publications

Munro v Wheeler demonstrates a common mistake in social media defamation cases—suing on artificially constructed compilations rather than actual publications. The plaintiffs presented two exhibits (A and B) comprising 70 and 40 pages respectively of hundreds of screenshots, often out of chronological order, with multiple copies and poor quality reproduction.

Justice Gibson observed that these exhibits were not documents "anyone ever published on Facebook, but a collection of hundreds of screen shots, out of chronological order and consisting of multiple copies" (at [66]). The problem was compounded when witnesses called to establish publication had seen a different 43-page version, not the exhibits claimed to be the defamatory publications.

This approach mirrors the problems encountered in The Sydney Cosmetic Specialist Clinic Pty Ltd v Hu [2022] NSWCA 1, where the plaintiffs similarly failed to establish that the artificial constructions they sued upon had ever been downloaded in that form.

Identifying the Publication with Precision

Courts have long emphasized the need to precisely identify what constitutes the defamatory publication. As Justice Bromwich explained in Hayson v Nationwide News Pty Ltd [2019] FCA 81:

"The plaintiff must identify the matter complained of in the precise form which is alleged to be defamatory of them, and... prove publication... in that form." (cited in Munro v Wheeler at [136])

This principle is even more important in the digital context, where evidence must establish both the content of the publication and that it was downloaded in substantially the same form as alleged. In Poland v Fairfax Digital Australia & New Zealand Pty Ltd [2023] WASC 383, Justice Tottle emphasized that plaintiffs must prove the complete publication was downloaded, not merely parts of it.

Fatal or Material Variance

When significant differences exist between what was allegedly published and what can be proven, courts may dismiss claims on that basis alone. This concept was historically known as "fatal variance" in English decisions (see Gatley on Libel and Slander, 12th ed, [32.15]).

While the NSW Court of Appeal in Brien v Mrad [2020] NSWCA 259 rejected this concept as overly rigid, Justice Gibson observed that where there is a "material" difference between the document alleged to have been published and what was actually published, this can be fatal to the claim.

The Queensland Court of Appeal recently addressed this issue in Surie v MacDonald [2024] QCA 254, where minor differences between an email and a letter did not amount to a material variance. By contrast, in Munro v Wheeler, the differences were so substantial that no publication could be established.

Practical Advice for Practitioners

Given the challenges highlighted in Munro v Wheeler, practitioners handling social media defamation cases should consider the following:

1. Capture accurate evidence promptly: Social media content can vanish or change rapidly. Secure proper forensic captures of the exact publication as soon as possible.

2. Sue on actual publications: Avoid constructing artificial compilations. Instead, identify discrete posts or clearly defined threads that represent actual publications.

3. Establish downloading evidence: Ensure witnesses can testify to downloading and reading the specific publications sued upon, not merely similar or partial content.

4. Be precise about imputations: Clearly identify which parts of the publication give rise to each imputation, particularly when dealing with lengthy social media threads.

5. Consider liability alternatives: In appropriate cases, consider suing on republications or pursuing alternative claims like injurious falsehood or misleading conduct.

Conclusion

Munro v Wheeler serves as a stark reminder of the fundamental importance of establishing publication in defamation actions. As Justice Gibson noted, even where serious allegations about plaintiffs were demonstrably made, failure to properly identify and prove publication of the matter complained of can be fatal to a claim.

The case highlights that while the principles underlying defamation law remain consistent, proving publication in the digital age requires careful attention to the unique characteristics of online communication. Practitioners must adapt their approach to ensure that what is pleaded reflects what actually appeared on screen and what was actually downloaded by third parties.