Craftsman Homes Aust P/L & Ors v TCN Channel Nine P/L & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

20085/02 - CRAFTSMAN HOMES AUSTRALIA PTY LIMITED & ORS v TCN CHANNEL NINE PTY LIMITED & ORS

JUDGMENT 1 KIRBY J: Mr Fred Cox is a builder. In 1982 he established a business in northern New South Wales, operating through a company, Ilvariy Pty Limited trading as Craftsman Homes. One gathers that the business was successful. In 1995, Mr Cox employed Mr Shipway to set up a franchise, operating through a company, Craftsman Homes Australia Pty Limited, as franchisor. By 2002, thirty-eight franchises had been established in Australia and New Zealand, each using the Craftsman Homes name and logo. 2 Once the franchise network had been established, Mr Cox traded under the name of Craftsman Homes Northern Rivers when carrying out building work. Other franchisees added the location of their franchise to the Craftsman Homes name. There was, for instance, Craftsman Homes Grafton, and Craftsman Homes Tweed Heads.

The Programmes 3 On 26 February 2002, Channel 9 concluded its programme, "A Current Affair", with what was referred to as "a promo", that is, an advertisement or trailer for the programme on the following evening. The promo included images and excerpts from the material which then appeared at greater length in A Current Affair on 27 February 2002. The promo opened with the following words, spoken by the presenter, Mr Mike Munro: "Well he's an award winning builder but you certainly wouldn't know it looking at some of his work tomorrow night we investigate some [of] his shoddy practices which have left home owners high and dry." 4 The promo then included short passages from the interviews with dissatisfied customers of Craftsman Homes Northern Rivers. The business was not identified by name. Nor was Mr Cox. There was, however, an image of the Craftsman Homes factory at Alstonville and footage of Mr Cox himself. Mr Cox was shown walking away from an interviewer, declining to answer his questions. 5 The programme the following evening began with these introductory words from the presenter: "1. ( Mike Munro) Now to a builder who's won several awards during his twenty years in the business. But all that is cold comfort to some of his latest customers because they claim that he has left them with their dream homes that are riddled with faults and it can take years to get commitments to fix them." 6 The reporter, Mr Fordham, was then shown attempting to interview Mr Cox. The programme included the following exchange: "2. Ben Fordham: Are you signing up new business in Sydney? 3. Fred Cox: Am I? 4. Ben Fordham: Mmmm 5. Fred Cox: Why? 6. Ben Fordham: Well you've left a trail of devastation on the North Coast of New South Wales. 7. Fred Cox: I don't think I have, I've got nothing to say to you. 8. Ben Fordham: Are you proud of the houses you build? 9. Fred Cox: Yep. 10. Ben Fordham: All of them? 11. Fred Cox: Yep. 12. Ben Fordham: Fred Cox may be proud of his handiwork but some of his customers are far from satisfied." 7 There followed interviews with dissatisfied customers, including the following: "13. Wayne Moss: What is behind us here is nothing more than a litany of errors and mistakes that no self respecting trades person would ever do. 14. Noel Allan: In all I think we've had over 100 complaints I mean we can't list them all here with you. 15. Gloria Vimpany: I've nearly had a nervous breakdown over the bricks cause it was a great disappointment this was the last home we're going to build and we really want to get it right. 16. Ben Fordham: But according to Gloria and Ian Vimpany Craftsman Homes Northern Rivers made obvious mistakes.

For starters they say the brick work was supposed to be this colour but many were laid the wrong way around." 8 The programme concluded with these words: "51. Ben Fordham: The allegations we've put to Craftsman Homes Northern Rivers have all been rejected but Fred Cox refuses to give any further comment on camera despite our offers. Meanwhile Wayne Moss has this message for the builder he once trusted: 52. Wayne Moss: Fred you know um the system very well you were right it did take two years, you could keep us off the job for two years but we will eventually get this house built. 53. Mike Munro: Ben Fordham with that investigation. We want to make it clear that Fred Cox runs only the Craftsman Homes Northern Rivers franchise in New South Wales. We are certainly not casting doubt on any other Craftsman Homes franchises."

