Aleksandra Gacic & Ors v John Fairfax Publications Pty Limited & Anor

CATCHWORDS: APPEAL - defamation - jury trial under s 7A of the Defamation Act 1974 (NSW) - unreasonable verdicts - appellate intervention warranted - verdict entered by appellate court in favour of appellant - APPEAL - error in inviting jury to consider whether an imputation involved an inference upon an inference - question one of capacity - DEFAMATION - publication - person injured in business, trade or profession - JURY - directions to jury - inadequate directions - clear directions needed to overcome misleading or irrelevant matters in counsel's address - interfering with jury verdict - imputations plainly defamatory - no reasonable jury properly directed could find otherwise

Defamation Act 1974 (NSW) s 7A LEGISLATION CITED: Supreme Court Act 1970 (NSW) ss 102, 108(3) Supreme Court Procedure Act 1900 (NSW) s 7

Alford v Magee (1952) 85 CLR 437 Amalgamated Television Services Pty Limited v Marsden (1998) 43 NSWLR 158 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Cairns v John Fairfax & Sons Ltd [1983] 2 NSWLR 708 Calin v Greater Union Organisation Pty Limited (1991) 173 CLR 33 Charlwood Industries Pty Limited v Brent [2002] NSWCA 201 Cinevest Ltd v Yirandi Productions Ltd [2001] Aust Torts Reports 81-610; [2001] NSWSC 68 CSR Limited v Della Maddalena [2006] HCA 1 Edmond Weil Inc v Russell (1936) 56 CLR 34 Eggins v Brooms Head Bowling and Recreational Club (1986) 5 NSWLR 521 Eggleston R, Evidence, Proof and Probability (2nd Ed 1983) Farquhar v Bottom & Anor [1980] 2 NSWLR 380 Gorman v Barber (2004) 61 NSWLR 543 Harvey v John Fairfax Publications Pty Limited [2005] NSWCA 255 CASES CITED: Hocking v Bell (1945) 71 CLR 430 John Fairfax Publications Pty Ltd v Rivkin (2003) 77 ALJR 1657 Jones v Skelton (1963) 63 SR 644 Lewis v Daily Telegraph Limited [1964] AC 234 Lloyd v David Syme & Co Limited (1985) 3 NSWLR 728 Milmo P and Rogers W V H (eds), Gatley on Libel & Slander (10th Ed) Mirror Newspapers Limited v Harrison (1982) 149 CLR 293 Morawski v State Rail Authority (1988) 14 NSWLR 374 Mularczyk v John Fairfax Publications Pty Limited [2001] NSWCA 467 Parker v John Fairfax & Sons Limited (New South Wales Court of Appeal, 30 May 1980, unreported) Pateman v Higgin (1957) 97 CLR 521 Prosser WL and Keeton WP, Prosser and Keeton on the Law of Torts, (5th Ed 1984) Shepherd v The Queen (1990) 170 CLR 573 Steele v Mirror Newspapers Limited [1974] 2 NSWLR 348 Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816; [2005] HCA 57

Aleksandra Gacic (First Appellant) Ljiljana Gacic (Second Appellant) PARTIES: Branislav Ciric (Third Appellant) John Fairfax Publications Pty Limited (First Respondent) Matthew Evans (Second Respondent)

COUNSEL: C Evatt; M Rollinson (Appellants) T D Blackburn SC; D R Sibtrain (Respondents)

SOLICITORS: David Leamey (Appellants) Freehills (Respondents)

• 52 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40501/05

HANDLEY JA BEAZLEY JA IPP JA

30 June 2006 ALEKSANDRA GACIC & ORS v JOHN FAIRFAX PUBLICATIONS PTY LIMITED & ANOR Headnote Facts

The second respondent, Matthew Evans, wrote an article critically reviewing the restaurant Coco Roco which was published in the Sydney Morning Herald, a newspaper owned by the first respondent. The appellants claimed that the article conveyed a number of defamatory imputations and claimed damages. The imputations pleaded by each appellant were:

(a) The appellant sells unpalatable food at Coco Roco. (b) The appellant charges excessive prices at Coco Roco. (c) The appellant provides some bad service at Coco Roco. (d) The appellant is incompetent as a restaurant owner because she/he employs a chef at Coco Roco who makes poor quality food. The jury, following a trial conducted pursuant to s 7A of the Defamation Act 1974 (NSW), found that imputations (a) and (c) were conveyed but were not defamatory and that imputations (b) and (d) were not conveyed. The appellants appeal against the jury verdicts on two grounds:

1. In respect of imputations (a) and (c), on the basis that the respondents' counsel misled the jury with his statements concerning defamatory meaning. The trial judge erred in failing to give proper or sufficient directions to the jury to overcome the misleading effect of the address of the respondents' counsel.
2. In respect of imputation (d), the respondents' counsel misled the jury by submitting that it involved an inference on an inference and therefore did not give rise to a defamatory imputation. The trial judge erred in permitting this matter to go to the jury. There was no appeal in respect of imputation (b). Held in relation to Ground 1: defamatory meaning of imputations (a) and (c)

Per Beazley JA (Handley JA and Ipp JA agreeing): (i) Defamation that is alleged on the basis that a person has been injured in their business, trade or profession (business defamation) is distinct from defamation as it is generally understood, in that it does not require proof that the imputation would tend to lower that person in the estimation of right-thinking members of society. It requires only that it be established that that person's reputation in their trade, profession or other office has been injured. Milmo P and Rogers W V H (eds), Gatley on Libel & Slander (10th edition) (ii) The trial judge did not adequately direct the jury that business defamation was distinct from defamation in its generally understood sense. (iii) A clear direction was particularly necessary in this case, where the respondents' counsel had addressed the jury almost exclusively on defamation in its generally understood sense. Defamation in that sense was entirely irrelevant to the claim brought by the appellants.

(iv) An appellate court will interfere with a jury verdict only if it is one that no reasonable jury, properly directed, could have reached. The only verdict that could have been reached was that imputations (a) and (c) were defamatory, thus interference with the unreasonable verdict of the jury to the contrary was warranted. John Fairfax Publications Pty Ltd v Rivkin (2003) 77 ALJR 1657 (applied) (v) The appellate court itself may enter a verdict where an imputation is plainly defamatory and no jury, properly directed, could reasonably reach any other verdict. It was appropriate for the Court to enter a verdict in favour of the appellants in respect of imputations (a) and (c), the imputations being clearly defamatory and there being no question of community standards and no suggestion of a compromise verdict. Charlwood Industries Pty Limited v Brent [2002] NSWCA 201 (applied; distinguished); Hocking v Bell (1947) 75 CLR 125 (discussed); Harvey v John Fairfax Publications Pty Limited [2005] NSWCA 255 (considered; distinguished); Gorman v Barber (2004) 61 NSWLR 543 (followed); Cairns v John Fairfax & Sons Ltd [1983] 2 NSWLR 708 (considered) (vi) The failure of counsel for the appellants to seek a redirection in this case did not preclude the Court exercising its appellate jurisdiction, if a failure to do so would involve a miscarriage of justice. Calin v Greater Union Organisation Pty Limited (1991) 173 CLR 33 (followed); Eggins v Brooms Head Bowling and Recreational Club (1986) 5 NSWLR 521; Morawski v State Rail Authority (1988) 14 NSWLR 374 Further per Handley JA: (vii) Where the appellants have pleaded their case only on the basis of business defamation (see (i) above), the trial judge should not leave to the jury the option of determining whether the imputations were defamatory on the basis of defamation as it is generally understood.

(viii) The trial judge was required to give clear directions to the jury that the address of respondents' counsel, to the extent that it was related to general defamation, was irrelevant (see (iii) above) and should be disregarded. The trial judge was required to identify for the jury that the only issue was whether the imputations tended to injure the appellants in their business. Her failure to do so meant her directions were erroneous and/or inadequate. Alford v Magee (1952) 85 CLR 437 (applied) (ix) According to orthodoxy an appellate court cannot enter a verdict in favour of the party with the legal onus on a question of fact. The only course open to an appellate court is to order a new trial. This is not altered by s 108(3) of the Supreme Court Act 1970 (NSW). However a potential exception could be in business defamation cases where community standards are less important. Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Held in relation to Ground 2: inference upon an inference Per Beazley JA (Handley JA agreeing): (x) The question whether an imputation involves an inference on an inference is part of the determination of the capacity of a matter to convey a particular imputation and is a matter for determination by a judge and not by the jury. Amalgamated Television Services Pty Limited v Marsden (1998) 43 NSWLR 158 (not followed) (xi) Imputation (d) did not involve an inference on an inference, and this question should not have been left to the jury. Harvey v John Fairfax Publications Pty Limited (considered) Further per Handley JA: (xii) (Beazley JA agreeing) The judge who is determining whether a matter is capable of conveying the imputation pleaded will rule against the imputation if it can only be derived by drawing an inference from an inference, as such a matter is not reasonably capable of conveying the imputation pleaded. In this case, the judge determining the capacity of the matter to convey ruled that the imputation was reasonably capable of conveying the imputation. Amalgamated Television Services Pty Limited v Marsden (not followed); Mirror Newspapers Limited v Harrison (1982) 149 CLR 293; Lewis v Daily Telegraph Limited [1964] AC 234 (xiii) (Ipp JA agreeing) Whether a matter involves an inference on an inference is an inappropriate question for the jury, who are likely to be distracted and confused by its complexities. Amalgamated Television Services Pty Limited v Marsden (distinguished) Per Ipp JA: (xiv) There is no absolute rule of law that precludes an inference upon an inference from having the capacity to convey a defamatory imputation. However caution should be exercised in cases involving such reasoning, and the need to draw an inference upon an inference may be a useful guide in determining the question. Amalgamated Television Services Pty Limited v Marsden (not followed); Lewis v Daily Telegraph Limited (explained); Mirror Newspapers Limited v Harrison (explained) (xv) There is no relevant connection between imputations (a) and (c) (Ground 1) and imputation (d) (Ground 2), and therefore there is no need for a jury, in determining the appellants' claim in relation to imputation (d), to be aware of any material relating to the appellants' claim in respect of imputations (a) and (c). Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816; [2005] HCA 57 (distinguished); CSR Limited v Della Maddalena [2006] HCA 1 (discussed); Pateman v Higgin (1957) 97 CLR 521 (distinguished) (xvi) (Agreeing with Beazley JA) To order a new trial in relation to imputations (a) and (c) would be an injustice to the appellants. Pateman v Higgin (1957) 97 CLR 521 (distinguished)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40501/05

