Citation : JWH GROUP PTY LTD (Discontinued 30 August 2004) & ANOR -v- BUCKERIDGE & ANOR [2006] WASC 11

Defamation - Whether words complained of capable of being defamatory - Whether a permissible Polly Peck defence - Turns on own facts

Aspro Travel Ltd v Owners Abroad Group Plc [1996] 1 WLR 132

Birmingham v West Australian Newspapers Ltd [1999] WASC 19

David Syme & Co Ltd v Hore-Lacy [2000] VSCA 24; (2000) 1 VR 667

Moir v Flint [2002] WASC 48

Nationwide News Pty Ltd v Moodie [2003] WASCA 273; (2003) 28 WAR 314

Smith v Littlemore (1996) 15 WAR 289

Sungravure Pty Ltd v Middle East Airlines Airliban SAL [1975] HCA 6; (1975) 134 CLR 1

Vitale v Bednall [2001] WASC 278

Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40

Wilson v Metaxas [1989] WAR 285

1 McLURE JA: This is the appellant's application for leave to appeal, and, if leave is granted, the appeal from the order of Master Newnes made on 21 March 2006, refusing the appellant's application for leave to amend his defence to include a "Polly Peck" plea.

2 The respondent (plaintiff), Mr Julian Walter, commenced defamation proceedings against the appellant, Mr Len Buckeridge, for slander arising out of a telephone conversation on 17 December 2003 between Mr Buckeridge and Mr Neale Prior, a financial journalist then employed by West Australian Newspapers Ltd, and for libel arising out of the publication of an article in the 18 December 2003 edition of The West Australian newspaper.

3 The learned Master refused leave to amend on two grounds, the first being that the Polly Peck imputation was substantially different from the imputation pleaded in the statement of claim and secondly that the Polly Peck imputation was not defamatory of the respondent. The Master did not determine the respondent's third ground of opposition to the amendment, being that the Polly Peck imputation was incapable of being conveyed by the words complained of. The appellant contends the Master ought to have granted leave because it was at least arguable that the Polly Peck imputation:

1. was not substantially different from the imputation pleaded by the respondent;

4 The respondent filed a notice of contention seeking to uphold the Master's decision on the further ground that the Polly Peck imputation was incapable of arising from the words complained of.

5 As the appellant requires leave to appeal, he must demonstrate that the decision of the Master was wrong or attended with sufficient doubt to justify the grant of leave and that he would suffer substantial injustice if the decision was not reversed (Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40; Wilson v Metaxas [1989] WAR 285).

6 In order to understand the issues, it is necessary to refer to the statement of claim. It is pleaded that Mr Walter is the promoter, founder and managing director of JWH Group Pty Ltd which is the ultimate holding company of the "JWH Group" of companies that carry on the business of designing, building and marketing residential homes in Western Australia (par 6) and that Mr Buckeridge is, and at all material times was, a director of J-Corp Pty Ltd (par 2). The words complained of the subject of the slander claim are as follows (par 3):

"Prior: 'What's this writ by J-Corp and Kimpura suing Walter for about $700,000 all about?'

[Mr Buckeridge]: 'This claim is based on figures compiled by Pricewaterhouse Coopers, which had been nominated by Walter to carry out calculations for the Deed. I think the reason that he does not want to pay is because he does not have the money to pay'."

7 The respondent pleads a false and true innuendo in terms that:

"[Mr Walter] had not paid approximately $700,000 to J-Corp Pty Ltd and Kimpura Pty Ltd which sum he was legally obliged to pay, because he did not have the money to do so."

8 The extrinsic facts relied on (par 5) for the true innuendo include that at the time of the conversation, Mr Prior was aware that a writ had been issued by J-Corp and Kimpura against Oswald Homes (1972) Pty Ltd, Rural Building Company Pty Ltd, WA Country Builders Pty Ltd, JWH Group Pty Ltd, Julian Walter Holdings Pty Ltd and Mr Walter claiming damages arising from the failure of Oswald Homes, Rural Building Company and WA Country Builders to pay to J-Corp moneys totalling $698,946 plus interest owing pursuant to deeds executed on 6 June 2003 and 31 July 2003 being a "Deed Governing Sale" and a "Deed of Variation - Deed Governing Sale" ("the deeds").