Hearing before Levine J 9 The Statement of Claim, when first issued, named three plaintiffs: · Craftsman Homes Australia Pty Limited (first plaintiff) · Invariy Pty Limited t/as Craftsman Homes Northern Rivers ... (second plaintiff) · Frederick Robert Cox (third plaintiff) 10 There were nine defendants. Each plaintiff complained about the promo and the programme. Each relied upon the same imputations. I will return to the imputations shortly. 11 In the hearing before Levine J in June 2002 ([2002] NSWSC 555), the defendants made a number of complaints. They included that the programmes, and especially the actual segment (which repeatedly referred to Craftsman Homes Northern Rivers), were incapable of identifying the franchisor, Craftsman Homes Australia Pty Limited (the first plaintiff) (hereinafter "Craftsman Homes Australia"). Levine J declined to deal with that issue at that stage. He said this: "12. The second objection more particularly relevant to the second program is that it is incapable of identifying, that is being found to be published of and concerning the first plaintiff. The defendants seek to have the action dismissed against the first plaintiff. I am not prepared to take that course at this stage nor to rule that the second matter complained of is capable of being held to be published of and concerning the first plaintiff. The matter complained of on two occasions shows the logo of Craftsman Homes; at the point referred to as paragraph 16 and at the point referred to as paragraph 51. Further, the opening line of Mr Munro about "a builder who's won several awards during his twenty years in the business" could be available for the embracing of the first plaintiff by any defamatory imputation given the fact that Mr Cox is said to be the Managing Director of both the first and second plaintiffs. Further, what is described as the "disclaimer" as Mr Shand QC argued, does not embrace the first plaintiff (of which the third plaintiff is the Managing Director) but rather other franchise holders."

The Further Amended Statement of Claim 12 On 23 August 2002, the plaintiff issued a Further Amended Statement of Claim. There were three defendants, rather than nine (Channel 9, Mr Munro and the reporter, Mr Ben Fordham). Again, all three plaintiffs relied upon the same imputations. In respect of the promo, the imputations were as follows: (para 6) "(a) That the Plaintiffs were guilty of shoddy building practices. (b) That the Plaintiffs were incompetent as building contractors. (c) That the Plaintiffs were unfit to be allowed to remain in the business of building residential houses." 13 In respect of the programme, the imputations against all plaintiffs were pleaded in these terms: (para 8) "(a) That the Plaintiffs construct homes that are riddled with faults. (b) That the Plaintiffs are not competent in the business of building residential homes. (c) That the Plaintiffs unjustifiably ignored reasonable complaints by clients about poor construction work. (d) That the Plaintiffs were guilty of disgraceful conduct and work in relation to the construction of a house for Wayne Moss and Jaclyn Burrows-Moss. (e) That the Plaintiffs were guilty of fraudulently overcharging clients."