HANDLEY JA BEAZLEY JA IPP JA

30 June 2006 ALEKSANDRA GACIC & ORS v JOHN FAIRFAX PUBLICATIONS PTY LIMITED & ANOR Judgment 1 HANDLEY JA: In this appeal I have had the benefit of reading the reasons for judgment of Beazley JA in draft form. Subject to the short reasons which appear below I agree with her Honour's reasons and the orders she has proposed. Defamatory meaning of imputations (a) and (c) 2 The trial Judge directed the jury that they could consider whether these imputations were defamatory on either of two bases. The first was that they tended to lower the plaintiffs in the estimation of ordinary right thinking members of the community. The second was that they tended to injure the plaintiffs in their trade or business. The Judge should not have left the first alternative to the jury. The plaintiffs had pleaded their case only on the second basis and their counsel had addressed the jury accordingly. The first basis was entirely irrelevant. 3 The submissions of senior counsel for the defendants on the defamatory meaning of these imputations were almost entirely directed to a defamation case that had not been pleaded or relied on by counsel for the plaintiffs. This could only have confused a jury and his address called for a clear and firm direction that everything he had said to the jury on this question, other than the short passage quoted by Beazley JA in para [12] of her reasons, was totally irrelevant, and they should disregard the rest of his submissions. 4 The relevant principles were stated in Alford v Magee (1952) 85 CLR 437, 466: "… the late Sir Leo Cussen insisted always most strongly that it was of little use to explain the law to the jury in general terms and then leave it to them to apply the law to the case before them. He held that the law should be given to the jury not merely with reference to the facts of the particular case but with an explanation of how it applied to the facts of the particular case. He held that the only law which it was necessary for them to know was so much as must guide them to a decision on the real issue or issues in the case, and that the judge was charged with, and bound to accept, the responsibility (1) of deciding what are the real issues in the particular case, and (2) of telling the jury, in the light of the law, what those issues are. If the case were a criminal case, and the charge were of larceny, and the only real issue were as to the asportavit, probably no judge would dream of instructing the jury on the general law of larceny. He would simply tell them that if the accused did a particular act, he was guilty of larceny, and that, if he did not do that particular act, he was not guilty." 5 Her Honour's directions (para [14]) may have caused a jury to think that the plaintiffs had to succeed on both bases and that a finding that the imputation tended to injure them in their trade or business was not enough. The directions may also have given them the impression that they could decide the case on either basis. 6 The principles stated in Alford v Magee (above) required the Judge to first identify what was the only issue for the jury on this part of the case, namely whether the imputations tended to injure the plaintiffs in their trade and business. She should then have instructed them as to the legal principles they must apply in deciding that question. I agree with Beazley JA that the failure to give firm clear directions to this effect occasioned a substantial miscarriage of justice and the verdicts for the defendant on these imputations must be set aside.

7 The plaintiffs had a strong case on the defamation issues in respect of these imputations, and it is likely that a new trial, with proper directions, will lead to verdicts in their favour on both. The verdicts of the first jury cannot stand because they are the result of a trial which was not conducted according to law and seriously miscarried. Were it necessary to do so I would also be prepared to find that the verdicts in respect of these imputations were unreasonable, but that question only really arises when the jury has been properly directed. 8 Beazley JA refers to decisions of this Court which appear to decide that if a jury's verdict in favour of a defendant in a defamation case is set aside as unreasonable, the Court is empowered by s 108(3) of the Supreme Court Act to enter a verdict for the plaintiff. This depends on the view that the Court can direct a verdict in favour of the party who bears the legal onus of proof on the issue. 9 I do not understand that s 108(3) altered the earlier law and I had understood that it was not competent for a trial Judge to direct the jury to enter a verdict in favour of the party with the legal onus on a question of fact and that an appellate court could not enter such a verdict either. A trial judge is bound to leave questions of fact to the jury for their decision and if their verdict is unreasonable the only course open to the appellate court, in the absence of a power such as that conferred by s 107 of the Supreme Court Act, was to order a new trial. What I had understood were the orthodox principles were explained by Glass JA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 154-6. 10 However the decisions in question are recent and were not appropriately and directly challenged by counsel for the respondent until the oral argument. If an exception to those principles were ever to be recognised in defamation cases this could occur in relation to imputations which tend to injure the plaintiff in his trade or business where general community standards are less important. I therefore concur in order 3 as proposed by Beazley JA. Imputation (d): inference upon an inference 11 Imputation (d) was that the plaintiffs are incompetent as restaurant owners because they employ a chef at Coco Roco who makes poor quality food. At a preliminary hearing Nicholas J ruled that this imputation was capable of being conveyed by the matter complained of and could therefore go to the jury. There was no appeal or application for leave to appeal from this decision. It appears that in doing so he rejected the defendant's argument that, as a matter of law, the ordinary reasonable reader could only derive that imputation from the matter complained of by drawing an inference from an inference. As Hunt CJ at CL said in Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158, 167: "An inference is something which the reader … adds to what is stated by the publisher; it may reasonably or even irresistibly follow from what has been expressly or impliedly said, but it is nevertheless a conclusion drawn by the reader … from what has been expressly or impliedly said by the publisher … It is the reader's … own conclusion." 12 A publisher is not responsible for an imputation which can only be derived from the matter complained of by a process of drawing an inference from an inference. The reasons for this were explained, again by Hunt CJ at CL in Marsden's case (above) at 166-7: "What must be emphasised is that it is the test of reasonableness which guides any court in its function of determining whether the matter complained of is capable of conveying any of the imputations pleaded by the plaintiff. In determining what is reasonable in any case, a distinction must be drawn between what the ordinary reasonable reader … could understand from what the defendant has said in the matter complained of and the conclusion which the reader … could reach by taking into account his or her own belief which has been excited by what was said. It is the former approach, not the latter, which must be taken … The publisher is not held responsible, for example, for an inference which the ordinary reasonable reader … draws from an inference already drawn from the matter complained of, because it is unreasonable for the publisher to be held so responsible." 13 The trial Judge, over objection from counsel for the plaintiffs, left to the jury the question whether imputation (d) was not conveyed in the present case because it involved drawing an inference from an inference. Mr Evatt for the plaintiffs submitted that this was only relevant when considering whether the matter complained was capable of conveying the imputation but was not relevant to the jury's consideration of whether in fact that imputation was conveyed. Her Honour rejected this submission and left it to the jury. 14 It is well established that the judge who is considering whether the matter complained of is capable of conveying the imputation pleaded will rule against the imputation if it can only be derived by drawing an inference from an inference. 15 In Lewis v Daily Telegraph Ltd [1964] AC 234 the newspaper was sued for publishing a statement that the Fraud Squad was investigating the affairs of a company linked with the appellant. The trial Judge had left to the jury for their determination the question whether this meant that the plaintiff was guilty of fraud. The House of Lords by majority held that the words complained of were not reasonably capable of bearing that meaning. In the course of doing so members of the House of Lords said that an imputation of guilt could only be drawn from the matter complained of by a process of drawing an inference from an inference. Lord Hodson said at 274: "Suspicion, no doubt, can be inferred from the fact of the inquiry being held … but to take the further step and infer guilt is, in my view, wholly unreasonable. This is to draw an inference from an inference and to take two substantial steps at the same time." 16 Lord Devlin was of the same opinion (286): "Let it be supposed, first, that a statement that there is an inquiry conveys an impression of suspicion; and, secondly, that a statement of suspicion conveys an impression of guilt. It does not follow from these suppositions that a statement that there is an inquiry conveys an impression of guilt. For that, two fences have to be taken instead of one. While, as I have said, I am prepared to accept that the jury could take the first, I do not think that in a case like the present, where there is only the bare statement that a police inquiry is being made, it could take the second in the same stride." 17 Mirror Newspapers Ltd v Harrison (1982) 149 CLR 293 confirmed the view that an imputation which can only be derived from the matter complained of by a process of drawing an inference from an inference is not reasonably capable of being conveyed by that matter. Such an imputation is not available, as a matter of law, to the plaintiff and should not be left to the jury. See also Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16, 22 per Sugerman ACJ. 18 In Harrison the newspaper had published a report that the plaintiff had been arrested and charged with an offence and this was said to convey an imputation that he was guilty or probably guilty of that offence. The High Court unanimously upheld the decision of Hunt J that the matter complained of was not capable of conveying those imputations. Mason J, who delivered the principal judgment, said that the imputation of guilt could only be derived from the matter complained of by drawing "an inference from an inference" and taking two substantial steps at the same time (299, 300). 19 Both cases were concerned with the preliminary question whether the matter complained of was reasonably capable of conveying the meaning or imputation relied on by the plaintiff. The House of Lords and the High Court did not have to consider how such a case should be left to the jury. In both cases the Court held that the matter complained of was not reasonably capable of conveying the meaning or imputation relied on so that matter did not arise. 20 In the present case the question arose after a Judge had ruled that the imputation relied on was reasonably capable of being conveyed by the matter complained of. There is nothing in Lewis or Harrison which supports the view that the jury should again be asked to consider whether the imputation can only be derived from the matter complained of by a process of drawing an inference from an inference. 21 However in Marsden (above) Hunt CJ at CL said that this question should be left to the jury (171): "… it will usually be for the jury to determine whether the first step in the process of reasoning involves an implication or an inference. They must be directed that, if the imputation does arise, and if it does arise from drawing an inference upon an inference rather than upon an implication, it would not be reasonable for the defendant to be made responsible for that imputation, and the defendant is entitled to succeed in relation to it." 22 Mason P and I both agreed with the judgment of Hunt CJ at CL in that case, but the question before the Court involved a challenge by the defendant to a preliminary ruling by Levine J that an imputation could go to the jury. The appropriate directions to the jury in such a case were not in issue and had not been the subject of argument. The passage quoted therefore is only dicta, and notwithstanding the formidable reputation of Hunt CJ at CL in this field I feel entitled and bound to reconsider the question. 23 I am fortified in this conclusion by the difficulties faced by the trial Judge in this case in directing the jury on the distinction between an implication and an inference, and the process of reasoning involved in drawing an inference from an inference. As oral argument in the appeal on this question developed the clearer it became that this analysis was not appropriate for the consideration of a jury, who were likely to be distracted and confused by its complexities. 24 Moreover in Lewis (above) Lord Morris of Borth-Y-Gest and Lord Devlin referred to the direction that should be given to the jury in such a case. Lord Morris of Borth-Y-Gest said (265): "… it was quite unnecessary for the judge to tell the jury what an innuendo was, or even to use the word … or to leave any issue or question to them concerning an innuendo. The question left to the jury - within the limits of the meanings which the judge regarded the words as being capable of bearing - was as to what they thought ordinary people would consider that the words meant." 25 Lord Devlin said (285): "One always gets back to the fundamental question: what is the meaning that the words convey to the ordinary man; you cannot make a rule about that." 26 It is settled law that a judge can reject, on legal grounds, an imputation which can only be derived from the matter complained of by drawing an inference from an inference. That is a test for determining the outer limits of reasonableness in this area. An imputation which can only be derived by such a process is not reasonably capable of being conveyed by the matter complained of and must be withdrawn from the jury. 27 Within the range of possible meanings available to the jury the question for them is a question of fact; which depends upon their understanding of what the words would convey to ordinary men and women in the community. The jury are expected to decide this by the application by their ordinary experience and commonsense. Their task should not be complicated by the legal reasoning the judge must apply which they are likely to find confusing and unhelpful. Moreover, as Lord Devlin said, in the passage quoted, the question for the jury is one that you cannot make rules about. I therefore agree with order 4 as proposed by Beazley JA. 28 BEAZLEY JA: In about mid 2003, the appellants opened a restaurant, Coco Roco, at the King Street Wharf, a prestigious city location for restaurants and other businesses. On 30 September 2003, the second respondent, Matthew Evans, a food writer for the Sydney Morning Herald, a newspaper published by the first appellant, wrote a review of the restaurant in the "Good Living" section of the paper (the article). The second respondent's conclusion as to the restaurant was set out in the summary at the end of his article. He said: "Unpalatable flavours on one hand and pricey but good steak with flawed garnishes on the other add up to a restaurant where the view is the best bit …" 29 The appellants brought proceedings in the Supreme Court claiming that the article was defamatory of them. They pleaded that the article as a whole contained the following imputations:

(a) The plaintiff sells unpalatable food at Coco Roco.

(b) The plaintiff charges excessive prices at Coco Roco.

(c) The plaintiff provides some bad service at Coco Roco.

(d) The plaintiff is incompetent as a restaurant owner because she/he employs a chef at Coco Roco who makes poor quality food. 30 A trial pursuant to s 7A of the Defamation Act 1974 (NSW) (the Defamation Act) was conducted before her Honour Justice Bell and a jury of four. The jury found that the imputations pleaded in paragraphs (a) and (c) were conveyed, but were not defamatory. The jury further found that the imputations pleaded in paragraphs (b) and (d) were not conveyed. It followed that a verdict was entered for the respondents. 31 The appellants appeal from the jury's findings relating to imputations (a), (c) and (d). Two essential grounds of appeal are raised. First, the appellants contend that in respect of imputations (a) and (c) the respondents' counsel misled the jury with his statements concerning defamatory meaning and that the trial judge failed to give adequate directions to the jury to overcome the misleading effect of counsel's address. Secondly, the appellants contend that the respondents' counsel also misled the jury by submitting that imputation (d) involved an inference built on another inference and as such could not be conveyed by the article and that the trial judge erred in permitting that issue to be left to the jury.

Ground 1: defamatory meaning: imputations (a) and (c) 32 The appellants' case was that the article conveyed the imputations alleged and that those imputations had injured their business, trade or profession as owners of the restaurant and were thus defamatory. I will refer to defamation in this sense as business defamation. A person may be defamed in their business trade or profession regardless of whether the defamation lowers the person in the estimation of others. In Milmo P and Rogers W V H, (eds), Gatley on Libel & Slander (10th edition) the distinction between defamation in its generally understood meaning and business defamation is explained by the authors at para 2.7: "Any imputation is defamatory if it would tend to lower the claimant in the estimation of right-thinking members of society generally or would be likely to affect a person adversely in the estimation of reasonable people generally. For instance to say of someone that he is ungrateful would scarcely expose him to hatred, ridicule or contempt, or cause him to be avoided, yet it has been held defamatory. To say of a person carrying on any trade or profession or holding any office that he is incompetent at it, may not even lower him in the estimation of others, but the words will be defamatory because of the injury to his reputation in his trade, profession or office … " (Footnotes omitted) (Emphasis added) Addresses to the jury:

Appellants' case 33 The appellants had specifically pleaded a case of business defamation in paragraph 6 of the Statement of Claim and this was the basis upon which their counsel addressed the jury. No case of general defamation was pleaded or pursued before the jury. When addressing the jury the appellants' counsel explained the way that the appellants brought their claim in these terms: "… that imputation if you found it to be conveyed [was] likely to injure the [appellant's] reputation in their business, trade or profession as restaurant owners. Any imputation which suggests some unfitness or incompetence for a trade, business or profession is defamatory and we say that these imputations are defamatory because they injure the [appellant's] reputation in their trade or profession."

Respondents' case 34 However, senior counsel for the respondents took a different approach altogether and made the following comments to the jury in respect of imputation (a): "Now, members of the jury, you haven't heard much about the test of what is defamatory. Her Honour will explain it to you, the legal test, because that is her Honour's job. Incidentally, if her Honour says anything to you about the law that conflicts with what Mr Evatt or I have said, then you follow her Honour … The test of whether something is defamatory is whether the thing would tend to make ordinary decent people in the community think the less of the [appellant]. It is a very simple test. It is the usual way it is put …. [s]ometimes it is put slightly differently but that is the usual test and her Honour, I apprehend, will tell you something like that or very similar to that." 35 Senior counsel continued, in relation to imputation (a): "How is it defamatory? How would it tend to make decent people think less of another person, even if they are the owner of a restaurant, to say that they sell unpalatable food? I mean, isn't it just it is one of those things. If you sell unpalatable food, then maybe you are a restaurant owner who owns a restaurant which isn't very good, but how does it make an ordinary decent person think less of somebody else to say that they sell unpalatable food? … Isn't it a bit neutral? You think, "Oh, well, yep, he says that this person sells unpalatable food. Yeah, okay, fine", but you are not going to march around are you, going to make some sort of judgment of that person or think any the less of them. It is a matter for you, members of the jury, but if you think that ordinary decent people, which is the test, in the community would tend to think the less of somebody because it is said about them that they sell unpalatable food, well, it is a matter for you. You are the community arbiters on that question." 36 Senior counsel for the respondents then dealt with imputation (b). The jury found that imputation (b) was not conveyed by the article. There is no appeal from that finding. However, it remains relevant to refer to senior counsel's comments to the jury as to the meaning of defamation in relation to this alleged imputation so as to provide an overview of the approach taken at trial by the respondent to defamatory meaning. Thus, having referred to the terms of imputation (b), senior counsel said: "Again you have got this problem, you might think - and I don't want to labour the point - but you might think that you have got this problem that even if the reader thought that the prices were excessive, the reader who reads this article on the bus or at the table or whatever, is not going to get a meaning that these individual people who are just named in the side-bar are charging - it is just not a meaning that is going to occur to the reader, is it?" 37 Senior counsel concluded his address in relation to imputation (b) by saying: "It wouldn't make the reader, you might think, think less of someone if that were said … ." (Emphasis added) 38 The same approach was taken when senior counsel for the respondents addressed the jury in relation to imputation (c). He again asked the jury to consider how it was defamatory of the appellants to say that they provided some bad service in the sense that "nobody [was] going to think the less of them" because of what was said in that part of the article. 39 Senior counsel for the respondents then dealt with imputation (d). He indicated to them that no defamatory imputation could arise where there was an inference upon an inference. This latter goes to the second ground of appeal. In relation to this ground of appeal, senior counsel for the respondents also suggested to the jury that the imputation was not defamatory. In that respect, he said: "Is the ordinary reader going to think, or decent people, going to think the less of somebody? I should tell you that it is only fair to say that it can also be defamatory of somebody if you impugn their professional competence in their job . It is what the law says. But at the end of the day it is your decision." (Emphasis added)

That was the only reference in senior counsel's address to a business defamation.

Directions sought 40 Before her Honour commenced her summing and in the absence of the jury, counsel for the appellants indicated to her Honour that he needed some directions. The exchange between her Honour, Mr Evatt, counsel for the appellants and Mr Blackburn SC, senior counsel for the respondents, was as follows: "EVATT: On defamatory meaning, my friend put that the test, which is pretty standard test -- (sic) HER HONOUR: He did, at the very end. EVATT: But not applicable to this case. HER HONOUR: He did, at the very end. EVATT: I know that, but that was -- BLACKBURN: I am happy for any correction. EVATT: I have the relevant passages from Gatley. BLACKBURN: I am happy for any corrections. HER HONOUR: I intend telling the jury that whilst, ordinarily, the notion of something being defamatory carries with it that it would lower a person in the estimate of ordinary, right thinking members of the community, the case here depends upon another aspect of the notion of being defamatory, acknowledged by Mr Blackburn towards the conclusion of his address, and that is that the meaning conveyed would be likely to injure a person in his or her trade or profession by reason of suggesting unfitness or incompetence or something of that nature. Does that address your problem? EVATT: Yes. That's what I put.

My friend just, in the last minutes of his address, did make a number of correct statements but four times he said about the ordinary reasonable reader, even if they read the side bar, and he said that at long intervals of time. But he did end up saying that they would have to read the whole of the article. BLACKBURN: I accept that. I am happy for any reinforcement."