9 The respondent pleads that the slander was actionable per se because it was calculated to disparage Mr Walter in his personal credit and in respect to his trade, business, occupation and calling. The particulars in support of that claim are that Mr Walter was the promoter, founder and managing director of JWH Group Pty Ltd.

10 The words complained of the subject of the libel claim, which include the headline "Buckeridge, Walter sling brickbats" are as follows:

"THE simmering row between construction mogul Len Buckeridge and his former business partner, Julian Walter, has erupted into tit-for-tat litigation over the carve-up of their former building joint venture J-Corp Pty Ltd.

Mr Buckeridge is pushing for a quick judgment in the WA Supreme Court after two of his private companies, including J-Corp Pty Ltd itself, sued Mr Walter for about $700,000 last month over valuations of J-Corp and its assets.

The companies are claiming to be owed the money as a deferred settlement payment over their carve-up in July of J-Corp that ended with Mr Buckeridge owning 100 per cent of J-Corp and Mr Walter owning its Oswald, Rural Building Co and WA Country Builders brands.

In other developments, Mr Buckeridge has vowed to cut off the credit provided by his building materials operations for materials supplied to Mr Walter's new home building venture, JWH Group.

Mr Walter is hitting back with a defamation action in the WA Supreme Court, claiming his reputation was damaged in the in-house newsletter of the mogul's flagship BGC Group.

In the newsletter, Mr Buckeridge described the buy-out of J-Corp as a very unpleasant business and gave his intepretation [sic] of what he described as an accountancy investigation.

Mr Walter said his lawyers would lodge a writ against Mr Buckeridge for defamation today unless he retracted comments in the BGC Bulletin and apologised.

Mr Buckeridge vowed to fight, saying he would use truth as a defence to a defamation action.

Industry observers had been expecting a legal war in the wake of Mr Walter and Mr Buckeridge breaking up in July after 18 years together as joint owners of J-Corp, which was WA's second biggest building group last year.

But until recent weeks, litigation was confined to JWH suing J-Corp over the former joint venture company advertising two home designs that Mr Walter claims went with him.

J-Corp and Buckeridge-controlled Kimpura Pty Ltd lodged a writ in the Supreme Court last month alleging they are owed $698,947 plus interest under a formula that was included in a deed governing the carve-up of J-Corp assets in July.

Mr Buckeridge told WestBusiness that the claim was based on figures compiled by PricewaterhouseCoopers, which had been nominated by Mr Walter to carry out calculations for the deed.

'I think he doesn't want to pay because he hasn't got the money,' he said.

Mr Buckeridge said BGC had difficulty being paid by JWH for building materials supplied since the carve-up and would only supply Mr Walter's new group as a cash-on-delivery basis from next month.

But Mr Walter rejected claims by Mr Buckeridge that JWH had not paid BGC for building materials, saying his group had withheld some money recently because BGC was slow in paying rebates for bulk discounts. He would no longer use BGC as a supplier if credit was cut.

Mr Walter said the Supreme Court action would be defended because the final accounts were based on valuations acceptable to BGC and involved changes to the underlying accounting policies at J-Corp."

11 The appellant's proposed Polly Peck defence (pleaded in materially the same terms in par 4A and par 10A of the proposed amended defence) materially provides:

"4A Further or alternatively, if, which is denied, the words pleaded in paragraph 3 of the Statement of Claim bore any meaning defamatory of [the respondent], those words in their natural and ordinary meaning, alternatively, in the meaning they bore to Mr Prior if he was aware of the matters alleged in paragraphs 5 and 6 of the Statement of Claim, bore or were understood to bear or were capable of bearing the meaning that:

4A.1 companies in the JWH Group of Companies owned and controlled by the [respondent] and named as defendants in the Supreme Court Writ as liable to pay to J-Corp and Kimpura the sum of approximately $700,000 had not paid the sum because they did not have the money to do so,

and the said words were true in substance and fact ... "

12 The appellant provided details of the matters relied on to justify the Polly Peck imputation which matters are confined to establishing the truth of the proposition that Oswald Homes, Rural Building Company and WA Country Builders had not paid the sum of $698,946 to J-Corp or Kimpura under the deeds because they did not have the money to do so.

