Rules of the Supreme Court, O 20 r 19, O 20 r 13A

Inkhorn Pty Ltd v Herbert [2000] WASCA 333

Nationwide News Pty Ltd v International Financing & Investment Pty Ltd [1999] WASC 95

1 HASLUCK J: This is an application by the plaintiff in a defamation case to strike out certain paragraphs of the statement of defence on the grounds that no reasonable defence is disclosed or, alternatively, that the paragraphs in question will prejudice, embarrass or delay the fair trial of the action.

2 The plaintiff, Stephen John Archer, is a legal practitioner. I understand from the pleadings that he was admitted as a solicitor in New South Wales in June 1971 and has practised exclusively as a barrister in that State from September 1980. He was admitted as a barrister and solicitor in Western Australia in June 1985 and thereafter practised exclusively as a barrister in Western Australia.

3 The plaintiff says that the defendant, Channel Seven Perth Pty Ltd, is the licensee of the Perth television station known as "Channel 7". He alleges that on 27 February 2001, in a programme called "Today Tonight", the defendant published the words set out in Schedule A to the statement of claim as a consequence of which the plaintiff has been injured in his reputation.

4 The words complained of form part of a news story which commences with the assertion that there is one law for the rich and one law for the poor. It was then said:

"That's the claim tonight with a group of high-flying barristers who owe millions of dollars in tax, but somehow keep their jobs and their rich lifestyles."

5 The words complained of included an assertion that:

"Stephen Archer, Barrister, owes $3.1 million in unpaid taxes, declared bankrupt twice."

6 Elsewhere in the story there is a suggestion that barristers are using insolvency to avoid their tax obligations. The story included a passage to the effect that the revelations were "creating waves". It was said further in regard to a group of barristers in New South Wales owing taxes that:

"Within hours the State Government toughened the laws, demanding bankrupt barristers be scrutinised to determine whether they are still fit enough to continue practicing."

7 The words complained of concluded with an observation made by the journalist and commentator, Paul Barry, to this effect:

"One of the things that seems to me that could change the situation is if people are shamed into paying their taxes by being named."

8 The plaintiff pleads in par 4 of the statement of claim that the matter complained of in its natural and ordinary meaning conveyed the following imputations, each of which was defamatory of the plaintiff:

"(a) that the Plaintiff had engaged in fraudulent conduct to evade the payment of income tax;

(b) that the Plaintiff had engaged in dishonest conduct to evade the payment of income tax;

(c) that the Plaintiff had made a fraudulent transfer of all his assets in order to defeat his creditors."

9 I note in passing that an application to strike out the plaintiff's pleaded imputations was dealt with previously by McLure J in Archer v Channel Seven Perth Pty Ltd [2001] WASC 195. Accordingly, the imputations referred to above can be regarded as the final form of the plaintiff's pleaded case.

10 The plaintiff advances claims for aggravated and exemplary damages with reference being made to an alleged failure on the part of the defendant to make proper enquiries and to the presentation of the story in a sensational manner.

11 In par 4(a) of the defence the defendant denies that the matter complained of bore or was understood to bear, or was capable of bearing any of the meanings pleaded in par 4 of the claim.

12 The defendant pleads in par 4(b) of the defence that if the matter complained of meant and was understood to mean that the plaintiff had engaged in fraudulent conduct to avoid the payment of income tax that meaning is true in substance and in fact.

13 Particulars of justification are then provided. It is said in subparagraphs (1) to (3) that the plaintiff was admitted as a practitioner in New South Wales and Western Australia and has earned income as a barrister. Subparagraph (4) contains an allegation that in December 1989 he was found guilty of illegal and unprofessional conduct by the Western Australian Barristers' Board in regard to an alleged failure to lodge tax returns and other tax offences. In subparagraphs (5) to (13) inclusive reference is made to various claims and proceedings involving the plaintiff and the Deputy Commissioner of Taxation and to the plaintiff being declared bankrupt in 1991. It is said in subparagraphs (14) and (15) that in or about March 1998 the plaintiff entered into a separation agreement with his wife but has remained married to his wife.