Trial judge's directions to the jury 41 In her summing up to the jury, her Honour dealt with the question of defamatory meaning in the following terms: "Let me now turn to the question of whether or not the imputations that are pleaded are defamatory … Generally, defamatory means having the tendency to lower a person in the estimate of ordinary, right-thinking members of the community. But there is another way in which an article or publication may be defamatory and it is the way that the [appellants] put their case here. It is important you understand that the question of whether or not the imputations were defamatory of the [appellants] takes up the concept of whether they may have the tendency to injure a person in his or her profession or trade by the suggestion of unfitness or incompetence or the like. Just to make that clear. Generally, defamatory means having the tendency to lower a person in the estimate of ordinary right-thinking members of the community but equally, and importantly for this case , defamatory has the meaning of having a tendency to injure the [appellant] in his or her profession or trade by the suggestion of unfitness or incompetence." (Emphasis added) 42 After further summing-up to the jury on matters not relevant to this ground of appeal, her Honour concluded by asking counsel for the parties whether there were any matters they wished to raise. Mr Evatt, counsel for the appellants, replied in the negative. Appellants' contention on ground 1 43 Counsel for the appellants contends that the trial miscarried for two reasons: first, due to the way in which senior counsel for the respondent addressed the jury in relation to defamatory meaning, and secondly, because her Honour failed to give correct directions to the jury in her summing-up in relation to the appellants' business defamation claim, and failed to give adequate directions so as to correct any misapprehension the jury may have been under as a result of the matters put by senior counsel for the respondent in his address. 44 Although I have already set out the relevant passages in detail above, it is convenient to repeat the final submission of senior counsel for the respondents on the question of defamatory meaning. He said:

"Is the ordinary reader going to think, or decent people, going to think the less of somebody? I should tell you that it is only fair to say that it can also be defamatory of somebody if you impugn their professional competence in their job". 45 The appellants submit that even though senior counsel for the respondents made reference to business defamation in this part of his address to jury, his statement did not correctly state the law. Their case was that the article defamed them in their business. They contend that the effect of what senior counsel for the respondent said at this point was that, if decent members of the community thought less of someone because the matter complained of impugned their professional competence, it would be defamatory. Counsel for the appellants pointed out that there is a significant distinction between putting the matter that way, which retains the underlying concept that, to be defamatory, the reputation of the individual person must be lowered in the eyes of decent members of the community in the case where there is an attack on a person's business. Where there is such an attack, it is defamatory to say that a person is incompetent at that person's business, even if the statement does not lower that person in the estimation of others. As is stated in Gatley at para 2.7, in the passage set out above, "[t]he words will be defamatory because of the injury to his reputation in his trade, profession or office" (emphasis added). 46 Taken in isolation, the last sentence in the comment made by senior counsel for the respondents correctly stated the meaning of business defamation. However, the comment as a whole was both misleading and, in my opinion, incorrect. It did not draw the jury's attention to the distinct nature of business defamation. In particular, the comment did not inform the jury that there could be business defamation even though the defamatory statement did not lower the defamed person in the estimation of right thinking members of the community. Accordingly, although I do not agree that the meaning of what the respondents' senior counsel said to the jury was quite as alleged by the appellant, the jury needed careful directions to ensure that they were not left with an erroneous or misleading understanding, either of the law or the way in which the appellants put their case. 47 When an erroneous or misleading statement is made during the course of counsel's address to the jury, it is the duty of opposing counsel to raise the matter before the trial judge and seek that appropriate action be taken. That can be by way of seeking a direction or redirection as the case requires, or, in an extreme case, a discharge of the jury. In this case, counsel for the appellants took the appropriate step at the end of the address by senior counsel for the respondents and sought a direction by her Honour. The appellants complain, however, that her Honour failed to give adequate directions to the jury given the problem that had been created by senior counsel for the respondents consistently putting to the jury that defamation meant lowering a person in the eyes of right minded members of the community. 48 The deficiency in her Honour's directions, on the appellants' submission, was that, having explained to the jury the usual meaning of 'defamatory', that is, that generally a statement is defamatory if it has the tendency "to lower a person in the estimate of ordinary right-thinking members of the community", her Honour then stated that "equally", 'defamatory' bore a meaning of "having a tendency to injure the plaintiff in his or her profession or trade by the suggestion of unfitness or incompetence" (emphasis added). Counsel for the appellants submitted that, by the use of the word "equally", her Honour left it open to the jury to find that, in this case, they could find the matter in the alternative, so that, if they concluded that the appellants were not lowered in the estimate of ordinary right-thinking members of the community by the imputations in the article, then they would fail. 49 Senior counsel for the respondents contended that the appellants were precluded from complaining about the direction because, her Honour having indicated the direction that she proposed to give to the jury following Mr Evatt's request and, having given a direction in respect of which Mr Evatt then made no complaint, the appellants were precluded from now raising the matter: see Alford v Magee (1952) 85 CLR 437. The respondents also contended that the direction given by her Honour was not materially different from that which she had proposed during the course of discussion with counsel. Finally, they argued that, in any event, the direction was not erroneous. The respondents submitted that it was open to them to defend the case on the basis that defamatory meaning in this case could, if the jury so decided, bear its general meaning of lowering a person in the estimation of right-thinking persons, so that it was correct for her Honour to direct the jury as to both meanings. Finally, senior counsel for the respondents submitted that, in any event, her Honour had pointed out that not only were the two meanings "equally" available, but also said, "importantly", for the purposes of this case, business defamation was alleged. 50 It is convenient to deal first with these last two submissions. In my opinion, the direction given by her Honour was wrong. It was incumbent upon her Honour to direct the jury that in the case of a business defamation, it did not matter whether the published material lowered the person in the eyes of right-thinking members of the community. Her Honour did not give that direction. Indeed, by directing the jury first as to the general meaning of defamation and then by "equally" referring to a business defamation, without adding the important qualification to which I have just referred, her Honour gave a direction that was wrong in law. In the present case, the error was likely to have been more serious because of the strong and almost uncompromising address by senior counsel for the respondents in his focus upon non-business defamation. As I have already explained, his reference to business defamation at the end of his address was itself erroneous in any event, and did not diminish the persistent reliance upon the irrelevant form of defamatory meaning in this case. 51 What then, is the consequence of the trial judge's error? That raises three questions. First, are the imputations defamatory? Secondly, even if they are defamatory, is counsel for the appellants bound by his conduct at trial in not seeking further redirections? Thirdly, if the imputations are defamatory, should this Court enter verdicts in respect of those imputations?

Are imputations (a) and (c) defamatory? 52 The appellants contend that the imputations (a), that they sell unpalatable food at Coco Roco and (c), that they provide some bad service at Coco Roco, were defamatory and that a verdict in their favour should be entered in respect of these two imputations. 53 Under the provisions of s 7A, if the court determines that an imputation is reasonably capable of carrying the imputation and is reasonably capable of bearing a defamatory meaning, it is the function of the jury to determine whether the imputation is conveyed and if conveyed whether it is defamatory. In this case, the jury found that imputations (a) and (c) were conveyed but were not defamatory. An appellate court will only interfere with a jury verdict "if it is one that no reasonable jury could reach": John Fairfax Publications Pty Ltd v Rivkin (2003) 77 ALJR 1657 per Callinan J at [185]. Gleeson CJ agreed with Callinan J: see [1]. In doing so, he stated, at [2], that the issue before the Court of Appeal was fairly stated as being whether the jury's verdict was one "that no reasonable jury, properly directed, could have given". See also McHugh J at [20]; Heydon J at [220]. Thus, an appellate court will only interfere with a jury verdict if it is one that no reasonable jury, properly directed, could have given. 54 The question to be asked in this matter therefore is whether, having found that the jury were wrongly and/or inadequately directed, imputations (a) and (c) are defamatory in the sense that no reasonable jury, properly directed, could have come to any other determination. 55 The appellants had recently opened their restaurant at King Street Wharf. The appellants had promoted the restaurant in terms: "A new level of dining comes to Sydney's King Street Wharf". The restaurant had been fitted out expensively and had extensive views of Darling Harbour. The style and price of the food was, as it appears from the article, intended to indicate that this was a high class restaurant. As I have indicated, the location at Darling Harbour was itself prestigious in a city which is sophisticated and cosmopolitan. 56 The food served in any restaurant is its essential business. If the food is "unpalatable" the restaurant fails on the very matter that is the essence of its existence. This is especially so of a purportedly high class restaurant. To say of a restaurateur of such an establishment that they sold "unpalatable" food injures that person in their business or calling and because of that, is defamatory. In my opinion, no reasonable jury properly directed could reach any other verdict. 57 Service is also an integral part of the experience of dining. Good service is expected at a high class restaurant. It is part of what the patron pays for. It is almost trite to say that poor service, even occasional poor service within the one dining experience, will not be tolerated by patrons of an expensive "swank" restaurant. To say, therefore, that the appellants provided "some bad service" at Coco Roco, even though the damnation was not total, would injure a person in their business or calling as a restaurateur and was likewise defamatory. No reasonable jury properly directed could reach any other verdict. Should this Court enter a verdict in respect of imputations (a) and (c)? 58 Having reached this conclusion the next question is whether this Court should itself enter verdicts for the appellants in respect of imputations (a) and (c). 59 It had been conventional for some years for this Court, in determining that a jury had perversely found that an imputation was not defamatory, to remit the matter to the trial court for rehearing: see Cinevest Ltd v Yirandi Productions Ltd [2001] Aust Torts Reports 81-610; [2001] NSWSC 68; Mularczyk v John Fairfax Publications Pty Limited [2001] NSWCA 467. However, commencing with the decision in Charlwood Industries Pty Limited v Brent [2002] NSWCA 201, there is now a line of authority in this Court that a verdict may be entered where an imputation is plainly defamatory. 60 In Charlwood Industries, Ipp AJA (as his Honour then was), (Sheller and Hodgson JJA agreeing) explained that the power contained in s 108(3) of the Supreme Court Act 1970 (NSW) (the Supreme Court Act) applies in circumstances where the Court has found that a jury verdict under s 7A of the Defamation Act was perverse. Section 108(3) provides: "Where it appears to the Court of Appeal that upon the evidence the plaintiff or the defendant is, as a matter of law, entitled to a verdict in the proceedings or on any cause of action, issue or claim for relief in the proceedings, the Court of Appeal may direct a verdict and give judgment accordingly." 61 Ipp AJA considered that the availability of a verdict being entered by the Court of Appeal was supported by the terms of s 102 of the Supreme Court Act which, as his Honour observed, was based upon the premise that a jury might, in a particular case, give a verdict on "any issue in the proceedings" and that an appeal from such a verdict was to be made to the Court of Appeal. It followed that an answer given by a jury to a question posed under s 7A, which, relevantly in this case, included the question whether imputations (a) and (c) were defamatory, were jury verdicts from which an appeal lay and upon which s 108(3) operated. 62 Ipp AJA further observed that the power of the Court under s 108(3) to direct a verdict was supported by Hocking v Bell (1945) 71 CLR 430, which involved a consideration of s 7 of the Supreme Court Procedure Act 1900 (NSW), the predecessor to s 108(3). In that case, Latham CJ said, at 441, that the Full Court could properly enter a verdict if the relevant party was, "as a matter of law entitled to a verdict". Latham CJ pointed out that the section was based upon the principle that all questions of fact were jury questions but, if upon analysis, there was no jury question to be determined, for example, if the evidence was all one way, there was no function left for the jury to perform, so that the Court could properly, as a matter of law, direct a verdict in accordance with the evidence presented. See also Hocking v Bell (1947) 75 CLR 125 at 131 where the above remarks were approved by the Privy Council; and Edmond Weil Inc v Russell (1936) 56 CLR 34 at 47. 63 The Court thus concluded in Charlwood Industries that if the imputation was plainly defamatory and if any other decision would be perverse (although, as I have already indicated, the test is that of unreasonableness), it followed as a matter of law that the Court of Appeal was entitled to direct a verdict on the issue. The Court pointed out that any other result would be incongruous, involving the matter being remitted to the Court for a retrial when the only possible verdict was that the imputation was defamatory. 64 Mr Blackburn SC submitted to the Court that this line of authority was wrong and ought to be reconsidered. The respondent had not foreshadowed that any such application would be made and the application was rejected by the Court: see appeal transcript 51. That, however, is not the end of the matter. The application of s 108(3) to a s7A jury verdict was considered again by the Court in Harvey v John Fairfax Publications Pty Limited [2005] NSWCA 255. 65 In that case, Hunt AJA (Santow and Basten JJA agreeing) observed, at [102] that it was not appropriate in every case to exercise the power given to the Court under s 108(3). In particular, it was not appropriate to do so where the case on one issue and the case on another issue were not in distinct compartments. His Honour considered that the regime under s 7A of the Defamation Act was a classic example, where the jury was asked to separately determine whether or not the imputation was conveyed and, if conveyed, whether it was defamatory. In such a case, Hunt AJA expressed the view that those questions ought ordinarily be determined by the same tribunal because the issues are usually interdependent. His Honour stated at [104]: "Where, for example, there is a real dispute that a particular imputation was conveyed, and the jury accepted that it was conveyed but then unreasonably found that that imputation was not defamatory, it would usually be unjust to the defendant to exercise the power given by s 108(3) to enter a verdict or judgment for the plaintiff on the issue of defamation." 66 His Honour noted that that was the approach of the Court in Charlwood Industries itself. 67 In Charlwood Industries, the Court considered that the jury's verdict, that the imputation was not defamatory, was most probably the result of a compromise verdict. The relevant imputation was that the plaintiffs lied to their customers. The Court considered that it was not self-evident that the imputation was conveyed, so that there must have been serious debate within the jury on that question. The Court considered that, the jury having found that it was, any finding other than that it was defamatory was unreasonable. The Court concluded therefore that both questions, whether the imputation was conveyed and, if so, whether it was defamatory, should be retried; as it was arguable, on the Court's view, that the imputation was not in fact conveyed. The appropriate course, in accordance with the policy of s 7A was for those questions to be retried by a jury. 68 A different course was followed in Gorman v Barber (2004) 61 NSWLR 543 where the jury had also found that the imputation had been conveyed but unreasonably found it not to be defamatory of the plaintiff. In that case, there was no suggestion that the imputation was not conveyed, nor was there any suggestion that the verdict was a compromise verdict. In those circumstances, this Court entered a verdict for the appellant. 69 Harvey v John Fairfax raised a different consideration. In that case, the jury found that the relevant imputation was not conveyed. In accordance with the usual directions from the trial judge, it did not then determine whether the imputation was defamatory. Hunt AJA, after again commenting on the interdependence of the two jury questions, namely, was the imputation conveyed and if so, was it defamatory, said at [105]: "This Court should rarely, if ever, proceed to decide the issue of whether an imputation is defamatory of the plaintiff before a jury has first determined that issue. That is because the jury has an especially significant constitutional role … in evaluating the impact of the matter complained of on the community …"

