Cao v Horan

District Court of NSW|2018-06-07

Judgment

These are my reasons for the ruling I made on 7 June 2018 refusing to strike out particulars of the plaintiff's claim for special damages.
As can be seen from the pleading set out below, the second plaintiff particularises two claims for special damages. These are as follows: 1. There is a claim for diminution in the value of the business from the $2.9 million plus stock offer received before the publications and the $2.38 million plus stock offer which was ultimately accepted from the same buyers after the publications. This claim is set out in particulars (a) to (d) and, as is set out in paragraph (d), depending on the result of court proceedings currently in progress, the claim for special damages will range between $180,000 to $530,000; 2. As is set out in paragraph (e), the second plaintiff also brings a claim for downturn in revenue of approximately 9% script volume, which is estimated at $11,174 when compared to the year before, which is asserted to be "a key pharmacy profit indicator".
The publications relate to the asserted inadequacies (called "holes" in the first matter complained of) in the service provided by the pharmacy at Coonamble and to the need for a second pharmacy to persuade the owners to raise their game if there is some competition. The loss is pleaded as arising from both publications.

The second matter complained of

The second matter complained of is attached as Schedule A to the Statement of Claim, a copy of which is annexed as Annexure A to this judgment.
The imputations pleaded to arise are set out at paragraph 7 of the Statement of Claim as follows: 1. The plaintiffs conduct a pharmacy that provides inadequate pharmacy services. 2. The plaintiffs, in conducting a pharmacy, acted negligently in the provision of medications in that they failed to provide them in a timely manner. 3. The plaintiffs, in conducting a pharmacy, failed to make available to patients emergency and acute medications, such as epi-pens.

Particulars of damage

The particulars of damage are set out at paragraphs 8 and 9 of the Statement of Claim as follows: "Damage 8. By reason of the publication by the first defendant of the first matter complained of and the second defendant of the second matter complained of, the first plaintiff has been brought into hatred, ridicule and contempt and has been gravely injured in his character and reputation, and has suffered hurt and embarrassment and has and will continue to suffer loss and damage. 9. By reason of the publication by the first defendant of the first matter complained of and the second defendant of the second matter complained of, the second plaintiff has suffered loss and damage, including economic loss and a general downturn in custom and business. Particulars of special damages (a) Prior to the publication of the second matter complained of, the company received from, and accepted, a written offer from Diana Hanna and Michael Ibrahim for the business of $2.9 million plus stock on or around 21 October 2016. (b) That offer was withdrawn by the purchasers on or around 24 October 2016, two days before the publication of the second matter complained of. (c) A subsequent contract was entered into on or around 24 November 2016 with another purchaser who defaulted in or around March 2017. That breach of contract is the subject of New South Wales Supreme Court proceeding (2017/00125871). The purchasers who made the initial offer, Ms Hanna and Mr Ibrahim, subsequently purchased the business for $2.38 million plus stock in April 2017. Settlement of that sale occurred in June 2017. (d) Depending on the result of the court proceeding (2017/00125871) which is in currently in progress, the special damages claim for loss caused by the first defendant and the second defendant is between $180,000 to $530,000. (e) Further, the second plaintiff suffered a downturn in revenue immediately after the publication of the second matter complained of, namely a reduction of 9% script volume (approximately $11,174 gross profit) compared to the same period the year before, which is a key pharmacy profit indicator."