14 The defendant pleads in subparagraph (4)(c) of the defence that if the matter complained of meant that the plaintiff had engaged in dishonest conduct to evade payment of income tax that meaning is true in substance and in fact. The particulars of justification previously provided are then repeated.

15 It is said in subparagraph (4)(d) that if the matter complained of meant that the plaintiff had made a fraudulent transfer of all his assets to defeat his creditors, that meaning is true in substance and in fact. The particulars of justification are repeated.

16 The defendant goes on to say in par 5 of the defence, in the alternative, that the matter complained of was fair comment on matters of public interest. Such matters are said to include problems with the Australian taxation system and the use of bankruptcy as a means of evading or delaying the payment of income tax.

17 Particulars of facts and matters on which the comment was based are then set out in subparagraphs (1) to (7). The particulars include reference to the plaintiff and a number of bankrupted barristers having not paid or having underpaid income tax over a period of years. It is said that the plaintiff and a number of bankrupted barristers have placed their assets with their wives, or in family trusts or companies and out of reach of their creditors.

18 The particulars of facts and matters on which the comment was based include an assertion in par 5(7) that:

"The evasion of the payment of income tax by the plaintiff and other barristers with unpaid tax liabilities has resulted in millions of dollars not being paid into consolidated revenue for expenditure on public infrastructure like hospitals, roads and education."

19 The defendant pleads in par 6, in the further alternative, that the matter complained of was published on an occasion of qualified privilege in that the defendant and its viewers shared a common and corresponding interest in the subject matter of the matter complained of.

20 Some lengthy "Particulars of Qualified Privilege" are then set out in subparagraphs (a) to (h).

21 Reference is made in subparagraph (a) to the Commissioner of Taxation's report for 1999/2000 being presented to the Federal Parliament and to comments in the report that individuals within the legal, accounting and medical professions have been using insolvency to avoid their tax obligations.

22 It is said in subparagraph (b) that the matter complained of was broadcast in the course of a discussion of Government or political matters at a Federal and State Government level in that it related to matters concerning the administration of Australia's income tax laws and the loss of revenue for expenditure on public services like hospitals, roads and education.

23 It is said in subparagraph (e) that the defendant had reasonable grounds for believing that the imputations pleaded were true and in subparagraph (f) that the defendant took proper steps to verify the accuracy of the material complained of.

24 The particulars include a further assertion, in par 6(h) that on or about 27 February 2001 and prior to the broadcast, the defendant requested the plaintiff for comment on the proposed broadcast but the plaintiff declined to make any comment.

25 Order 20 r 19 of the Rules of the Supreme Court provides that the Court may strike out any pleading on the ground that it discloses no reasonable cause of defence or it may prejudice, embarrass or delay the fair trial of the action.

26 The application, in the present case, is directed to par 4(b), par 4(c), par 4(d), par 5 and par 6 on the basis that these paragraphs disclose no reasonable defence or, alternatively, that they may prejudice, embarrass or delay the fair trial of the action.

27 It is apparent from previously decided cases such as General Steel Industries Inc v Commissioner for Railways of New South Wales [1964] HCA 69; (1964) 112 CLR 125 and Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986 that there is a need for caution in exercising the power to strike out pleadings in order to ensure that the party whose plea is attacked is not improperly deprived of an opportunity for the trial of his case by the appointed tribunal.

28 The plaintiff must establish that the plea is so obviously untenable it cannot possibly succeed or is manifestly groundless. For the purposes of an application of this kind, the Court will not go outside the pleadings and will assume that evidence can be adduced to substantiate the allegations in the relevant pleading.

29 The decided cases indicate also that a court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a line of defence where there is a reasonable possibility that, as the law develops, it will be found that the defence in question has merit.

30 It is a defence to establish that the imputation in respect of which the defendant is sued is true. The essence of such a plea is that if the words complained of bear the defamatory meaning contended for by the plaintiff then those words, so understood, are true.

31 It is not enough for the defendant to prove that he believed in the truth of what he said. He must prove that the defamatory imputation is substantially true. If the matter complained of contains defamatory statements both of fact and of opinion, the defendant, under a plea of justification, must prove that the statements of fact are true and that the statements of opinion are correct. Gatley on Libel and Slander (9th ed) par 11.1 to par 11.5.