His Honour continued: "It is not possible in every case to say with confidence in advance what impression the matter complained of may have on a jury. It is usually only when a jury give a verdict which surprises the lawyers that the issue of the reasonableness of that verdict can safely be argued." 70 In this case, in respect of imputations (a) and (c), the jury found that each imputation was conveyed. I have reached the conclusion that the imputations are defamatory and that the jury verdicts to the contrary were unreasonable. The respondents did not suggest that there was any error in the jury's findings that the imputations were conveyed, nor did they submit that there was any question of compromise in the jury's verdict. In those circumstances, this case, in relation to these two imputations, is more closely aligned to the decision in Gorman v Barber than it is to either Charlwood Industries or Harvey v John Fairfax. 71 However, Mr Blackburn, senior counsel for the respondents, argued that the imputations alleged in this case raised questions of community standards (transcript 52) and that questions of community standards were peculiarly jury questions. Indeed, Mr Blackburn argued that "any decision by a jury as to whether a particular meaning found by them is defamatory raises community standards" (transcript 52-53). That might be so, but only in the broadest of senses. A jury is enjoined to apply their commonsense and experience as ordinary members of the community. They are asked to determine whether right-minded members of the community would find a publication to be defamatory. However, if Mr Blackburn's submission were correct, the decision of this Court in Gorman v Barber and the principles stated in Charlwood Industries would be completely undermined. 72 This is not a case like Cairns v John Fairfax & Sons Ltd [1983] 2 NSWLR 708 at 720. In that case, the Court was concerned with what conclusions were open to a jury in relation to general community standards in respect of sexual morality or immorality: Mahoney JA, however, drew a distinction at 720 between those cases where the issue was the meaning of the words that had been used in the matter complained of and a case which depended upon community standards. His Honour observed that in a case such as was before the Court "the defamatory quality of [an] imputation depends upon the general community attitude to conduct of a particular kind". The question whether a restaurant serves unpalatable food or provides some bad service does not raise questions of community standards of the type discussed in Cairns v John Fairfax. 73 There is however, another consideration relevant to the question whether this Court should itself enter verdicts on these two imputations or whether the matter should be remitted for redetermination by a jury. The appellants' contention on the appeal was that there was a misdirection to the jury. Accordingly, there has been no jury determination in this matter by a properly directed jury. There is, therefore, a sense in which the remarks of Hunt AJA in Harvey v John Fairfax have some relevance. In that case his Honour was dealing with the circumstance where the jury had not dealt with the question whether the matter complained of was defamatory. However, his comments relating to the jury's role in evaluating the impact of the alleged defamatory utterance on the community have some analogous application in circumstances where the jury has not had the opportunity to properly consider that matter because the jury was not properly directed. 74 I do not consider however that that circumstance determines the outcome in this case although it may be a determinative consideration in a given case. Here, had the jury been properly directed, I am of the opinion that the only verdict that could have been returned by the jury was that the imputations were defamatory. It follows, subject to the matters considered below, that there is no reason why this Court ought not to enter verdicts in respect of imputations (a) and (c).

Is counsel for the appellants bound by his conduct at the trial in not seeking redirections? 75 Senior counsel for the respondent acknowledged that this Court may set aside the jury verdict as a result of a misdirection by the trial judge notwithstanding the failure by counsel for the appellants to seek a redirection at the trial: see Calin v Greater Union Organisation Pty Limited (1991) 173 CLR 33 where Mason CJ, Deane, Toohey and McHugh JJ said, at 39, that notwithstanding the absence of a request for a redirection, the Court could order a new trial if it appeared that "some substantial wrong or miscarriage [had] been thereby occasioned": see Supreme Court Rules Pt 51 r 23(1)(a) and (c). The matter was discretionary. One of the matters relevant to the exercise of the Court's discretion was what had occurred at trial. A failure to seek a redirection, whilst not fatal, is a "most material matter" to be taken into consideration in the exercise of the Court's discretion; Calin at 39; Eggins v Brooms Head Bowling and Recreational Club (1986) 5 NSWLR 521 at 524-5 per McHugh JA; Morawski v State Rail Authority (1988) 14 NSWLR 374 at 381 per Clarke JA. 76 In my opinion, in this case, the trial miscarried because of the failure of the trial judge to give a correct direction to the jury. Although experienced counsel at trial should have sought a clear redirection that the only question the jury need consider and should consider, was whether the imputations were likely to injure the plaintiffs in their business, this Court should still interfere to correct a miscarriage of justice.

