DOAN & ANOR v ADVANCED MICRODEVICES & ORS

APD INTERNATIONAL PTY LTD (ACN 060 392 556) (Second plaintiff)

v PARTIES : ADVANCED MICRO DEVICES INC (First defendant)

PENTON MEDIA AUSTRALIA PTY LTD (ACN 095 358 802) (Second defendant)

PAUL BROWN (Third defendant) FILE NUMBER(S) : SC 20431 OF 2002 T Molomby SC (Plaintiffs)

C Henderson (First defendant) COUNSEL : G Hryce (Second defendant)

T Blackburn (Third defendant) Verekers (Plaintiffs)

Tress Cocks & Maddox (First defendant) SOLICITORS : Corrs Chambers Westgarth (Second defendant)

Minter Ellinson (Third defendant)

[2003] NSWSC 560 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

APD INTERNATIONAL Pty Ltd (acn 060 392 556) (S econd plaintiff)

ADVANCED MICRO DEVICES INC (First defendant)

PENTON MEDIA AUSTRALIA PTY LTD (ACN 095 358 802) (Second defendant)

JUDGMENT (Publication - republication - particulars - imputations of a corporation - capacity - difference in substance) 1 The plaintiffs sue in respect of two publications. The first was on or about 6 May 2002; the text is appended to these reasons as Appendix A. The second publication complained of is said to have been published on 3 May 2002; its text is Appendix B. 2 In relation to the first matter complained of the following particulars of publication are provided: 8 Particulars of Publication by the First Defendant The publication of the first matter complained of by the Second Defendant was authorised or intended by the First Defendant, or was the natural and probable result of the First Defendant through its employee John Girvan or otherwise, or through the Third Defendant and/or its solicitors Baker and McKenzie, giving to the Second Defendant the information which appears in lines 2 to 22 and 26 to 54 of the first matter complained of. Particulars of Publication by the Second Defendant The first matter complained of was published by the Second Defendant as an article entitled "$3 million marketing scam exposed", accompanied by a large colour photograph of the First Plaintiff carrying the caption "APD MD Ngat Doan", on pages 5, 7 and 59 of the issue of "CRN Australia" dated 6 May 2002. The Plaintiffs do not know, but expect to establish from discovery or interrogatories, the distribution and readership of "CRN Australia". Particulars of Publication by the Third Defendant The publication of the first matter complained of by the Second Defendant was authorised or intended by the Third Defendant, or was the natural and probable result of the Third Defendant giving to the Second Defendant the information which appears in lines 2 to 22 and 26 to 54 of the first matter complained of.

