Beechwood Homes (NSW) Pty Ltd v Camenzuli

Beechwood Homes (NSW) Pty Ltd v Camenzuli - [2010] NSWSC 521 - NSWSC 2010 case summary — Zoe

[11]

3 LED Builders Pty Ltd, LED South Coast Pty Ltd and LED North Coast Pty Ltd traded as Beechwood Homes until May 2008 when the companies were placed in receivership. In July that year the plaintiff purchased the assets and business of these companies from the receiver. At that time it appears that many of the homes that had been constructed by these companies were in poor condition, having been left in a state of partial completion and exposed to the elements for a number of months. Following the purchase of the business the plaintiff entered into a series of novation agreements with home buyers for the assignment of their original building contracts, with the intention that the plaintiff would then take over and complete construction of these various projects in accordance with their terms. 4 In November 2008 Mr and Mrs Schembri, who had contracted with one of the original companies and who had concerns about their home then under construction, engaged the defendant as a building consultant. A number of meetings were arranged in an attempt to resolve certain issues and allay their concerns. It would appear that no resolution of the dispute was achieved. In due course the plaintiff became aware that the defendant had uploaded certain material onto a website maintained by him. The plaintiff contends that what has been published gives rise to the causes of action pleaded in the amended statement of claim and that in advance of the final determination of these proceedings the defendant is liable to be enjoined from continuing to publish it. 5 Matters that are fundamental to the exercise of the Court's discretion include the nature of the plaintiff's case, whether there is a serious question to be tried, whether the plaintiff is likely to suffer injury for which damages are not an adequate remedy and the balance of convenience. The nature of the plaintiff's case 6 The putative offending material referred to in the current statement of claim is said by the plaintiff to convey the following allegations concerning the plaintiff: (a) The defendant as a professional building consultant has carried out a comparative survey of building companies in New South Wales including the plaintiff, Masterton Homes, Gremmo Homes, Renco Developments and Felton Homes and reached an independent and unbiased conclusion that the plaintiff is the worst ranked builder and should not be chosen by anyone to build a new home.

[22]

It is for the plaintiff in injurious falsehood to establish falsity, malice and special damage, burdens not imposed upon the plaintiff by defamation. On the other hand, the inhibition upon the use of the injunction to restrain further publication of defamatory material does not apply to injurious falsehood; a rationale for the distinction is said to be that the latter tort protects proprietary and commercial rather than personal interests ". (emphasis added) 11 In Australand Holdings Ltd v Transparency & Accountability Council Incorporated [2008] NSWSC 669, McCallum J granted a final injunction concerning a threatened publication disparaging of a building company, without referring to any need to consider issues of freedom of speech or special considerations applicable to the exercise of discretion in the circumstances. Indeed, on the issue of damage her Honour said only this: "[169] As to the question of damage, the amended defence concedes, in effect, that a general loss of business would be suffered if future publication were permitted. [Counsel for the plaintiff] submitted that the absence of evidence of actual loss could be explained by reference to the fact that an injunction restraining publication was swiftly sought by Australand and ordered by this Court . I am satisfied that there is a reasonable probability that actual damage to the plaintiff would result if the statements were permitted to be published." (emphasis added) 12 The defendant argued that the true nature of the plaintiff's case was one in defamation effectively in the guise of injurious falsehood in order to avoid the effect of s 9 of the Defamation Act 2005 providing relevantly that a corporation has no cause of action for defamation in relation to the publication of defamatory matter about it. The defendant contends that the case is pleaded in a way that is redolent of a pleading in defamation with the only relevant difference being that the pleading alleges that the offending material was conveyed as opposed to having been published. The defendant submitted that the plaintiff could not avoid the rule that an interlocutory injunction would not ordinarily be granted in a defamation action by framing the claim as another tort or breach of a statute. He relied upon what White J said at [38] - [39] in Kaplan as follows: "[38] It was submitted for the second defendant that an injunction should not lie to prevent him and members of the public from exercising their right of free speech to comment on the second plaintiff's services and business. In Swimsure (Laboratories) Pty Ltd v McDonald , Hunt J, as his Honour then was, said that the concepts of free speech and discussion and liberty of the press had little relevance to an action for slander of goods. That action is one variety of the tort of injurious falsehood. His Honour said that some of the other categories of injurious falsehood may not be exempt from the special rule that applies in defamation cases.