13 I propose to start with the question of whether the Polly Peck imputation is defamatory of the respondent.

Whether Polly Peck imputation defamatory

14 The current orthodoxy is that there is no wholly satisfactory definition of a defamatory imputation (Gatley on Libel and Slander, 10th ed [1.5]). For present purposes, it is sufficient to rely on the definition in the 8th edition of Gatley adopted by Owen J in Smith v Littlemore (1996) 15 WAR 289 at 294:

"A defamatory statement is one that is to a person's discredit, or which tends to lower that person in the estimation of others, or to expose him or her to hatred contempt or ridicule, or to injure reputation in an office, trade or profession or to injure the person's financial credit".

15 Whether an imputation is defamatory raises questions of law and fact. The question of law is whether the imputation is reasonably capable of being defamatory. If the answer is in the affirmative, the next question is whether the imputation is defamatory in fact. We are solely concerned with the question of law.

16 A Polly Peck imputation must be defamatory of the plaintiff who instituted the defamation proceedings, in this case, Mr Walter. Further, a Polly Peck imputation must satisfy the same pleading rules that apply to a plaintiff's imputation. In particular, the imputation must express the precise act or condition asserted of or attributed to the plaintiff (Birmingham v West Australian Newspapers Ltd [1999] WASC 19) and represent the final distillation of the alleged defamatory meaning (Sungravure Pty Ltd v Middle East Airlines Airliban SAL [1975] HCA 6; (1975) 134 CLR 1). These rules apply even if the defamatory imputation is not based on misconduct. In written and oral submissions made on behalf of Mr Walter, it was contended that the Polly Peck imputation failed to satisfy these rules. Although that was not an independent ground of challenge before the Master, it is relevant to the determination of both grounds of appeal.

17 I will assume in the appellant's favour that the imputation alleges that companies owned and controlled by Mr Walter did not have the money to pay a presently due and owing debt of around $700,000. The focus of the imputation is on the condition of the companies, being their inability to pay the specified debt. The reader is left to speculate as to the precise act or condition asserted of or attributable to Mr Walter. It is unclear whether it is intended to relate to, inter alia, his competence as a director, a possible breach of his duty as a director or his personal financial position. The Master inferred that it was intended, in general terms, to be an adverse reflection on Mr Walter's personal financial reputation. Although there is some support for that view in oral submissions made on behalf of the appellant at the hearing, it is not supported by the particulars of justification (which are confined to proving the companies' inability to pay the debt) or the written submissions in the appeal (which enigmatically suggest that the respondent had "responsibility" for the actions of the corporate group, which I take to be a reference to the failure to pay the specified debt).

18 However, it is necessary to address the Master's decision that the pleaded imputation was incapable of adversely reflecting on Mr Walter's personal financial reputation in any manner. The Master said (at [33] - [35]):

"The basis of the principle that it is defamatory to say of a person they cannot pay their debts, even if that inability is only due to misfortune, is because it would affect their financial reputation. That is to say, it would affect their creditworthiness. A statement simply that a company cannot pay its debts, however, does not, of itself, reflect on the personal financial reputation of a director or shareholder in that way. Indeed, the limitation of personal liability is one of the accepted purposes of trading by the medium of a private company.

In Aspro Travel Ltd v Owners Abroad Group [1996] 1 WLR 32, the question before the Court of Appeal was whether it was arguably defamatory to say of a man that he was a director of a company that had traded while insolvent. It was held that it was. In the course of his judgment (with which Waite LJ agreed), Stuart-Smith LJ said:

'But to say of a company that it is insolvent does not involve any imputation about the solvency or credit of the directors ... I do not consider that it is capable of being defamatory to say of someone that he is a director of a company that is in serious financial difficulty. But it may be defamatory to say that he is causing or permitting it to trade while insolvent.'

Senior Counsel for the first defendant referred to a number of cases where a statement as to the conduct of a company was held to be defamatory of the person who was the alter ego of the company. But that was because the company could only have engaged in the alleged conduct through a natural person acting on its behalf. It is one thing to regard the conduct of a company as the conduct of the person who acts as the mind and body of the company; it is another thing to regard the financial state of the company as the financial state of that person."