The Hearing 14 The action commenced as a s7A trial on 25 February 2003. Three witnesses were called by the plaintiff on the issue of identification. Two, Mrs McGuiness and Mrs Cole, were the wives of builders who held Craftsman Homes franchises. The other witness, Mr Shipway, was the person who had set up the franchise network for Mr Cox. Each knew Mr Cox. Each understood the nature of the franchise operation. Each gave evidence which established, or was capable of establishing, the following extrinsic facts: · First, that Craftsman Homes Australia was concerned with franchising. It was not engaged in building work. · Secondly, that Craftsman Homes Australia operated from the same premises as Craftsman Homes Northern Rivers, being a factory at Alstonville. The factory was shown, and recognised, in the promo and the programme. Mr Cox and his wife were the shareholders of Craftsman Homes Australia. Mr Cox was its manager. · Thirdly, that the services provided by the franchisor to each franchisee included the name "Craftsman Homes", the logo, a design service which they could use if they wished, access to 150 to 200 home designs, advertising on behalf of the group, and an information service on occupational health and safety and other issues. 15 Mrs McGuiness did not see the promo. She saw the programme. She said this, referring to Mr Cox: (T61/62) "Q. Craftsman Homes Australia is the company he used for his franchise operation? A. That's right. Q. You were aware at the time of the programme, weren't you, Mrs McGuiness, that Craftsman Homes Australia did not carry on any building activities? A. That's right. Q. So you would agree with me, wouldn't you, that anyone who knew that would think that the references on the programme were to Craftsman Homes Northern Rivers, that is correct isn't it? Not Craftsman Homes Australia? A. Yes." 16 In cross examination, Mrs McGuiness was reminded of Mr Munro's concluding words (set out above) (supra para 8 - 53). She said this: (T63) "Q. It follows that you knew that Mr Munro was saying that it wasn't focussing on Craftsman Homes Australia, the franchise operation, correct? A. Yes." 17 Mrs Lynette Cole saw both the promo and the programme. In chief she said this: (T65) "Q. And when you watched it did you believe it referred to anyone or anybody? A. Just Craftsman Homes, Craftsman Homes, all of us and Craftsman Homes Australia. Just the name Craftsman Homes." 18 Mrs Cole also gave evidence of conversations she had with people who contacted her after the promo and the programme. Arguably those conversations were capable of identifying the whole group, including Craftsman Homes Australia. In cross examination, however, Mrs Cole acknowledged that, by the end of the programme, she knew it was "focussing" upon Craftsman Homes Northern Rivers (T84). She recognised that the work, said to be defective, was done by Mr Cox through his company, Craftsman Homes Northern Rivers. She agreed that, by the end of the programme (as opposed to the promo), it was clear to her that the commentary had been directed at Craftsman Homes Northern Rivers (T85). She added: (T86) "A. No, because I truly believe in my heart that it's us, but because of how it is said, Northern Rivers, I have to say okay, it was Northern Rivers." 19 Mrs Cole, later in her cross examination, agreed that the evidence that she had given the previous day, implicating Craftsman Homes Australia, was untrue (T85). She also said this: (T90) "Q. I have asked you questions about it and what happened in the course of the programme. Just while I am on that, though, you were aware at the end of the programme, weren't you, that it was Craftsman Homes Northern Rivers, the building company, being referred to, not Craftsman Homes Australia?" A. Yes." 20 The remaining identification witness, Mr Shipway, gave the following evidence in chief, in relation to the promo: (T96) "Q. And what was the person or company you believed it referred to? A. Craftsman Homes. Q. When you say Craftsman Homes, what do you man by that? A. Well, Craftsman Homes Australia, Craftsman Homes as an entity." 21 Mr Shipway believed, on the other hand, that the programme referred to Ilvariy Pty Limited, that is, Craftsman Homes Northern Rivers (T97). When cross examined, Mr Shipway said this: (T100/101) "Q. And you knew that Craftsman Homes Australia wasn't, as at 2002, engaging in any building work, didn't you? A. Yes. Q. It follows, doesn't it, that you understood the criticisms being made by Channel 9 in the promo as criticisms of building work being done by Ilvariy and Mr Cox. That's correct, isn't it? A. Yes." 22 Other documentary material was admitted concerning the nature of the franchise, including advertisements lodged in various publications by the franchisor on behalf of franchisees (Exhibit E). I do not believe that such material was capable of establishing "notorious facts" which might then be used as the basis for an identification by viewers of Craftsman Homes Australia (cf Ferrier v Jones & Anor [2003] NSWSC 39, paras 43 to 79).

Application for a Verdict 23 The defendants, in these circumstances, made an application for a verdict against the first plaintiff (Craftsman Homes Australia) in respect of both publications. It should be noted that the first plaintiff also sued in trespass. The application obviously did not relate to that aspect of its claim. 24 Two matters were relied upon by the defendants: · First, there was no evidence capable of identifying the first plaintiff in respect of either publication. · Secondly, that, in any event, the imputations pleaded were incapable of arising. 25 Dealing with the first issue, Mr Garnsey QC, appearing for the plaintiffs, asserted that there was evidence in respect of both programmes which was capable of being understood by persons acquainted with Craftsman Homes Australia as referring to it (Morgan v Odhams Press Ltd [1971] 1 WLR 1239, per Lord Morris at 1252). Mr Garnsey pointed to the following: · First, the witnesses (more clearly in respect of the promo than the programme) were still capable, at the end of cross examination, of being read as identifying Craftsman Homes Australia upon the basis of the words and images published. · Secondly, the images included the Alstonville premises (inscribed with the logo of Craftsman Homes) which the identifying witnesses each recognised. Those premises were used by Mr Cox to run the operation of both Craftsman Homes Northern River and the franchise operation, and each identifying witness was aware of that fact. · Thirdly, the conversations between Mrs Cole and the persons to whom she spoke after the promo and the programme were each capable of being viewed as an identification of Craftsman Homes Australia, as well as other members of the group. · Finally, each witness was aware of the nature of the franchise operation, including the fact that there were a number of franchisees. Depending upon the particular imputations, a programme about a franchise was capable of reflecting upon the franchisor. Counsel gave an illustration. Assuming, hypothetically, an attack upon McDonalds, the food chain, in context, the attack may also hit as a target the franchisor, even though it does not serve food. For instance, if it were imputed that McDonalds "sold crummy food", that would reflect upon the franchisor. 26 In my view, by the end of the cross examination, each witness had acknowledged that he or she did not believe either the promo or the programme referred to Craftsman Homes Australia. Each recognised that both programmes concerned building work performed by Craftsman Homes Northern Rivers. Each knew that Craftsman Homes Australia did not carry out building work. Reading their evidence fairly, and as a whole, I do not believe that it is capable of being regarded as an identification of Craftsman Homes Australia with either programme. 27 Unquestionably, an attack upon a franchisee may reflect adversely upon the franchisor. Here, with real misgivings, especially in the case of the programme (where the identification of Craftsman Homes Northern Rivers was made a number of times), I am prepared to assume that the evidence may be capable of referring to Craftsman Homes Australia in respect of both publications. I reach that view mainly because of the principles relating to group defamation. Arguably, the franchisor, and all 38 franchisees, were identified as a group, explaining why Mrs Cole believed "in (her) heart" that all associated Craftsman Homes had been identified (cf Knupffer v London Express Newspapers Ltd [1944] AC 116, per Viscount Simon LC at 119). Alternatively, the repeated references to Mr Cox, visually in the promo and visually and by name in the programme, in the context of his dual role as the head of Craftsman Homes Australia and Craftsman Homes Northern Rivers, may be just enough (looked at charitably), to get to the jury (cf Abraham v The Advocate Co Limited ([1946] 2 WWR 181 at 185).