[23]

[39] The plaintiff cannot avoid that special rule merely by framing its case, not in defamation, but in another tort." 13 The defendant submitted that it is well established that, in defamation actions, an interlocutory injunction should only be granted in very clear cases and with caution lest it interfere with the right of the community in general to discuss in public matters of public interest and concern. He referred to Chappell v TCN Channel Nine Pty Ltd (1988) 14 NSWLR 153. See also Church of Scientology of California Incorporated v Reader's Digest Services Pty Ltd [1980] 1 NSWLR 344 at 349 and Heartcheck Australia Pty Ltd v Channel 7 Sydney Pty Ltd [2007] NSWSC 555. 14 It is not in my opinion correct to say that the plaintiff's case is really, or should really be, a claim in defamation. There are some logical and semantic problems with such a contention. For example, the plaintiff's case cannot be, for the reasons pointed out by the defendant, an action in defamation, because the plaintiff, as a corporation, has no such cause of action. It cannot therefore be the case, as the defendant submits, that the plaintiff is attempting to avoid any special rule concerning the restrictions upon restraint of an alleged defamation merely by choosing to frame its case, not in defamation, but in another tort because it did not have that choice in the first place. 15 Secondly, the true nature of the cause of action must be determined by reference to the substance of the claims that are made in the context of the facts that give rise to the claim. In this case the defendant's statements are directed to the products and services provided by the plaintiff and to its methods of doing business, including allegations of underhanded commercial tactics, its current poor standard of building work, its current standing as a bad and shonky builder, and that under its current ownership and management it has become a disreputable builder. The defendant has alleged also that the plaintiff acts in a dishonest manner, and has caused the defendant to be bullied and physically threatened in order to prevent him from raising legitimate building defects. 16 By way of comparison, the allegations that were sought to be restrained in Australand were set out at [7] of that case as follows: (a) The plaintiff, in conjunction with other persons, was an instigator and organiser of the well planned and executed fraud against the second defendant, his family and other Australand clients.

[33]