32 Where a number of distinct charges are made, a prospective plaintiff can single out the matters in respect of which he will sue. But the plaintiff is not entitled to take a blue pencil to the article so as to change its meaning and then prevent the defendant from justifying the words in their unexpurgated form. For this purpose, the defendant is entitled to use the whole of the published article as the basis for the plea of justification. Gatley (supra) at par 11.12.

33 A defendant can plead the imputations which he says arise from the matter complained of pursuant to a Polly Peck defence and then seek to justify those imputations. However, there is no need for me to say anything about that in the present case, for the defendant simply asserts that the three imputations contended for by the plaintiff in par 4 of the claim are true.

34 Whether a plea of justification is sufficiently particularised depends upon whether the defamatory allegation is a specific or general one. In most cases, in order to comply with the rules, the defendant must set out all the facts and matters relied upon in support of his plea of justification with sufficient particularity as will enable the plaintiff to know precisely what are the facts to be tried. Gatley (supra) at par 27.10.

35 A court will strike out particulars of justification on the grounds of irrelevance only in a clear case. In Godman v Times Publishing Company Ltd [1926] 2 KB 273 it was alleged the plaintiff had conspired to defraud the underwriters of a certain ship by pretending the ship had been attacked by pirates. The Court of Appeal refused to strike out particulars of justification concerning an alleged over-insuring of two other vessels. It held that a defendant is entitled to take a wide view of his obligation to provide particulars so that the plaintiff will know fully the case he has to meet and the defendant will not be unduly prejudiced in obtaining discovery. Where the charge is general in its nature, the defendant must set out the specific acts upon which he will rely by way of justification.

36 In seeking to strike out par 4(b) to par 4(d) of the defence the plaintiff submits that there must be justification of the specific meanings contended for by the plaintiff in his claim. In other words, it must be kept steadily in mind that the imputations contended for by the plaintiff speak of fraudulent and dishonest conduct, and not some lesser degree of questionable activities.

37 I will turn firstly to subparagraph 4(b) of the defence and the particulars of justification provided in support of the same.

38 Objection is taken to subparagraphs (1) to (3) of the particulars as being introductory material upon which nothing turns.

39 The decided cases suggest that material will not be struck out merely because it is introductory: Speidel v Plato Films Ltd [1961] AC 1090 at 1104; Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472 at 477. An introductory allegation will not be struck out if it is material, not as an essential ingredient of the cause of action, but in the sense that evidence could be led at trial to support it: Gaston v United Newspapers Ltd (1915) 32 TLR 143 at 144; Millington v Loring (1880) 6 QBD 190 at 194, 196. I pointed out in earlier discussion that a court will strike out particulars on the grounds of irrelevance only in a clear case.

40 In the circumstances of the present case I am not persuaded that these subparagraphs should be struck out. They establish the nature of the plaintiff's profession to which his income and liability to pay income tax is related. I dismiss this part of the application.

41 The plaintiff contends that subparagraph 4(b)(4) comprises a plea setting out alleged findings of the Barristers' Board which are of no utility as particulars of the plea of justification. They amount to an attempt to substitute alleged findings of the Board for the true position in fact.

42 The defendant concedes this point but seeks leave to replead by alleging, as a fact, that the plaintiff engaged in the conduct in question, that is to say, that he failed to lodge certain income tax returns, comply with Court orders, and embarked on a course of illegal conduct as part of a deliberate campaign to prevent or delay the Commissioner of Taxation from raising and enforcing tax assessments in a manner that was expected to be adverse to the plaintiff.

43 The plaintiff says further, as a separate objection, that none of the matters referred to in this paragraph are directed to an imputation of fraudulent conduct on the part of the plaintiff. Unlawful or unprofessional behaviour is not synonymous with fraud.

44 The Macquarie Dictionary definition of "fraud" includes advantage gained by unfair means. I note that in Lionetti v Romeo, unreported; SCt of WA; (Anderson J); Library No 960737; 19 December 1996 the learned Judge observed that ordinary reasonable readers not trained in the law would understand the term "defraud" as meaning to cheat a person out of money or property which belongs to that person.

