Big loss for Stokes and Seven in Ben Roberts-Smith defamation costs battle

The Seven Network and a private company owned by media magnate Kerry Stokes will have to hand over their lawyers’ invoices related to the failed defamation suit brought by war veteran Ben Roberts-Smith, in a significant setback to their claim that they should not have to bear the costs of those proceedings.

Roberts-Smith, a decorated former soldier and employee of Seven, sued The Age, The Sydney Morning Herald and The Canberra Times over six stories that alleged he was a murderer, war criminal, bully and domestic abuser. Justice Anthony Besanko found last month that all those descriptions, except the allegation of domestic violence, were proven to be true.

Kerry Stokes bankrolled Ben Roberts-Smith’s failed defamation action, but is arguing that he should not pay the winning party’s costs.Credit: Trevor Collens

Nine, which owns The Age and the Herald, is arguing that the Seven Network (Operations) Ltd and Stokes’ private company, Australian Capital Equity (ACE), should pay the costs of the defamation trial, which they bankrolled for Roberts-Smith under a loan agreement. The combined costs are estimated at $25 million.

Roberts-Smith has agreed to pay Nine’s costs, and to pay a greater proportion of the costs incurred after March 17, 2020, when he knocked back the newspapers’ offer to settle. However, he may yet lodge an appeal against the judgment, and has until next Thursday to do so.

Shortly after the Federal Court heard that Roberts-Smith had agreed to pay the costs on Thursday last week, he was filmed exiting the offices of a bankruptcy lawyer.

But Seven and ACE are resisting the notion that they should be forced to foot the bill.

Ben Roberts-Smith outside the offices of a bankruptcy lawyer last month.Credit: Nine

Nine subpoenaed the two companies and their solicitors, Herbert Smith Freehills, for invoices related to the attendance of lawyers at the defamation trial, billed correspondence and advice and any costs agreements related to the proceedings.

Seven’s commercial director Bruce McWilliam attended the trial in person on at least 12 occasions and via the online stream on at least 71 occasions, according to court documents.

The Seven Network offered to pay Roberts-Smith’s costs for the defamation trial and a separate inquiry into war crimes by the Inspector-General of the Australian Defence Force, in a letter dated August 6, 2019.

Roberts-Smith was required to reimburse the company 12 months after the cessation of his employment with Seven or 12 months after all legal proceedings, including appeals, had concluded.

“We recognise that part of you being a target by our opposition (Nine/Fairfax) in the stories the subject of the actions, arises out of your employment by Seven,” the letter said.

“Nevertheless because of what we understand to be the strong case to defend your reputation and the unfairness aspects, and that fact that the company wishes for you to use experienced solicitors and Senior Counsel – who may be more expensive than you would ordinarily engage as an individual – we are prepared to make available funding of legal costs and disbursements on the terms set out herein.”

Under the terms of the agreement, Roberts-Smith was obligated to take whatever actions Seven required in terms of appeals or cost recovery.

Seven paid the costs up to June 23, 2020, after which ACE took on the liability and paid out Roberts-Smith’s existing debt to Seven.

Under the terms of the agreement with ACE, Roberts-Smith agreed to pay the company an additional payment of 15 per cent of the proceeds that exceeded the amount owing in the loan balance if he won the case.

“In the Company’s view, the SNOL [Seven Network (Operations) Ltd] legal team’s continued oversight and management of the defamation proceedings and inquiry is important for a successful outcome to the proceedings,” the agreement stated.

Nine also subpoenaed communications between Seven, ACE and the law firm Addisons, which represented three of the witnesses called by Roberts-Smith. Seven and ACE agreed to pay the costs of their legal representation at the defamation proceedings and the war crimes inquiry.

Seven, ACE and Herbert Smith Freehills argued that those communications and the records of attendance by their lawyers in the defamation trial were irrelevant to whether they should pay the costs of the proceedings, and applied to have the subpoenas set aside.

But Besanko found that the documents sought by Nine were “undoubtedly relevant” to whether Seven and ACE should pay Nine’s costs. “The fact is that, where documents may possibly throw light on the issues, then they are properly the subject of a subpoena to produce them,” Besanko ruled.

He also ordered that Seven, ACE, Herbert Smith Freehills and Addisons pay for the costs of their application to set aside the subpoenaed documents.

The argument over whether ACE and Seven have to pay Nine’s costs will be heard on September 5.

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