19 The proposition of Stuart-Smith LJ in Aspro Travel Ltd v Owners Abroad Group Plc [1996] 1 WLR 132, quoted with approval by the Master, was conceded as being correct by counsel for the directors in that case. I am not persuaded that it is correct in the factual circumstances pleaded in the imputation in this case. The inability of private companies owned and controlled by an individual to pay a debt is reasonably capable of supporting an adverse inference as to the financial reputation of the owner/controller. In particular, reasonable people to whom the publications were made would be likely to understand that the financial position of Mr Walter and his companies were, or were likely to be, very closely connected and may arguably draw an inference that Mr Walter did not have the financial standing to himself provide funds to, or secure third party funding for, his companies to enable them to pay their debt. (I do not intend to suggest that that is an imputation which itself complies with the pleading rules. That is a matter for the parties.) For these reasons, I conclude that the Master erred in determining that the companies' inability to pay their debt was incapable of reflecting on the personal financial reputation of the respondent.

Whether a permissible Polly Peck plea

20 A defendant is permitted to plead a Polly Peck defence in this jurisdiction: Nationwide News Pty Ltd v Moodie [2003] WASCA 273; (2003) 28 WAR 314. The scope of a Polly Peck defence is delineated by the extent to which a plaintiff can depart from his or her pleaded imputations. All members of the Court in Moodie agreed that a defendant cannot plead a Polly Peck imputation that is outside the extent to which a plaintiff would be permitted to depart from his or her pleaded imputations. However, on my reading of the judgments in Moodie, only Anderson J expressly approved the test formulated by Ormiston JA in David Syme & Co Ltd v Hore-Lacy [2000] VSCA 24; (2000) 1 VR 667 at 675, being that a Polly Peck imputation must not be substantially different or more serious than that pleaded by the plaintiff ("Hore-Lacy test"). Steytler J (as he then was) did not expressly approve that test. I repeated my previously stated position that the Hore-Lacy test is arguably unduly narrow: Vitale v Bednall [2001] WASC 278; Moir v Flint [2002] WASC 48; and Moodie at 334 - 335. However, it was unnecessary to determine that issue in Moodie because the Polly Peck imputations pleaded in that case satisfied the Hore-Lacy test.

21 The Master applied the Hore-Lacy test in this case. The appellant does not in his grounds of appeal or written submissions challenge the correctness of the test applied by the Master. In oral submissions the appellant put his case on the basis that the Polly Peck imputation satisfied the Hore-Lacy test and, if it did not, there was uncertainty as to the correct test in which event the pleading should be permitted to proceed. However, the appellant did not contend for a particular test or explain how the uncertainty affected his pleading. In those circumstances he should be confined to his existing grounds of appeal.

22 The Master concluded that the Polly Peck imputation did not satisfy the Hore-Lacy test. He said (at [30]):

"In my view, the imputation which [the appellant] seeks to plead is substantially different to the imputation pleaded by [the respondent]. The question of whether the companies in the JWH Group have the money to pay the debt is quite different to the question of whether the [respondent] personally has the money to pay the debt, and on the face of it involves quite different enquiries. One involves an inquiry into the financial circumstances of the companies concerned, not an inquiry into the [respondent's] personal financial circumstances. The other involves an inquiry into the [respondent's] personal financial circumstances, not an inquiry into the financial circumstances of the companies concerned, save perhaps to any extent that the latter might be relevant to the [respondent's] personal financial circumstances."

23 It is apparent from this extract that the Master addressed the focus of the Polly Peck imputation and the particulars of justification, being the financial capacity of the companies to pay the debt. This resulted from the failure of the pleader to identify the precise condition attributed to Mr Walter. I have concluded that the Master erred in ruling that the inability of the companies to pay their debt was incapable of supporting an imputation adversely reflecting on the respondent's personal financial situation. However, in circumstances such as the present where there is significant uncertainty as to precisely what it is that the appellant wishes to impute and justify, the Court cannot (and should not) make a determination as to whether the defective imputation is a permissible Polly Peck plea. In those circumstances, there was no error in refusing leave to amend the defence to incorporate proposed pars 4A and 10A because it is not possible to make a judgment on whether the imputation is an impermissible Polly Peck plea having regard to the appellant's failure to formulate an imputation that clearly identifies the act or condition attributed to the respondent.

24 In those circumstances it is preferable not to determine whether the Polly Peck imputation was incapable of arising from the words complained of. That question is more appropriately considered for the first time if and when the appellant makes any further application to amend to include a Polly Peck defence.

25 For these reasons, I would refuse leave to appeal.

• Whether Polly Peck imputation defamatory
• Whether a permissible Polly Peck plea