[23] As to the claim made under the Fair Trading Act , the Court's power under s 65 of that Act is enlivened if either defendant has engaged or proposes to engage in conduct in contravention of the Act. The plaintiff contends that the publication or threatened publication of the documents would contravene s 42 of the Fair Trading Act . It relies on the definition of trade or commerce in s 4 of the Act which includes any business or professional business activity and expressly includes a business not carried on for profit." 18 The facts of this case, although specifically different from those with which her Honour was concerned, are similar in form and effect. It does not appear to me that the present case is one in which the plaintiff has illegitimately formulated its case so as to avoid what would otherwise be a fatal impediment to success. I do not consider that any special rules that apply in cases concerned with attempts to restrain a defamation apply in cases of alleged injurious falsehood. I note in this respect what was said by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 at [56] as follows: "[56] The qualification expressed by Lord Cairns LC allowed, for example, for injunctive relief in respect of those torts of slander of title and slander of goods, where property interests were involved, and which were classified as 'trade libel', and later, after Ratcliffe v Evans , were developed as the tort of injurious falsehood, elements of which were malice and special damage. The logical consequence was that, where causes of action both for defamation and injurious falsehood lay in the same situation, an injunction might be granted in respect of the injurious falsehood claim." Is there a serious question to be tried? 19 The defendant conceded that there was a serious question to be tried. But for that concession the plaintiff would have to demonstrate the existence of a prima facie case with a sufficient likelihood of success to justify interlocutory relief. The principles are well established. Hunt J referred to them in Swimsure at 801 in these terms: "The first is whether the plaintiff has made out a prima facie case, in the sense that the degree of probability or likelihood of the plaintiff's success at the trial of the action is sufficient, in the circumstances of the case, to warrant preservation of the status quo. In considering this question, I am not required to undertake a preliminary trial, and to give or withhold interlocutory relief upon a forecast as to the ultimate result of the case." Misleading and deceptive conduct: s 42 20 The plaintiff relies on two causes of action. The first is based upon s 42 of the Fair Trading Act. To be actionable the defendant's conduct must have been in trade or commerce. The High Court of Australia has described this requirement in the following terms in Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 at 603-4: "As a matter of language, a prohibition against engaging in conduct 'in trade or commerce' can be construed as encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business. If the words 'in trade or commerce' in s 52 are construed in that sense, the provisions of the section would extend, for example, to a case where the misleading or deceptive conduct was a failure by a driver to give the correct handsignal when driving a truck in the course of a corporation's haulage business. It would also extend to a case, such as the present, where the alleged misleading or deceptive conduct consisted of the giving of inaccurate information by one employee to another in the course of carrying on the building activities of a commercial builder. Alternatively, the reference to conduct 'in trade or commerce' in s 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed, to borrow and adapt words used by Dixon J in a different context in Bank of NSW v The Commonwealth, the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business." 21 The defendant did not appear to contest the proposition that the defendant's allegedly offending activities were conduct performed in the course of trade or commerce. In my opinion it clearly was. It was arguably, if not certainly, the publication of material designed to advance the defendant's commercial interests. Moreover, the website clearly advertises the business services of the defendant and the publication of the material concerning those services is directly connected to the defendant's professional activities as a building consultant. Conduct 22 Nor is there any contest that the defendant published the allegedly offending material. The plaintiff contended that the proper approach must be the same as that for injurious falsehood or defamation. As noted by McCallum J in Australand at [98], "[t]]here does not seem to … be any relevant distinction between the concept of publication for the purpose of defamation and for the purpose of injurious falsehood". It is necessary to consider whether the defendant participated in the publication in the sense discussed in Webb v Bloch [1928] HCA 50; (1928) 41 CLR 331. Anyone who is to a degree an accessory to publication is to be considered as a principal in the act of publication. The material about which the plaintiff complains is also referred to in correspondence between the parties' representatives in a way that appears uncontroversially to accept that the defendant published it. Misleading or deceptive or likely to mislead or deceive / injurious falsehood 23 The defendant strenuously contested the proposition that the statements that he made were false. 24 "Mislead" is to lead into error or to cause to err: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564. "Deceive" is to cause to believe what is false, to mislead as a matter of fact to lead into error: Weitmann v Katies Ltd (1977) 29 FLR 336. Intention is irrelevant, the question being whether objectively tested the conduct was misleading or deceptive or likely to be so: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216 at 223. 25 There are four elements of the tort of injurious falsehood. First, a false statement concerning the plaintiff's goods or business. Secondly, publication by the defendant to a third person. Thirdly, malice on the part of the defendant. Fourthly, actual damage suffered as a result. 