The first defendant's argument

The first defendant seeks an order under r 14.28 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") that the claim for special damage in paragraph 9 be struck out or, alternatively, that full and proper particulars of the claim be provided, in addition to the claim for general damages for "general downturn in custom and business" (this is in addition to the special damages claim). A letter dated 5 April 2018 sought particulars of the claim for special damages and I was informed that no reply had been received.
Mr Potter's objections are as set out in his written submissions at paragraphs 7 to 9, namely that "not one single fact or matter particularised of any alleged causal connection between publication of material giving rise to the defamatory imputations pleaded and actual loss suffered by the plaintiffs" has been provided (written submissions, paragraph 7). The first defendant complains that the claim as pleaded asks the reader to draw interferences that following the purchase which failed and the latter acceptance of a refused offer that the reason for this was the publication of the matter complained of. Mr Potter submits that there can be no connection between the matters complained of and the imputations pleaded and the drop in price.
Mr Potter relied upon a number of authorities setting out the requirement for precision in relation to claims for special damage, a number of which are set out in my decision in Hanson v Hunter [2015] NSWDC 220.
The claim in Hanson v Hunter was for special damages made by a medical practitioner arising from a complaint to a medical oversight body. In the course of addressing the issue of claims for special damages as pleaded by the medical practitioner, I noted a surprising number of claims for special damages of this nature by members of the medical profession. I note that the subject matter of these proceedings is a claim of a not dissimilar nature in relation to a pharmacy. It is probably not entirely coincidental that so many claims of this kind are brought in relation to damage to medical and pharmaceutical practices, because the manner of record keeping and the importance of reputation is or maybe readily ascertainable from profit and loss figures. It is certainly the case in these proceedings that the loss in question has been determined in a very precise manner.
However, where the loss in question is asserted to have occurred, the requirement for precision has always been the keystone: see Lighthouse Forward Planning Pty Ltd v Queensland Newspapers Pty Ltd [2014] QSC 217 at [42]-[49]. A plaintiff who does not set out particulars correctly the first time is less likely to be granted leave to replead, as is noted in Heugh v Askin [2014] WASC 30 and Pisano v Thrum (No 4) [2011] WASC 290. While all of these claims involved medical practices, that does not mean that there are special rules for medical or pharmacy practices.
In Pisano v Thrum (No 4) Le Miere J at [10]-[13] set out the relevant principles as follows: "[10] Where a plaintiff has suffered financial loss as a result of a publication he is entitled to claim for the loss as special damages. The plaintiff must prove that the defamatory publication is the cause of the financial loss. The defendant submits, in effect, that the plaintiff has not pleaded or established any causative link between the letter and the plaintiff working fewer hours per week. [11] In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457 Chesterman J in the Supreme Court of Queensland said: In any cause of action in respect of which causation is an essential element it is necessary to plead the material facts which are said to give rise to the causal connection. In particular it is necessary to plead the facts which lead to a reasonable inference that the acts complained of … and the alleged later event … stand to each other in the relation of cause and effect. [12] The degree of certainty and particularity with which the special damage must be pleaded will vary from case to case and will depend on the circumstances. In Ratcliffe v Evans [1892] 2 QB 524 Bowen LJ said: In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves will produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be manifest pedantry (532-533). [13] Working fewer hours is not an obvious or logical consequence of the publication of the letter complained of. Paragraph 19 does not plead the facts which lead to a reasonable inference that the publications complained of and the plaintiff working fewer hours stand to each other in the relation of cause and effect. The current plea is nothing more than a bald assertion than the publications caused the plaintiff to work fewer hours. The question for the court is whether [19] is a sufficient plea of special damage in all the circumstances. The court should require as much certainty and particularity as is reasonable having regard to the circumstances and to the nature of the acts by which the damage is alleged to have been done." (Footnotes omitted)
More recently, in relation to a claim for special damages by an actress for loss of movie roles, the Victorian Court of Appeal in Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154. These were proceedings for defamation where a challenge to special damages was raised. As the handing down of this decision was imminent at the time of hearing this application (it was in fact handed down seven days after I heard this argument), I deferred providing reasons for my orders until I could determine whether it was necessary to recall the parties or otherwise revisit my findings.
As the Court points out at [292], the loss of opportunity identified in these proceedings was "a quite specific loss" rather than loss of a generic opportunity. The same is the case here. However, as the Court set out at [334]ff, the basis upon which the orders made at first instance were set aside related to specific issues of fact and errors of approach which are of limited assistance here, particularly as the actual loss claim was abandoned in the course of the hearing (at [343]). This is a claim for actual loss. Consequently, while I am mindful of the helpful discussions of pitfalls in relation to the assessment of special damages, I cannot see that there are any factors in the reasoning of the Court of Appeal which are applicable to the case before me. Decisions such as Bauer Media Pty Ltd v Wilson (No 2), if only by their sheer size in terms of the amount awarded and the dramatic content of the issues involved, tend to distort what should be straightforward and long settled principles of law. Whether the matters complained of, individually or collectively, led to the special damages pleaded as occurring will be a disputed issue of fact for the trial. Issues of this nature are particularly unsuited to summary disposal by reason of the inclusion of disputed issues of fact.
There is one issue concerning which the decision in Bauer Media Pty Ltd v Wilson (No 2) may be of relevance, namely its reference to Andrews damages (Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225).
However, while the comments of the court at [336]ff concerning Andrews damages are of assistance in relation to the portion of the plaintiff's pleading in these proceedings, the bases upon which Ms Wilson's claim for special damages is very different to that which is pleaded in these proceedings in that it was essentially a case of lost opportunity of uncertain parameters, whereas the loss pleaded here is very definite.