45 In my view, the subparagraph in question is to be considered in the context established by the surrounding particulars concerning justification. It is apparent from the particulars considered as a whole that the plaintiff is a barrister who at all material times was in receipt of income by practising as a barrister. It is a matter of common knowledge that a person in receipt of income at such a level becomes liable to taxation. There is also reference in subparagraph 4(b)(4) to an alleged deliberate campaign on the part of the plaintiff. When these matters are considered in combination I consider that, subject to the repleading mentioned earlier, there is a basis for contending that the plaintiff acted in the manner imputed to him. Such a stance by the defendant cannot be regarded as untenable or manifestly groundless. It is not embarrassing.

46 It follows from these comments that subparagraph 4(b)(4) should be struck out but with leave to replead. The likelihood is that if a plea is then set up that the plaintiff engaged in the conduct in question, such a plea will be sufficient.

47 The plaintiff seeks to strike out subparagraphs (5) to (9) and (10) to (13) on the basis that these paragraphs concern matters between the Deputy Commissioner of Taxation and the defendant which cannot be said to justify the imputation that the plaintiff engaged in fraudulent conduct to evade the payment of income tax.

48 I have already noted that the defendant is entitled to rely upon the aggregate impact of the particulars pleaded in support of par 4(b) and is entitled to take a wide view of his obligation to provide particulars. It follows from my earlier observations that I am not prepared to strike out these subparagraphs, for the particulars in question go to the issue of whether the conduct of the plaintiff amounted to the securing of an advantage gained by unfair means. Such a plea cannot be described as untenable. Godman v Times Publishing Company Ltd (supra) shows that a defendant can plead to a general allegation concerning fraudulent conduct by reliance upon a number of specific instances which are set out in particulars. A court will strike out particulars on the grounds of irrelevance only in a clear case.

49 The plaintiff submits that there is no possible link between the matters set out in subparagraphs (14) and (15) and the pleaded meaning. The entry into a so-called "separation agreement" upon terms which are not pleaded cannot be regarded as a justification of the plea that the plaintiff engaged in fraudulent conduct to evade the payment of income tax.

50 This point is conceded by the defendant with leave being sought to replead that paragraph by inserting the following words at the end of the subparagraph:

"which agreement provided for the transfer of assets from the plaintiff to his wife."

51 I will strike out the subparagraphs in question in their present form but with leave to replead. It follows from earlier discussion that the likelihood is that when the paragraph is repleaded in its proposed new form it will be sufficient.

52 I must now turn to the plaintiff's challenge to the defence of fair comment on matters of public interest raised by par 5 of the statement of defence. It will be useful to begin by looking at some relevant legal principles.

53 It is a defence to an action for defamation at common law for the defendant to prove that the words complained of were published by him as fair comment on a matter of public interest. The defence can be defeated, however, by proof that the defendant was actuated by express malice or an improper purpose.

54 The basic rule is that the defence applies to comment but not to imputations of fact. If the imputation is one of fact the defence must be justification or privilege. However, the matter is complicated for two reasons: first, there may be difficulty in distinguishing comment and fact; secondly, a statement of fact which is an inference from other facts stated or referred to may be a comment for the purposes of the defence. Gatley (supra) par 12.6. If a defamatory allegation is to be defended as fair comment it must be recognisable by the ordinary, reasonable reader as comment and the key to this is whether it is supported by facts, stated or indicated, upon which, as comment, it may be based. Gatley (supra) par 12.7.

55 It follows from these observations that for the defence of fair comment to be available it must be indicated with reasonable clarity by the words themselves, taking them in their context and the circumstances in which they were published, that they purport to be comment and not statements of fact.

56 This view of the matter can be conveniently illustrated by referring to O'Shaughnessy v Mirror Newspapers Ltd [1970] HCA 52; (1970) 125 CLR 166. A theatre critic contended that the plaintiff had wasted the talents of a group of players in a dishonest production devoted to enhancing his own role at the expense of those of the rest of the cast. The High Court held that the article could be regarded as going beyond criticism of the production and attributing a dishonourable motive to the plaintiff as a statement of fact. The question of whether an imputation of dishonesty is a statement of fact or an expression of opinion depends on all the circumstances of a given case.