26 The plaintiff relied upon the evidence of Mr Cavasinni and Mr Romano. Mr Cavasinni deposed to the falsity of the published material. He said that the plaintiff had not sued anyone, let alone the defendant, to "squash any adverse comment". He said that he personally commenced the defamation proceedings referred to by the defendant in respect of comments made about him. He said there was no home owners warranty direction that had been made to the plaintiff with which it had not complied. He said that it was false to say that the plaintiff had orchestrated a system to get customers to pay a deposit and then to overcharge for variations to the contract once the customer was locked in. He also said that it was false to say that the plaintiff is a dishonest and cut throat builder that goes about separating clients from their money, or that the plaintiff is a bad and shonky builder or that anyone from the plaintiff had threatened the defendant personally. 27 Mr Romano deposed in detail to the allegations of defective workmanship referred to by the defendant in his three reports dated 3 November 2008 and 15 December 2008 with respect to the Schembri's house and his report dated 24 March 2009 with respect to the house constructed for Ms Adamietz nearby. Mr Romano effectively puts in issue substantial portions of the complaints and problems highlighted by the defendant. 28 In the nature of things, this being an application for interlocutory relief, Mr Cavasinni and Mr Romano were not cross-examined on their affidavits. 29 The plaintiff submitted that for the purposes of the present application the threshold issue was whether there was a serious question to be tried or more particularly whether there was a prima facie case of either misleading and deceptive conduct or injurious falsehood. The plaintiff insisted that the reality was that the defendant has some form of grudge or unresolved dispute with the plaintiff and is using his business website to disparage the plaintiff's business: see, for example, Kaplan at [12]. 30 The defendant's response is that the things that he has said are true. He accepts that for present purposes I cannot properly or finally determine that issue. The defendant disputes that all of the words complained of were actually conveyed by the published material. The defendant, however, contends that there is at least prima facie evidence that supports the truth of the allegations that the defendant is a bad, shonky and disreputable builder, that at least one officer of the plaintiff bullied and physically threatened him and that the plaintiff failed to comply with directions from the home owners warranty insurer. 31 For example, in relation to the first issue, the defendant prepared the reports to which earlier reference has been made. They are in evidence. The defendant is a licensed building consultant and a licensed builder with a Bachelor of Engineering degree. He accepts that there will necessarily be a dispute concerning the nature and extent of any defective workmanship that he has purported to identify. He contends, however, that for the purposes of the present application there is sufficient evidence to satisfy me that the plaintiff may well be a bad, shonky and disreputable builder as he alleges. 32 In addition to his own reports the defendant points to a building inspection report by Censeo Pty Ltd dated 8 September 2009 addressed to the home owners warranty insurer and a report from Donovan Associates dated 25 September 2009 addressed to the plaintiff. Each of those reports is said to refer to a number of items of work requiring rectification at the Schembri's home and to specify the recommended steps to do it. 33 Part of the plaintiff's response to the defendant's allegations has been to emphasise that it is an entity that came to the defective work as a stranger, and stepped into the shoes of its predecessor which, by implication, was the party responsible for any defects that were present when it did so. The defendant described that contention as unmeritorious. That is said to be because in accordance with the deed of novation the statutory warranties provided for in Part 2C of the Home Building Act 1989 extended to the work done and materials provided by the predecessor and the plaintiff as well, and further that the plaintiff would be responsible for breaches of the warranties that have occurred in performance of the work up to the date of the deed. The evidence is currently silent on the question of precisely what work the plaintiff did and precisely what work was done by its predecessor to rectify any defective work prior to July 2008. The defendant contends, however, that there is sufficient evidence that the plaintiff failed to comply with its obligations after that date to justify it being described as a bad, shonky and disreputable builder. 34 Paragraphs 28 to 30 of the defendant's affidavit sworn 26 January 2010 refer to a meeting on 11 May 2009 at the Schembri home. Those present at the meeting included Mr Cavasinni, the defendant and Mrs Schembri. The defendant said that towards the end of the meeting Mr Cavasinni walked up to him and stood face to face with him, pointing his finger towards the defendant's face in what he described as "a very menacing way". Mr Cavasinni said to the defendant: "You're a dickhead". The defendant said that this intimidated him. Mrs Schembri also swore an affidavit in which she corroborated what the defendant described. 35 Finally, a report from the home owners warranty insurer identifies certain damage and work that required rectification. The defendant contended that his reports were at least prima facie evidence of an ongoing failure by the plaintiff to rectify all defects. 36 I have recorded the defendant's position on the falsity or otherwise of the statements that he made even though the defendant has specifically conceded that there is a serious question to be tried. The defendant's submissions concerning whether or not what he said was true in whole or in part are therefore to some extent beside the point of the present inquiry if part of that serious question, which both sides accept has been made out, must of necessity include the issue of whether or not the plaintiff can establish falsity of the defendant's statements as constituting at least one of the important elements of each of its pleaded causes of action. 