Ground 2: inference upon an inference 77 During the course of his address to the jury, senior counsel for the respondents invited the jury to find that imputation (d) involved an inference upon an inference and therefore it was not conveyed. At the conclusion of the address, Mr Evatt raised this issue with the trial judge, indicating that it was a matter that was not relevant to the jury's determination because a "capacity" argument in relation to imputation (d) had been held before Nicholas J, who had ruled that the imputation could go to the jury. The effect of Mr Evatt's submission was that Nicholas J had already ruled that imputation (d) did not involve an inference upon an inference. 78 Mr Blackburn disputed this proposition, and submitted to her Honour that the argument before Nicholas J was strictly as to whether the publication had the capacity to convey the imputation pleaded. It was still open, on his argument, for the jury to determine, as a matter of fact, that the imputation involved an inference upon an inference. 79 The trial judge expressed a concern that the way the matter had been put to the jury by Mr Blackburn in his address was confusing, because it led to the possibility that the jury would understand the legal position to be that because a matter was not stated expressly in the article, it gave rise to an inference and that in imputation (d) there were two such inferences. The trial judge indicated that she considered it appropriate for her to give the jury a direction to ensure that they were not left with any confusion on the issue. She thus gave the following direction to the jury: "If, as a matter of law, the imputation pleaded in paragraph (d) were not capable of arising, then you would not be determining the matter. There is provision made for a judge to rule if an imputation, for legal reasons, cannot arise, then it is not left to a jury … Can I suggest to you it is not helpful to you to analyse the question by reference to inferences upon inferences, but rather to look at imputation (d) in light of the general principles that I have explained to you and ask whether the plaintiff has satisfied you that that meaning arises from the terms of the article as it would have been read in September 2003 by the hypothetical ordinary reasonable reader." 80 Following her Honour's summing up, senior counsel for the respondents objected to her Honour's direction. He sought a further direction. Her Honour acceded to the application and in further directions to the jury informed them that nothing that had been said by Mr Blackburn SC was wrong as a matter of law and that it was a correct principle of law to state that a defamatory imputation cannot be conveyed by a process of reasoning that involves drawing one inference upon another. She then specifically directed the jury in relation to imputation (d) in the following terms: "The matter that I wanted to make clear to you was that if, as a matter of law, … [imputation (d)] was not capable of arising, you would not be concerned with it. That does not mean that if you, in your role as the trier of fact, conclude that the imputation does not arise because it involves the ordinary reasonable reader drawing one inference upon another inference, if that is the process of reasoning that you are attracted to, then you would find that the imputation does not arise. This leads me necessarily to tell you something briefly about the process of inferential reasoning." 81 Her Honour then explained what was involved in finding an inference. She said: "An inference is a conclusion drawn from a number of established facts. If (a), (b) and (c) are proved as facts, then one might conclude or infer that (d) is also a fact. An inference relevantly means a conclusion that you draw from the established material. I do not propose to go back to the factual submissions advanced with respect to the imputation pleaded in (d) of those questions. You understand that, as a matter of law, imputation (d) is capable of arising; whether you find that it does or does not is a matter for you, and in answering that question you are concerned with whether the ordinary reasonable reader would have taken, from the article, the meaning that each of the plaintiffs, that he or she is incompetent as a restaurant owner because he or she employs a chef at Coco Roco who makes poor quality food." 82 Two questions were argued in relation to this ground of appeal. The first was whether the question whether an imputation is conveyed by proscribed inferential reasoning, that is, by drawing an inference upon an inference, is a question of "capacity" only and accordingly arose for determination at the pre - s 7A hearing stage. If the point was not taken at that stage, or was rejected, it could not be raised before the jury. 83 The second question was whether imputation (d) in fact involved the drawing of an inference upon an inference. 84 The question of what is involved in inferential reasoning was discussed by the Court in Amalgamated Television Services Pty Limited v Marsden (1998) 43 NSWLR 158. The Court was concerned as to whether two imputations were capable of being conveyed by the alleged defamatory publication. In a hearing under s 7A(1), Amalgamated Television Services argued that the imputations involved the proscribed form of inferential reasoning to which I have referred. The trial judge had held that the imputations were capable of being conveyed. The judgment of the Court of Appeal was given by Hunt CJ at CL, with whom Mason P and Handley JA agreed. 85 Hunt CJ at CL dealt first with what was involved in the judicial task of determining whether the matter complained of was reasonably capable of conveying the imputation pleaded. Section 7A(1) of the Defamation Act (which is declaratory of the common law on this issue) provides that that question is to be determined by the court and not by the jury. In making that determination, which does not involve a question of fact, the court is required to decide whether there is a case to go to the jury: Jones v Skelton (1963) 63 SR 644 at 656; Steele v Mirror Newspapers Limited [1974] 2 NSWLR 348 at 372; Farquhar v Bottom & Anor [1980] 2 NSWLR 380 at 386; Lloyd v David Syme & Co Limited (1985) 3 NSWLR 728 at 733. His Honour also referred to the statement in Prosser WL and Keeton WP, Prosser and Keeton on the Law of Torts, (5th Ed 1984) at 238, namely: "… if reasonable persons may differ as to the conclusion to be drawn, the issue must be left to the jury; otherwise it is for the court".

His Honour observed, at 164, that that statement has been applied in defamation cases: Parker v John Fairfax & Sons Limited (New South Wales Court of Appeal, 30 May 1980, unreported); Farquhar v Bottom at 386-7. 86 Hunt CJ at CL at 166 re-emphasised that it is the test of reasonableness that guides the court in determining whether a matter complained of is capable of conveying any of the imputations pleaded. In determining that question, it was necessary to draw a distinction between what the ordinary reasonable reader could understand the defendant has said and the conclusion which that reader could reach by taking into account his or her own belief in relation to the subject matter. As his Honour pointed out, it is the former approach, not the latter, that must be taken in the determination of the "capacity" issue. This is because, as his Honour said at 167: "The publisher is not held responsible … for an inference which the ordinary reasonable reader … draws from an inference already drawn from the matter complained of, because it is unreasonable for the publisher to be held so responsible: Lewis v Daily Telegraph Limited [1964] AC 234 at 259-260, 274, 286; Mirror Newspapers Limited v Harrison (1982) 149 CLR 293 at 299-300." 87 It is apparent from his Honour's discussion that at the point of determining the "capacity" issue, the Court is concerned with whether the imputation pleaded involves an inference upon an inference. To that extent, it would appear that the question whether an imputation involves an inference upon an inference is an integral part of the determination of the "capacity" issue. However, his Honour also said at 171: "Where the capacity of the matter complained of to convey a particular imputation is being considered, it is true to say that the defendant will fail to exclude it from the jury unless that imputation can only be conveyed by such a process. [That is, by drawing an inference upon an inference.] Except in that situation, however, it will usually be for the jury to determine whether the first step in the process of reasoning involves an implication or an inference. They must be directed that, if the imputation does arise, and if it does arise from drawing an inference upon an inference rather than upon an implication, it would not be reasonable for the defendant to be made responsible for that imputation, and the defendant is entitled to succeed in relation to it." 88 It follows from this passage, that there may still be a jury question involved in the question whether a particular imputation is based upon an inference upon an inference. 89 Handley JA and Ipp JA disagree with Hunt CJ at CL's proposition in this paragraph, which, as their Honours point out, was an obiter observation. With respect to Hunt CJ at CL, I agree with the analysis of Handley JA on this question. 90 The question of whether an imputation involves an inference upon an inference is a question of capacity, which, under the provisions of s 7A(1) of the Defamation Act must be determined by the court and not by the jury. In this case, if the respondents wished to contend that the imputation contained an inference upon an inference, it was necessary for them to do so before the judge. It was not a jury question. 91 In accordance with the practice in the Defamation List of the Supreme Court, it should have been raised by the respondents at the capacity hearing before Nicholas J. Regardless of whether or not that issue was argued before his Honour, and regardless of whether his Honour's rulings on the capacity questions implicitly involved a finding that imputation (d) did not involve an inference upon an inference, the question was not one that could be left to the jury. 92 Ipp JA has reached his conclusions on this question by a different process of reasoning. Having regard to the conclusion that I have reached in relation to imputation (d) it is not necessary for me to express a view on his Honour's approach.

Does imputation (d) involve an inference upon an inference? 93 In Amalgamated Television Services v Marsden Hunt CJ at CL explained the difference between an implication and an inference. The passage is lengthy, but needs to be set out in full. His Honour said at 167: "It is necessary to emphasise the important distinction between an implication and an inference. An implication is included in and is part of that which is expressed by the publisher. It is something which the reader … understands the publisher as having intended to say. An inference is something which the reader … adds to what is stated by the publisher; it may reasonably or even irresistibly follow from what has been expressly or impliedly said, but it is nevertheless a conclusion drawn by the reader … from what has been expressly or impliedly said by the publisher ... It is the reader's … own conclusion. …

An inference is drawn from an inference when the reader … draws an inference which is available in the matter complained of and then uses that inference as a basis (at least in part) from which a further inference is drawn. The publisher is held responsible for the first of those inferences but not for the second because - as I have already said - it is unreasonable for the publisher to be held so responsible. In Mirror Newspapers Ltd v Harrison (at 300), the High Court illustrated the process which leads to an inference upon an inference in the case where the matter complained of states that the plaintiff had been charged with an offence. The first inference available from that statement (for which the publisher is held responsible) is that the police believed the plaintiff to be guilty or had a ground for charging him. (The phrase "reasonable cause" is substituted for "ground" at page 301.) The second inference, which is based at least in part upon that first inference (and thus is not one for which the publisher is held responsible because it is unreasonable to do so), is that the plaintiff is in fact guilty of the offence charged. That requirement of reasonableness must apply in every case. There can, however, be no unreasonableness involved in making the publisher responsible for an inference drawn by the reader … from a statement which the publisher is reasonably understood to have intended to imply in the matter complained of." (Cases and citations omitted) 94 The portions of the newspaper article that were alleged to convey imputation (d) stated the following. (The article is divided into paragraph numbers in accordance with the practice in the Defamation List. Not all paragraphs are reproduced below, it being sufficient to refer to some only of those that criticise the food). The heading of the article read: " CRASH AND BURN (Para 3) When dining on the view is the only recommendation " (Para 4) 95 The article then stated: "If a restaurant serves good as well as bad food, do you give it the benefit of the doubt? I wouldn't do that with a three-chef's-hat restaurant so why should I do it here? Especially when more than half the dishes I've tried at Coco Roco are simply unpalatable. (Para 5)