57 Barwick CJ, McTiernan, Menzies and Owen JJ said at 174 that in order to safeguard themselves from too broad a generalisation they would add "...that it is not our view that an imputation of dishonesty is always an assertion of fact."

"Dishonesty does not necessarily mean cheating or fraud. It may denote other forms of improbabity - conduct that is dishonourable because not straightforward but designed to serve an unworthy end. In whatever sense it is used, it is a defamatory word. It is no doubt a judgment upon conduct. It is a judgment that in some contexts is a comment upon facts stated or well known: in other contexts, when the facts on which it is based are not fully stated or known, it is an allegation of fact. Whether in a given case it is a statement of fact or merely the expression of an opinion, a comment on facts, must depend upon all the circumstances: see Kemsley v Foot [1952] AC 345, especially the passage from Odgers on Libel and Slander quoted by Lord Porter [1952] AC, at pp 356-357."

59 It is a necessary ingredient of fair comment that the comment shall be based on facts which are either stated by the commentator or indicated by him with sufficient clarity to enable to reader or listener to ascertain the matter on which the comment is being made: Kemsley v Foot [1952] AC 345. It is sufficient if the relevant sub-stratum of fact is indicated: Pervan v North Queensland Newspaper Co Ltd [1993] HCA 64; (1993) 178 CLR 309 at 340.

60 Reasoning of this kind has given rise to certain rules of pleading including the requirements that the defendant must identify the passage in the publication which he seeks to defend as fair comment and must give particulars of all the facts upon which the comment is based. Gatley (supra) at par 27.12. Requirements of this kind are reflected in O 20 r 13A of the Rules of the Supreme Court in this State.

61 The plaintiff is generally not entitled to particulars of the words in the matter complained of that are said to constitute comment. Tobin: Australian Defamation Practice par 25.195. On some occasions, however, so that the plaintiff will know with precision the case to be met, it may be necessary to set out the substance of the comment: Anderson v Nationwide News Pty Ltd [2001] VSC 335; Moir v Flint [2002] WASC 48; Cock v Hughes [2002] WASC 108.

62 It is against this background that I must now turn to that part of the plaintiffs' chamber summons which is directed to striking out certain paragraphs of the first defendant's statement of defence concerning fair comment.

63 The plaintiff in the present case places reliance upon O'Shaughnessy (supra) and submits that the meanings contended for by the plaintiff arise from the matter complained of in such a way as to make it plain beyond doubt that the words are not capable of being construed other than as a statement of fact. On this view of the matter, it would seem to follow from earlier discussion that par 5 of the defence should be struck out as not disclosing a reasonable defence.

64 The plaintiff argues additionally that in the absence of a plain statement of the substance of the comment the paragraph ought to be struck out: Anderson v Nationwide News Pty Ltd (supra); Cock & Anor v Hughes & Anor (supra).

65 I consider that the matter complained of can arguably be regarded as comment. It is apparent from O'Shaughnessy (supra) that an issue of this kind must be resolved by a consideration of the circumstances and is a question that is usually left to the jury. I noted earlier that the news broadcast in question commenced by setting up a framework of debate as to whether there was one law for the rich and one for the poor. These and other assertions within the body of the matter complained of make it arguable that the various imputations said to be reflected in the words complained of can be regarded as comment.

66 Counsel for the plaintiff sought to persuade me, having regard to O'Shaughnessy (supra), that the assertion in the transcript of the broadcast that "...this is tax fraud at the top end" should be regarded as a statement of fact. However, as I have already noted, (in that case) Windeyer J was of the view that whether a matter is characterised as comment will depend on the circumstances. The assertion in the present case is preceded by a reference to the bankruptcy of certain barristers. To my mind, the assertion must be regarded as a comment upon that which preceded it.

67 It follows that I am not prepared to strike out the plea on this ground.

68 It is true that in certain cases such as Anderson v Nationwide News (supra) and Cock v Hughes (supra) it may be necessary to plead the substance of the comment in order to avoid potential embarrassment. However, I am not persuaded that this is such a case. The words are arguably comment and the nature of the comment is apparent. Accordingly, I will not strike out the plea on this ground.