37 As far as I can determine, the point of the defendant's contentions on false and misleading conduct or falsity was that the plaintiff's case was in effect hopeless, because the truth defence was so strong that neither case against him could survive scrutiny. Be that as it may, it remains the fact that there will be a serious dispute about these issues in due course. The defendant has not established at this stage, as he quite properly concedes he cannot establish at this stage, that the plaintiff is destined to fall at the first hurdle on the issue of falsity. His submissions were limited to only some of the matters that he published and serve merely to confirm the existence of a serious issue to be tried on the question of the falsity or otherwise of at least the others, if not all of the statements that he made. Malice 38 There is no difference between malice in injurious falsehood and defamation. In Palmer Bruyn at [61], Gummow J described the position as follows: "[61] It has been said that it is the requirement in the third element of malice set out above that causes the most difficulties for courts in resolving cases of injurious falsehood. In this case, the trial judge was of the view that malice is established either by showing the existence of some indirect, dishonest or improper motive, or by showing an intent to injure without just cause or excuse. The trial judge concluded that 'on this test the publication and republication to the limited number of people identified in this judgment (that is before publication of The Newcastle Herald article) was malicious'. The trial judge's finding of malice was not the subject of any challenge before the Court of Appeal or before this Court. The subject of malice may therefore be put to one side, and it is unnecessary to consider the view of the English Court of Appeal that the criteria for malice in injurious falsehood are the same as at common law for libel and slander." 39 In Australand at [159], McCallum J adopted the passage from Clerk & Lindsell on Torts as follows: "Malice means one of three things: either personal spite, or an intention to injure the plaintiff without just cause, or knowledge of the falsity of what is said. There has been a great deal of discussion as to which formulation is correct; this has largely been arid, because the precise formulation has hardly ever mattered. The best view now seems to be that any one of the three states of mind will suffice for liability." 40 The plaintiff submitted that for the purposes of establishing the likelihood of success, there needs only to be evidence of falsity from which an inference can be drawn that the object of the publication was to injure the plaintiff's business. In Swimsure at 802, Hunt J said this: "I turn then to the likelihood of the plaintiff's success at the trial of the action. There is before me evidence of falsity, and evidence from which the inference can be drawn that the direct object of the publication was to injure the plaintiff's business, rather than to sell the defendants' product. That is sufficient to establish malice in the publication." 41 The plaintiff submitted that not only is there an abundance of evidence about falsity but there is also at least inferentially knowledge of falsity, or recklessness amounting to wilful blindness, as many of the facts are demonstrably false. For the same reasons that made assessment difficult at this stage of whether any of the defendant's statements were false, it is also difficult to be satisfied that the defendant had knowledge of the falsity of what he said. That is an assessment that must abide the result in the final hearing. 42 The plaintiff submitted that at least one of the remaining elements of malice was not so hard to discern. The plaintiff contended that it could demonstrate the existence of personal spite if not an intention to injure the plaintiff without just cause. In this last respect the plaintiff suggested that the language used by the defendant on his website is not the dispassionate professional analysis of a building consultant or something similar but instead an emotional tirade clearly intended to influence readers against the plaintiff. The plaintiff also suggested that the defendant used an aggressive and patronising tone in his correspondence, which gave an insight into the defendant's true motives. This was said to have been repeated in the defendant's affidavits as well. The defendant also threatened, in his letter of 19 October 2009, to refer his concerns to the media. 43 The defendant however did not concede that any one of the alternative elements of malice had been made out. He said that there was no evidence of personal spite on his part and that the material, first published in April 2009, remained on his website until removed in October the same year. He posted that material because he said that it was true, and that he was of the view that readers of the website had a right to know the information and because it reflected his opinion and was based on the material contained in his reports. There was a contrast with cases such as Kaplan, where the defendant established a website using a disparaging name for the sole purpose of damaging the plaintiff, its business and its products and where it was done anonymously. 44 As to whether there was an intention to injure the plaintiff, the defendant submitted that the evidence was silent. This is to be contrasted with Australand, where the defendant threatened publication of material with the object of inducing the plaintiff to compensate him for his perceived loss. That is not the position here. 45 The defendant also submitted that the evidence is "overwhelming" that he believed that the material that he published was true. There is said to be no evidence that the defendant did not believe that what he published was true. 46 The key to separating these competing contentions is the published material itself. It is not possible to reproduce it all. Some of what the defendant published is as follows: "Beechwood Homes appear to us to be the type of builders that will "sue" to quash any adverse comment rather than carry out the needed repairs. This is a comment on Beechwood Homes (builder) and not any individual. I am presently in a protracted legal battle, so I am restricted in any comments that could be made.