… … … A degustation of oysters ($28 for six/$40 for 12) arrives as different flavoured bivalves, rather than oysters from various regions. There's a saffron-infused ginger one. There's a seafood foam, which looks like it's been piped on top. The texture is scary and, let's be polite, not to my tastes. The limoncello, however, is worse - flavours jangle like a car crash; all at once it's sickly sweet, overtly alcoholic, slippery, salty and bitter. (Para 10) Only the lone natural oyster is gloriously free from interference and there's an exquisite verjuice jelly on another. (Para 11) … … … Small Queensland scallops ($24) on jagged shells with cauliflower and vanilla nearly work but are uninteresting. (Para 13) … … … A few days later, in the interests of impartiality, I'm back. This time it's salad to start ($8), sweetly dressed with honey and balsamic vinegar and topped with fine cress. It's not great but passable, except for a few wilting leaves. (Para 17) … … … I've never had pork belly that could almost be described as dry. Until tonight. A generous square of pig's paunch ($33) is snuggled into a mass of starchy lentils. The meat is unevenly spiced with Moorish flavours and the lentils are poor. Texturally, it brings to mind the porcine equal of a parched Weetbix. (Para 19) … … … It could be argued that Coco is still settling in. But apricots in sherry-scented white sauce aren't meant to garnish a rib eye of beef. The menu isn't held back by minor glitches; it's flawed in concept and execution. (Para 22) In a city where harbourside dining has improved out of sight in recent years, Coco Roco is a bleak spot on the culinary landscape." (Para 23) 96 Paragraphs 33 and 34 identified the owners and the chef by name. Paragraph 41 described "The Value" as "A shocker". 97 Finally, "The Summary" of the review was in these terms (Paragraphs 42-43): "Unpalatable flavours on one hand and pricey but good steak with flawed garnishes on the other add up to a restaurant where the view is the best bit. And you can't eat that." 98 It will be remembered that imputation (d), said to be conveyed by this material, was: "The [appellant] is incompetent as a restaurant owner because she/he employs a chef at Coco Roco who makes poor quality food". 99 Mr Blackburn SC submitted that the imputation contained the following two inferences: first, "that the [appellant] is incompetent as a restaurant owner"; and second, "that the [appellant] employed a chef who makes poor quality food". Alternatively, Mr Blackburn submitted that that part of the imputation "the [appellant] employed a chef who makes poor quality food", could have been either an inference or an implication, but that that was a jury question. 100 It followed from the respondents' argument that the jury could have returned its verdict in relation to imputation (d) on the basis that they reached the conclusion that it was simply not conveyed. Alternatively, the jury could have determined that the two contentions contained within imputation (d) amounted to an inference upon an inference, that being a question of fact for them, in which case, as a matter of law, the imputation was not one for which the respondent was legally responsible. Mr Blackburn SC pointed out that, as a result of the very nature of the jury process, the Court does not know which approach the jury took, and so should not intervene. Alternatively, if the correct legal characterisation of the two contentions within the imputation was that of an inference upon an inference, then, this Court could not intervene as the imputation, as a matter of law, was not defamatory. 101 In my opinion, the imputation does not involve an inference upon an inference. There are at least these implications within the imputation, namely: that the appellants employed the chef (implied by separate reference to the owners and the chef in paras 33 and 34); that the chef was responsible for the food (by identification of the chef). That leaves the remainder of the imputation: the appellants "are incompetent as restaurant owners" and that "the chef makes poor quality food". In my opinion, the latter is not an inference. It is clearly implied in the article. The former is probably an inference, although it could be an implication. On either basis, this imputation was permissible, as it did not involve an inference upon an inference. Accordingly, it was a question for the jury to determine whether the imputation was conveyed. 102 I should add that there was considerable debate during the course of the appeal as to whether there were other aspects of the imputation other than the two contentions to which I have referred. In particular, there was discussion as to whether it needed to be established, for the imputation to be conveyed, that the chef was responsible for the food (in the sense of being present in the kitchen) on the nights that the second respondent attended and that the appellants were aware that on those nights the food was of poor quality. In my opinion, these matters do not arise out of the imputation. In relation to the first, a chef has the responsibility for the food in the restaurant, present or not. But even if this was an aspect of the imputation it involves an implication, again by separate nomination of the chef and possibly the omission by the reviewer to state that a reason for the problems he encountered was due to the absence of the chef. I am also of the opinion that the second matter, that the appellants were aware that the chef prepared poor quality food, is not part of the imputation. A person can be as incompetent for what they know as for what they do not know. If the appellants were not aware that the food prepared by their chef at their high class restaurant was of poor quality that, in my opinion, would speak of incompetence as restaurant owners as much as if they did know. 103 It follows, in my opinion, that the question whether imputation (d) involved an inference upon an inference did not arise in this case and that question should not have been left to the jury. 104 The appellants seek an order that imputation (d) be remitted for determination by a jury. For my part I am concerned that the imputation is defamatory and that any other verdict would be unreasonable. Having said that, as this imputation has not been determined by a jury, that is probably the result that ought to follow: see Harvey v John Fairfax. 105 Accordingly I propose the following Orders:

1. Appeal allowed. 2. Set aside the verdicts for the respondents. 3. Order that there be verdicts for the appellants in respect of imputations (a) and (c). 4. Order that the appellants' claim in relation to imputation (d) be remitted for determination by a jury in accordance with s 7A of the Defamation Act 1974 (NSW). 5. Order that the respondents pay the appellants' costs of the appeal and to have a certificate under the Suitors' Fund Act 1951 (NSW) if so entitled. 6. Order that the order for costs of the trial pursuant to s 7A of the Defamation Act 1974 (NSW) made by the trial judge remain as to 25 per cent thereof. Otherwise set aside the costs order made by the trial judge and Order that the respondents pay 50 per cent of the appellants' costs of that trial; the balance of the costs of that trial to abide the outcome of the further hearing.

106 IPP JA: I have had the benefit of reading the reasons for judgment of Handley JA and Beazley JA. I agree with the orders proposed by Beazley JA. Subject to what follows I agree with her Honour's reasons. 107 The reported judgment of this Court in Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 has been abbreviated in the editing process. It appears from the unreported version that the issues before the Court were whether the jury could find that the material complained of conveyed two particular defamatory imputations (referred to as "imputation (g)" and "imputation (h)"). In regard to imputation (g), the Court held that the plaintiff should succeed, that the defendants' appeal in relation to that imputation should be dismissed and that that imputation should go to the jury for ultimate decision. In regard to imputation (h), the Court held that the plaintiff failed and the defendants' appeal in relation to that imputation should be upheld. 108 The reasoning in regard to imputation (h) is not presently relevant as the grounds on which the Court came to its decision on this issue did not include any reasoning based on the merits of an inference drawn from an inference. In dealing with the arguments relating to imputation (g), however, the inference upon an inference reasoning process was discussed. 109 Hunt CJ at CL (with whom Mason P and Handley JA agreed) said that the law "at present does indeed preclude a plaintiff" from reliance upon drawing an inference upon an inference. His Honour said that this principle was "entrenched" by the decision of the House of Lords in Lewis v Daily Telegraph Limited (1964) AC 234 and the decision of the High Court in Mirror Newspapers Limited v Harrison (1982) 149 CLR 293. To the extent that the trial judge had relied on an inference upon an inference, the Court expressed the view that he had erred. Nevertheless, the Court upheld the plaintiff's contentions in regard to imputation (g) on other grounds (having nothing to do with an inference upon an inference). 110 As the decision did not depend on the Court's views on an inference upon an inference the Court's comments in regard to this process of reasoning were not necessary to its decision. Those comments, in my respectful view, did not form part of the ratio decidendi and constituted obiter dicta. I therefore do not regard myself as being bound by them. Despite my regard and respect for the members of the Court in Marsden's case I have a different view on this issue. 111 Before leaving Marsden, I would observe that Hunt CJ at CL accepted that an inference based on an implication could convey a defamatory imputation and explained (at 167) the distinction between an implication and an inference. His Honour said: "It is necessary to emphasise the important distinction between an implication and an inference. An implication is included in and is part of that which is expressed by the publisher. It is something which the reader (or listener or viewer) understands the publisher as having intended to say. An inference is something which the reader (or listener or viewer) adds to what is stated by the publisher; it may reasonably or even irresistibly follow from what has been expressly or impliedly said, but it is nevertheless a conclusion drawn by the reader (or listener or viewer) from what has been expressly or impliedly said by the publisher: cf Lubrano v Gollin and Co Pty Ltd (1919) 27 CLR 113 at 118; Rose v Hvric (1963) 108 CLR 353 at 358. It is the reader's (or listener's or viewer's) own conclusion." 112 With respect to his Honour, while the distinction may be possible to define in words, it is very often extremely difficult to apply in practice. This case is an example of the difficulties that may arise. 113 In my opinion, while reasoning based on an inference drawn from an inference should be looked at with caution, there is no absolute rule of law that precludes such reasoning in an appropriate case. 114 I commence my explanation for this opinion by going, first, to Lewis v Daily Telegraph Ltd, the House of Lords decision relied on by Hunt CJ at CL. This case concerned a report by the Daily Telegraph that police were conducting an inquiry into the plaintiff's affairs in connection with fraud. The majority of the House of Lords decided that a report of that kind was not capable of bearing the imputation that the plaintiff was guilty of fraud. 115 Lord Hodson said at 274: "I am myself satisfied that the words cannot reasonably be understood to impute guilt. Suspicion, no doubt, can be inferred from the fact of the inquiry being held if such was the case, but to take the further step and infer guilty is, in my view, wholly unreasonable. This is to draw an inference from an inference and to take two substantial steps at the same time." 116 Lord Hodson went on to illustrate the distinction between suspicion and guilt and observed (at 275) that a statement that a person is under suspicion of guilt does not imply that that person is in fact guilty; it implies "only that there are reasonable grounds for suspicion, which is a different matter". His Lordship's conclusion that the words used did not convey actual guilt of a fraud was not based on a technical analysis of a chain of reasoning but on the ordinary meaning of the words. His references to drawing "an inference from an inference" and to taking "two substantial steps at the same time" were not part of his essential reasoning process but were employed to bolster and reinforce the conclusion otherwise arrived at, namely, that - by reference to the ordinary meaning of the words used - an inference that a person is under suspicion of guilt is not, alone, reasonably capable of conveying that that person is in fact guilty. 117 In my respectful opinion, Lord Hodson was not laying down any rule of law that to draw an inference on an inference was impermissible. He was merely holding that in the particular circumstances of the defamation alleged, to infer guilt after inferring suspicion from the fact of the inquiry being held was "wholly unreasonable". 118 I do not understand Lord Devlin to have said anything different and to have expressed the opinion that, as a rule of law, an imputation could not be based on an inference drawn on an inference. This is made clear at 285 where Lord Devlin said: "One always gets back to the fundamental question: what is the meaning that the words convey to the ordinary man: you cannot make a rule about that." 119 I would emphasise and follow these remarks. The court should always focus on the "fundamental question". There are no subsidiary rules of law governing the means by which this fundamental question is to be resolved. This, in my respectful opinion, is right and proper. The question as to the meaning that the words convey to the ordinary person should be a simple and straightforward one, as befits a law that governs the everyday life and actions of all levels of persons in the community. The question should not be obscured by overly complex and subtle metaphysical distinctions that stand as a formidably esoteric barrier to what should be an easily comprehensible reasoning process akin to common sense. 120 Lord Devlin went on to say at 286: "Let it be supposed, first, that a statement that there is an inquiry conveys an impression of suspicion; and, secondly, that a statement of suspicion conveys an impression of guilt. It does not follow from these two suppositions that a statement that there is an inquiry conveys an impression of guilt. For that, two fences have to be taken instead of one. While, as I have said, I am prepared to accept that the jury could take the first, I do not think that in a case like the present , where there is only the bare statement that a police inquiry is being made, it could take the second in the same stride. If the ordinary sensible man was capable of thinking that wherever there was a police inquiry there was guilt, it would be almost impossible to give accurate information about anything: but in my opinion he is not." [My emphasis] 121 In my opinion, the italicised words indicate that, like Lord Hodson, Lord Devlin was dealing only with the facts of the particular case. He was not intending to lay down a legal rule of absolute effect and general application. His own words at 285, to which I have referred above, make this clear. 122 In Mirror Newspapers Limited v Harrison (1982) 149 CLR 293 the principal judgment of the High Court was given by Mason J. Again, the issue before the Court was whether a newspaper report stating that the plaintiff had been arrested and charged, or would be charged, with a criminal offence, was capable of bearing the imputation that the plaintiff was guilty of that offence. 123 Mason J at 299 referred to the conclusion of the House of Lords in Lewis that a newspaper report that an inquiry was being held into the plaintiff's affairs in connection with fraud was not capable of bearing the imputation that the plaintiff was guilty of fraud. His Honour then said: "As an element in the reasoning leading to that conclusion some of the Law Lords, notably Lord Reid, Lord Hodson and Lord Devlin considered that suspicion could be inferred from the fact of the inquiry being held, but that guilt involved the taking of a further step which was unreasonable. It was, they thought, 'to draw an inference from an inference and to take two substantial steps at the same time'."