69 I must now turn to the attack upon the defence of qualified privilege reflected in par 6 of the statement of defence.

Principles Applicable to Qualified Privilege

70 The common law recognizes that there are occasions upon which, on grounds of public policy and convenience, a person may make statements about another which are defamatory and in fact untrue. On such occasions a person is protected if the statement was fairly warranted by the occasion and was not made with malice, that is to say, with some indirect or improper motive or with knowledge of its untruth. Gatley (supra) par 14.1.

71 Privilege will not be available as a defence if the statement exceeds the reasonable requirements of the occasion: Guise v Kouvelis [1947] HCA 13; (1947) 74 CLR 102.

72 Generally speaking, privileged occasions are those where the maker of the statement has a duty to make the statement and the recipient has a corresponding interest to receive it: Adam v Ward [1917] AC 309. In most cases a qualified privilege will not be available to a newspaper or a television station because there is no community of interest between the publisher and the general public: Smith's Newspapers Ltd v Becker [1932] HCA 39; (1932) 47 CLR 279 at 304; Telegraph Newspaper Co Ltd v Bedford [1934] HCA 15; (1934) 50 CLR 632 at 658.

73 It is well-known that the decision of the High Court in Lange v Australian Broadcasting Corporation [1997] HCA 25; (1997) 189 CLR 520 marked out an extension to the defence of qualified privilege in regard to political discussion. The categories of qualified privilege must now be recognized as protecting a communication made to the public on a government or political matter. A publisher relying on that category of qualified privilege must establish that its conduct in making the publication was reasonable in all the circumstances.

74 As a general rule, a defendant's conduct in publishing defamatory material will not be regarded as reasonable under the Lange defence unless the defendant had reasonable grounds for believing the defamatory imputation was true, took proper steps so far as they were reasonably open to verify the accuracy of the material, and did not believe the imputation to be untrue.

75 Consistently with the general rules concerning qualified privilege, the Lange defence will be defeated if the plaintiff proves that the publication was actuated by ill-will or other improper motive.

76 The plaintiff submits that it is essential that there be a statement of the government or political matter in relation to which it is contended the matter complained of was published. Counsel for the plaintiff acknowledged that such a statement purports to be made in par 6(b) of the defence in which it is said, inter alia, that the discussion related to matters concerning the administration of Australia's income tax laws. However, the plaintiff submits that the matter complained of is an attack in sensational terms upon the plaintiff and other barristers and is not of and concerning a genuine political or government matter.

77 The plaintiff submits further that the last portion of the matter complained of sets out the purpose of the publication, namely, to shame the persons named into paying taxes by being named. Such a purpose is plainly not the communication of government or political information or ideas and the paragraphs ought to be struck out on this discrete ground.

78 The nature of the Lange defence was addressed in Bristile Ltd v The Buddhist Society of Western Australia Inc (2000) A Tort Rep 81-548. In that case it was held that an arguable defence had been raised because the letter in question was arguably relevant to the exercise by the Minister for the Environment of her public functions and powers, being a matter in which the general public has a legitimate interest in receiving information about.

79 I am of the view, in the present case, that reasoning of a similar kind applies to the circumstances of the present case. This is a case in which it can arguably be said that the general public has a legitimate interest in receiving information concerning matters relevant to the exercise of public functions and powers vested in officials charged with the responsibility of administering income tax. The article includes reference to the laws being "toughened". The High Court made it clear in Lange that a narrow view should not be taken of the matters about which the general public has an interest in receiving information about.

80 I am not persuaded that the final reference to shaming persons into paying tax can be fairly described as the purpose of the article. The comment in question is preceded by a reference to a problem with the current laws in that they are said to protect the anonymity of tax cheats. There is room for debate as to whether such matters fall within the boundaries of the Lange defence. However, as I noted earlier, a striking out application should not be used as a means to stifle development of the law.

81 Accordingly, I am not prepared to strike out par 6 of the defence upon the grounds relied upon by the plaintiff.

82 In summary, then, the application to strike out will be dismissed save for that part of the application directed to par 4(b)(4) and par 4(b)(14) to par 4(b)(15). The paragraphs just mentioned will be struck out but with leave to replead in the manner indicated at the hearing before me. I will hear from the parties as to whether any further orders are required.