The plaintiff's arguments

Ms Chrysanthou submits that while UCPR r 15.1 requires pleading all necessary particulars, there is no special rule that claims for special damages needed to be pleaded with greater particularity than is otherwise the case. In the earlier decision of Ratcliffe v Evans [1892] 2 QB 524 at 533 Bowen LJ considered it was not necessary for a plaintiff suing for special damages to identify and prove the publication that had an impact on particular customers to justify a claim for loss profits which he would otherwise have made.
Although both case management and modern business management have changed out of all recognition in the subsequent 120 years, it is worth noting that the publication in question was not dissimilar, in that a local newspaper claimed falsely that a local businessman had ceased his business.
Ms Chrysanthou points to the structure of the claim as being as follows: "17. The particulars of Special Damages to paragraph 9 of the SOC are: a. Prior to publication of the second matter complained of, the company received from, and accepted, a written offer from Diana Hanna and Michael Ibrahim for the business of $2.9 million plus stock on or around 21 October 2016. b. That offer was withdrawn by the purchasers on or around 24 October 2016, two days before the publication of the second matter complained of. c. A subsequent contract was entered into on or around 24 November 2016 with another purchaser who defaulted in or around March 2017. That breach of contract is the subject of New South Wales Supreme Court proceedings (2017/00125871). The purchasers who made the initial offer, Ms Hanna and Mr Ibrahim, subsequently purchased the business for $2.38 million plus stock in April 2017. Settlement of that sale occurred in June 2017. d. Depending on the result of the court proceeding (2017/00125871) which is in currently in process, the special damages claim for loss cause by the first defendant is between $180,000 to $530,000. e. Further, the second defendant suffered a downturn in review immediately after the publication of the second matter complained of, namely a reduction of 9% script volume (approximately $11,174 gross profit) compared to the same period the year before, which is a key pharmacy profit indicator."
This careful summary of the facts and matters set out in the pleading is not challenged as to detail but rather as to causation. Ms Chrysanthou's answer to this is that the question of causation must be determined upon the issues of disputed fact at the trial.