This passage indicates that his Honour understood the decision of the Law Lords concerned as being based on the finding that it was unreasonable to infer guilt from an inference of suspicion, properly drawn. It is the "unreasonableness" of the conclusion that is the basic reason for the conclusion. The reference to the drawing of an inference from an inference and the taking of two substantial steps at the same time merely supports or reinforces the conclusion arrived at. A reading of the speech of Lord Hodson (and that of Lord Devlin) makes this plain. Lord Reid did not base his decision on the inference argument at all. He said (at 260): "What the ordinary man, not avid for scandal, would read into the words complained of must be a matter for impression. I can only say that I do not think he would infer guilt of fraud merely because an inquiry is on foot".

In my respectful view, Mason J was not saying anything different to the Law Lords mentioned. This appears from a reading of the whole of his Honour's judgment. 124 After referring to a number of authorities on this issue Mason J said at 300-301: "As we have seen, there is now a strong current of authority supporting the view that a report which does no more than state that a person has been arrested and has been charged with a criminal offence is incapable of bearing the imputation that he is guilty or probably guilty of that offence. The decisions are, I think, soundly based, even if we put aside the emphasis that has been given to the process of inference on inference that is involved in reaching a contrary conclusion . The ordinary reasonable reader is mindful of the principle that a person charged with a crime is presumed innocent until it is proved that he is guilty. Although he knows that many persons charged with a criminal offence are ultimately convicted, he is also aware that guilt or innocence is a question to be determined by a court, generally by a jury, and that not infrequently the person charged is acquitted." [My emphasis]

By the italicised words, Mason J explained that the conclusion that the imputation of guilt cannot reasonably be imputed is "soundly based" because of the ordinary meaning of the words used (and the inference upon an inference argument can be regarded as a collateral factor). 125 His Honour went on adumbrate upon his conclusion by saying at 301: "A distinction needs to be drawn between the readers understanding of what the newspaper is saying and the judgments or conclusions which he may reach as a result of his own beliefs and prejudices. It is one thing to say that a statement is capable of bearing an imputation defamatory of the plaintiff because the ordinary reasonable reader would understand it in that sense, drawing on his own knowledge and experience of human affairs in order to reach that result. It is quite another thing to say that a statement is capable of bearing such an imputation merely because it excites in some readers a belief or prejudice from which they proceed to arrive at a conclusion unfavourable to the plaintiff. The defamatory quality of the published material is to be determined by the first, not by the second, proposition."

Thus, Mason J concluded, by reference to the ordinary meaning of the words used and not by any reference to a process of inference on inference, that a reasonable reader would not read the report as meaning that the plaintiff was guilty of an offence. 126 Mason J's remarks, generally, indicate that the need to draw an inference on an inference may be a guide to the ultimate conclusion. His Honour does not, however, say that, as a matter of law, such a reasoning process may never give rise to a defamatory imputation. In my view his Honour's remarks do not imply that there is an absolute rule to this effect. 127 In my view, it is not inapposite to look at other branches of the law to see how the inference upon an inference argument has been treated. It has surfaced elsewhere as an argument relating to fact finding. I accept that the question whether material complained of is capable of conveying a defamatory imputation is a different inquiry, but the basic potential weakness of an inference upon an inference is the same in both situations, namely, the potential unreliability of the ultimate conclusion. It is this problem of potential weakness that gives rise to the arguments (in all fields of law) that have been raised in regard to this reasoning process. It is therefore relevant to see how other branches of the law have coped with the problem. 128 In the criminal law, it is now authoritatively established that the ultimate inference of guilt beyond reasonable doubt may be drawn from an intermediate factual conclusion which "may itself be a matter of inference": Shepherd v The Queen (1990) 170 CLR 573 at 579 per Dawson J, with whom Mason CJ, Toohey J and Gaudron J agreed. There is no rule in civil cases that a balance of probabilities cannot be established by drawing an inference upon an inference. Each case depends upon its own circumstances. In some cases it would be inappropriate to draw an inference upon an inference. In other cases the converse would apply. It all depends upon the material being considered by the Court in each particular case. In my opinion, the same applies in determining whether material is reasonably capable of conveying a defamatory imputation. 129 It is common sense that in most cases there would be underlying distrust of inferences that rest upon too many intervening inferences or inferences that are weak. An inference which is uncertain or speculative, or which is conjecture or possibility, or one of a number of inferences, may not be capable of giving rise to further inferences leading to a finding of defamatory imputation. But there may be inferences, which are the only possible inferences that can be drawn from a given set of facts, or which may be so strong, that it would be reasonable to regard the material in question as having the capacity to convey a defamatory meaning. 130 In Evidence, Proof and Probability, Eggleston, 2nd ed at 237 to 240, the learned author discusses the rational force of an inference upon an inference. He refers to a number of American cases and authorities that discuss the topic. One of these is the American Law Reports Annotated where the following was said: "The language [of 'an inference upon an inference'] has become a sort of judicial slogan, used carelessly, inaccurately, and to the confusion of the profession. The statement of the rule in many of the cases, that an inference cannot be based on an inference, shows that what is meant primarily is that an inference cannot be based upon evidence which is uncertain or speculative, or which raises merely a conjecture or possibility."

According to Sir Richard Eggleston, this passage has frequently been quoted in later American cases. 131 The following passage at 239 of Eggleston's work is relevant: "[I]n Vaccarezza v Sanguinetti [163 P.2d 470 (1945)] it was said [p.477]: 'The true rule is and should be that an inference cannot be based on an inference that is too remote or conjectural. In a civil case, if the first inference is a reasonably probable one it may be used as a basis for a succeeding inference'. And in Garrett v S N Nielson Company Murphy J, quoting from an earlier case, said [p.84]: 'The pertinent consideration is whether the inference based on an inference is reasonable'. At the same time, many of the cases draw attention to the point made in Masonite Corporation v Hill [95 ALR (1934)] that to build one inference on another involves a progressive weakening of the ultimate conclusion."

These comments illustrate the true meaning and effect of the phrase "inference upon an inference" and the dangers of using it as a rule of law. 132 I have concluded therefore, with respect to those who are of a different view, that there is no absolute rule of law that precludes an inference upon inference having the capacity to convey a defamatory imputation. The fact that a plaintiff relies on an inference upon an inference is, nevertheless, a useful guide in determining the question, and may serve as a sharp signal to exercise caution, but it does not give rise to some immutable principle. 133 I agree with Handley JA that the issue whether defamatory material is based on an inference upon an inference is not a matter on which the jury should be directed. I agree that the jury would find any such direction confusing and unhelpful. The question for the jury must be simply and plainly put, without making any rules about the reasoning process involved. 134 Finally, I wish to say something about orders (3) and (4) proposed by Beazley JA. These orders are that there be verdicts for the appellants in respect of two imputations (imputations (a) and (c)) and one order that the appellants' claim in relation to a third imputation (imputation (d)) be remitted for determination by a jury in accordance with s 7A of the Defamation Act 1974 (NSW). 135 In Waterways Authority v Fitzgibbon [2005] HCA 57 Gleeson CJ (at [20] and [22]) warned against ordering a separate trial on issues which are not truly separate and where there are a number of inter-connected questions of fact relevant to facts in issue (at [22]). Hayne J at [133] said: "The defect in the primary judge's fact-finding lay in the failure to evaluate all of the evidence bearing upon the relevant issue of fact. The Court of Appeal could not substitute its finding when that too was based on only part of the material which ought properly to have been considered by the primary judge. Yet that is what the Court of Appeal did." 136 In CSR Limited v Della Maddalena [2006] HCA 1 Kirby J (with whom Gleeson CJ agreed), after referring to Waterways Authority v Fitzgibbon, said (at [81]) that: "It is a fair inference from the reasoning of the majority in that case that the principle in Pateman v Higgin [(1957) 97 CLR 521] still represents the approach to be taken by intermediate appellate courts, in formulating their orders, once an appeal is allowed." 137 In Pateman v Higgin (1957) 97 CLR 521 Kitto J, discussing the power of an appellate court to order a retrial (at 527) said: "[I]t remains … a sound general proposition from which to start in the consideration of each particular case according to its own circumstances that if there is to be a new trial it ought to be of the case as a whole unless the Court thinks that 'they shall do more injustice by setting the matter at large again'." 138 In the present case the appellants' claim for defamation based on imputations (a), (c) and (d) are claims based on three entirely independent and separate causes of action. There is no relevant connection between imputations (a) and (c) on the one hand and imputation (d) on the other. There is no need for a jury, in determining the appellants' claim in relation to imputation (d) to be aware of any material relating to the appellants' claim in respect of imputations (a) and (c). This case does not fall within the categories of those discussed in Waterways Authority. 139 I agree with Beazley JA that had the jury been properly directed the only verdict it could have returned was that the imputations were defamatory. To send the issues involving imputations (a) and (c) back to a jury would in my view, in the circumstances, be an injustice to the appellants (cf Kirby and Heydon JJ in Waterways Authority at [120]). There would be no injustice to the respondents if verdicts were to be ordered for the appellants in respect of imputations (a) and (c) and were the claim in relation to imputation (d) be returned to the jury. Thus, after having due regard to the "sound general proposition from which to start" referred to in Pateman v Higgin, I think that the orders proposed by Beazley JA are appropriate. **********

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