[44]

GOLDSMITH: We certainly concede that there is a prospect for that." 51 Indeed, it would appear in any event to follow from the nature of the material that the defendant published that people might not do business with the plaintiff for the reasons to which the defendant refers in that material. Whether what followed should be characterised as tortious damage to the plaintiff's business, or as a reduction in turnover as the result of the legitimate communication of accurate information about the plaintiff that persuaded or convinced prospective customers to take their business elsewhere, remains to be seen. 52 I am, as Hunt J was in Swimsure, satisfied on the evidence that there is a reasonable probability that actual damage will result to the plaintiff from the continued publication of the statements in question. Is damages an adequate remedy? 53 The defendant's written submissions on this issue were originally predicated on the existence of the contest about whether the plaintiff had suffered any loss at all. The defendant ultimately conceded that it had. The defendant made no submissions on the question of whether or not damages would be adequate to compensate the plaintiff for any loss that may be established to flow from the publication. 54 In the nature of things, the plaintiff would be very unlikely to be able to prove that any particular prospective customer or customers were steered away from using it to construct a dwelling for them as a result of visiting the defendant's website. A general reduction in its business may or may not be capable of being sourced to the matters complained of in the published material. On one view of the matter, damages may not even be a remedy at all. 55 I consider that the plaintiff's losses may not be truly or adequately compensated if it were left to establish such losses that might be caused if the publication were to go unrestrained. Balance of convenience 56 The inquiry is whether the inconvenience or injury, which the plaintiff would be likely to suffer, if an injunction were refused, outweighs or is outweighed by the injury, which the defendant would suffer, if an injunction were granted. The plaintiff submitted that this issue was all one way. The defendant did not accept that submission. I put to Mr Goldsmith in the course of argument on this issue that, on one view, pending a final determination of this litigation, the plaintiff had everything to lose and the defendant had nothing to lose if an injunction were granted. However, other than as a general proposition, the defendant was not prepared to agree to that. It relied upon detailed written submissions. 57 However, these submissions did not seek to come to terms with the fact that the defendant in fact did have nothing to lose by the restraint. He submitted that he was trying to do no more than his job, and that the evidence was "overwhelming" that defects existed in the houses constructed for the clients that he represented. He said that he was simply trying to get the houses completed to the satisfaction of his clients. 58 The defendant was not and is not in a competing commercial relationship with the plaintiff. There was no suggestion that his retainer with the clients concerned was tied in some way to, or was dependent upon, the plaintiff rectifying the defects. The defendant's whole approach has been to emphasise his greater and wider concerns to warn the public at large about what he considered was poor workmanship and faulty practices. A failure to achieve that result if his concerns are well founded would cause him no loss at all, but continued publication of his concerns has the very real potential that it will cause the plaintiff loss if they are not. I can foresee no general or particular injury to the defendant from a continuation of the current regime to which the defendant earlier consented. Conclusions and Orders 59 In these circumstances I consider that the defendant should be restrained, until a final hearing, in terms in or to the effect of the regime currently in place. It is appropriate that the parties be given an opportunity to bring in short minutes of order to reflect these reasons, which they should do within seven days.

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Judgment (45 paragraphs)

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Legislation Cited (5)

Cases Cited (17)

Cited By (5)