Consideration of the competing arguments

In addition to compensation for injury to reputation and personal feelings, a plaintiff may be entitled to recover special damages where these have been pleaded and proved. Professor R. E. Brown, "Brown on Defamation (Canada, United Kingdom, Australia, New Zealand, United States), Second Edition (formerly The Law of Defamation in Canada)" (Thomson Reuters, Canada) at 25.3 adds that, "[i]t is possible that proof relevant to special damages may be admissible also for the purpose of supporting general damages, although the distinction should be pointed out to the jury", citing Hutley JA in Andrews v John Fairfax & Sons Ltd. Another form of Andrews damages is a claim for general downturn of an unspecified and unquantified kind, which forms part of the general damages. This forms part of the general presumption of damage to reputation following publication of the matter complained of (Bristow v Adams [2012] NSWCA 166).
It used to be said that "significant awards for special damages in defamation cases are the exception rather than the rule" (Hodgson v. Canadian Newspapers Co. (2000), 49 O.R. (3D) 161 (ONT. C.A.) at 164 per Sharpe JA). As the recent awards in Wilson v Bauer Media Pty Ltd [2017] VSC 521 (overturned on appeal: Bauer Media Pty Ltd v Wilson (No 2)) and Rayney v Western Australia (No 9) [2017] WASC 367 demonstrate, that is no longer the case. That is all the more reason for caution.
The principles may generally be stated as follows: 1. Only special damages which flow naturally and directly from the wrongful act may be claimed: Ratcliffe v Evans at 530; 2. There must be a showing of a causal relationship in the form of a reasonable relations and satisfactory link to the wrong permitted by the defendant; 3. The damage must be foreseeable and the natural and proximate consequence of the wrongful act; 4. The claim must be supported by evidence, which is generally of an expert nature; 5. The defamatory publication does not have to be "the" cause of the injury to the plaintiff's reputation. It is enough if it is "a" cause of the injury and the consequences that flow from it (Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 per Kirby J). It must, however, be a substantial factor in bringing about the harm (Selecta Homes & Building Co Pty Ltd v Advertiser-News Weekend Publishing Co Pty Ltd (2001) 79 SASR 451); 6. The special damages may include not only actual financial or material loss but a general falling of business and/or trade, loss of custom or goodwill, prospective work and the like. Loss earning capacity is a common claim: see Chakravarti v Advertiser Newspapers Ltd; Wilson v Bauer Media Pty Ltd; and Rayney v Western Australia (No 9).
It is significant that the challenge to particularisation is one of causation rather than specificity. Both claims made are costed in a precise fashion, the nature of which is not challenged. The issue is the relationship between the loss and the matters complained of.
Mr Potter submitted that there could be other causes for the loss, such as other publications which are not sued upon, or which are not defamatory, and that the reduction in price was arguably part of the negotiation process generally.
All of these matters are disputed issues of fact for the trial. The case as pleaded is that the plaintiff had an agreement to purchase which broke down after publication of serious imputations as to the reputation of the business, in circumstances where the inadequacies were such that a second pharmacy was likely to be opened in the small town where the second plaintiff's business had previously enjoyed a monopoly.
To require greater specificity than that which is already set out in the pleadings and particulars, as enlarged upon by Ms Chrysanthou's submissions, is to amount to a counsel of perfection which is not required on the factual situation as pleaded and particularised here. I am conscious of there being a number of other decisions where particulars of special damages have been found to be wanting.
Each of these cases, however, turns upon its own facts. In the present case, the particulars of damages are clear and concise, and the first defendant's application to strike out those particulars on a summary basis cannot be made out.

Costs

The plaintiffs have been successful in resisting the orders sought by the first defendant, and costs should follow the event.

Orders 1. First defendant's application to strike out the particulars of special damages and the Andrews claim is dismissed. 2. First defendant to pay plaintiffs' costs of the application. 3. Gibson DCJ to provide reasons for decision on a later date. 4. First defendant granted leave to file and serve an Amended Defence on or before 14 June 2018. 5. First defendant to pay the plaintiffs' costs thrown away occasioned by the Amended Defence. 6. Time for the parties to attempt to agree on categories of documents and interrogatories, be extended to on or before 6 July 2018. 7. Pursuant to r 31.19 Uniform Civil Procedure Rules 2005 (NSW) the plaintiffs to serve an expert report of an expert valuer in connection with the special damages claim on or before 2 August 2018. 8. Matter stood over to the Defamation List on Thursday 16 August 2018 for further directions.

Cao v Horan (Annexure A) (1.49 MB, pdf) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 October 2018

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