The Capacity Argument 28 The touchstone for determining whether an imputation is capable of being conveyed is reasonableness. In Amalgamated Television Services Pty Limited v Marsden (1998) 43 NSWLR 158, Hunt CJ at CL said this: (at 165) "In deciding whether any particular imputation is capable of being conveyed, the question is whether it is reasonably so capable ( Defamation Act, s7A, reflecting the common law: Capital and Counties Bank Ltd v George Henty & Sons (1882) 7 App Cas 741 at 745; Lewis v Daily Telegraph Ltd [1964] AC 234 at 259, 266; Jones v Skelton (at 650; 1065); Farguhar v Bottom (at 385); Mirror Newspapers Ltd v Harrison (1982) 149 CLR 293 at 302), and any strained or forced or utterly unreasonable interpretation must be rejected: Jones v Skelton (at 650; 1065)." 29 His Honour added: (at 166) "What must be emphasised is that it is the test of reasonableness which guides any court in its function of determining whether the matter complained of is capable of conveying any of the imputations pleaded by the plaintiff." 30 Here, the test involves the ordinary reasonable viewer who knows the extrinsic facts from which the plaintiff is identified. So the pool from which ordinary reasonable viewers in this case will be drawn are those who will know, relevantly, that Craftsman Homes Australia does no building work. Such viewers would know that the first plaintiff had not carried out the poor work depicted and described in the promo and the programme. Such viewers must be taken to know (as did each identifying witness) that such work was carried out by the building company with which Mr Cox was associated, Craftsman Homes Northern Rivers. 31 It cannot be reasonable, knowing any of these extrinsic facts, to impute to the first plaintiff that it was guilty of shoddy building practices (imputation 6(a)), or that it was incompetent as a building contractor (imputation 6(b)), or that it is unfit to be allowed to remain in the business of building residential homes (para 6(c)). That was not the business of Craftsman Homes Australia. Nor can it be reasonable to impute the meanings suggested in respect of the programme, that is, that the first plaintiff constructed homes that were riddled with faults (imputation 8(a)), or that the first plaintiff was not competent in the business of building residential homes (imputation 8(b)). Imputations 8(c), (d) and (e), each relate very directly to Craftsman Homes Northern Rivers and Mr Cox. Imputation (c) relates to unjustifiably ignoring reasonable complaints by clients about poor construction work. Imputation (d) suggests that the plaintiff was guilty of disgraceful conduct and work in relation to the construction of a house by Wayne Moss and Jaclyn Burrows-Moss. The final imputation suggests that the plaintiff was guilty of fraudulently overcharging clients. None of these, in my view, can be reasonably taken as relating to the franchisor, Craftsman Homes Australia. They are not, in my view, capable of arising. 32 It is for these reasons I directed a verdict against the first plaintiff in relation to both publications (T204).

Last Modified: 03/10/2003 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.