3 Notices of objection under SCR Pt 67 r 12A were delivered by each defendant. The principal arguments were advanced by Mr Blackburn of counsel for the third defendant and were adopted by the representatives of the other defendants. One of the points taken by Mr Blackburn was the insufficiency of the particulars in relation to the asserted republication. The point was taken, and in my view validly so, that the particulars were deficient in failing to clarify to the respective defendants the assertion of "authorised" or "intended". Similarly, no particulars were provided of the case to be made by the plaintiffs that publication "was the natural and probable result" of the particular defendant's conduct. 4 In response, the plaintiffs candidly stated that the particulars in the pleading are the best that can be given at this stage. The publications contain information, it is said, which in can be inferred comes from within the first defendant's camp. The publications were analysed and, on the basis of inference, parts can specifically be attributed to an employee of the first defendant. Another part attributed to the third defendant who, it is said, may be inferred to have been acting on behalf of the first defendant. It is thus argued that the publications reveal that both the first and third defendants were the direct source for part of the publications. It strongly can be inferred, therefore, that they were also sources for other information in the publications which appears to have come from within the first defendant's camp. The plaintiffs have no means of determining between them. It is also possible, the plaintiffs contend, that the first defendant, being willing to assist in the publications, as demonstrated by the contributions of its employee and of the third defendant, provided information through other sources, though at present the plaintiffs do not know. 5 Whilst the plaintiffs intend, before the s7A trial, to seek orders for discovery and interrogatories limited to the issue of publication, at present the best that can be said, and this is incorporated in the particulars appended to the pleading, is that the case for republication or the role of the other defendants is founded upon inference rationally capable of being drawn from such facts as are available from the matters complained of themselves. 6 It will, nonetheless, be necessary for the relevant defendants to know with clarity the facts, matters and circumstances upon which the plaintiffs rely as founding a rational inference that can be drawn to establish that such defendants were publishers or were liable for republication. Any distinction, for the purposes of the s7A trial, between the role of the defendants as liable for the original publications or as liable for the original publications by reason of "republication", will have to be considered in the light of my judgment in Griffith v Australian Broadcasting Corporation [2003] NSWSC 298, 9 April 2003, at para [23]. 7 A second matter that was sought to be raised by the third defendant related to the particulars of aggravated damages. No notice was given and that matter has been placed in abeyance. 8 Further, a matter was raised by the first defendant in relation to the particulars provided in support of the allegation in paragraph 15 of the statement of claim being particulars of "special damage". Further particulars of that have been provided by the plaintiff in paragraph 12 of their response to the objections. 9 In relation to each of the matters complained of the following imputations are pleaded of the first and second plaintiffs respectively: 9(a) that for the company of which he was Managing Director, APD International Pty Ltd, he had obtained by deception a benefit of more than $3 million; (b) that he had created false invoices in order to defraud American Micro Devices Inc; (c) that he had created false purchase orders in order to defraud American Micro Devices Inc; (d) that he had been involved in deceptive conduct involving microprocessor remarking. 10(a) that it had obtained by deception a benefit of more than $3 million; (b) that it had created false invoices in order to defraud American Micro Devices Inc; (c) that it had created false purchase orders in order to defraud American Micro Devices Inc; (d) that it had that it had been involved in deceptive conduct involving microprocessor remarking. 10 Before turning to the substantive submissions made by Mr Blackburn for the third defendant which were adopted by the first and second defendants, it is appropriate to deal with two matters that were raised by Mr Hryce for the second defendant. 11 The major objection taken on behalf of the second defendant relates to the imputations of the first plaintiff (Mr Doan). It was argued for the second defendant that none of those imputations is capable of arising. Whilst acknowledging that published material may make allegations against a company, and could be understood also to be defaming officers of that company and people associated with it, whether that can apply is of course dependent upon the nature of the publication and its contents and the nature of the imputations pleaded and the status of the relevant person. 12 It was argued that imputations 9(a), (b), and (c) allege that Mr Doan himself committed the acts encapsulated in the imputations, but those acts, on a fair reading of the matter complained of, were attributed to the company. Imputation 9(d) of the first plaintiff is pitched very high. All are imputations of guilt; none is an imputation of suspicion. It is contended that nowhere in either article is the commission of the respective acts attributed to Mr Doan himself. It would be understood that the allegations are made against the company and only against the company. The more so is this the case, it is contended, not only by reason of the assertion of guilt in terms of commission of the acts but by reason of the articles containing statements of ignorance, if not denials, by Mr Doan himself. 13 On a capacity basis I am not persuaded by these submissions. A plaintiff always is in peril of the consequences of having pleaded imputations which can be characterised as "too high", that is, imputations of guilt as opposed to imputations of suspicion. Once the capacity barrier has been passed, that price is to be determined by a jury and I think that should be the case here. Further, the mere inclusion of denials or statements of ignorance on the part of the person or plaintiff would be insufficient, on reading these complex articles, to hold as a matter of law that the imputations are incapable of being carried. Another matter that stands in the way of the success of the discrete submission made for the second defendant is the statement set out at lines 54 and 55 of Appendix A and lines 55 and 56 of Appendix B where express reference is made to allegations being put to the plaintiff that "he and his company had been involved in …". 14 The second point made by Mr Hryce, on a strictly technical basis, could warrant a finding that the matter complained of is incapable of carrying the pleaded imputations in their natural and ordinary meaning. Imputations 9(b) and (c) contain the words "American Micro Devices Inc". Nowhere in either matter complained of do these words appear. No doubt that is the full name for the entity which is described as "AMD". I am not prepared to find in favour of the second defendant on this basis. It is clearly a matter, as Mr Hryce acknowledged, for amendment. The plaintiffs will have to amend the imputations to include the abbreviation or take the step of pleading a true innuendo if such is to be required. The former course I would have thought would be the more attractive. 15 I turn now to the principal submissions made by the third defendant and adopted by the other defendants. All questions of law relating to capacity were, by consent, to be determined pursuant to SCR Pt 31 r 2. 16 The point first made in relation to capacity was that the matters complained of are incapable of conveying any of the imputations of the first plaintiff. These I have dealt with above. I decline to find that the matters complained of are incapable of carrying the pleaded imputations of the first plaintiff. 17 It was next contended that imputations 9(a), (b) and (c) contravene SCR Pt 67 r 11(3) in that they do not differ in substance. Fundamental to this submission is what the ordinary reasonable reader of each article would understand to be the thrust and principal theme of each publication as the "$3 million marketing scam…" That is, the emphasis is on one scam. The "scam" might have had several components but imputations (b) and (c) do no more than specify the manner in which the "scam" was carried out. It is submitted that such imputations add nothing to the sting encapsulated in imputation 9(a). 18 Further, imputations 9(b) and (c) as a matter of substance do not differ each from the other. Whilst 9(b) refers to "false invoices" and 9(c) refers to "false purchase orders", it is contended that the substantive allegation is precisely the same in each case, namely that the first plaintiff created false documentation in order to defraud the first defendant. 19 If it be the case that imputations 9(b) and (c) do not between themselves differ in substance then each should be struck out leaving imputation 9(a). To put it another way, if imputation 9(a), as the defendants submit, encapsulates everything that is sought to be separately pleaded in 9(b) and (c), then the rule has been contravened. 20 When one considers the terminology of each of the imputations it is, in my view, unarguably clear that as a matter of language each is different in substance. Imputation 9(a), the more general, refers to the obtaining by deception of a benefit of more than $3 million; 9(b), the creation of false invoices to defraud; 9(c), the creation of false purchase orders to defraud. However the defendants argue that by reference to context (and in my view this is not an illegitimate approach on a difference in substance point) as outlined above, namely that the overriding "scam" is that which had netted $3 million. Nothing further is added by 9(b) and (c). 21 A concession was made by Mr Molomby SC for the plaintiffs that the imputations have a similar "defamatory impact". That of course is not the same as failing to differ in substance. As I have remarked, each imputation alleges a different "discreditable" act as Mr Molomby described it. Indeed each arises from a different section of the matter complained of. They are independent; a justification could succeed in relation to one but not another. 22 Imputation 9(b) relates to false invoices for media advertising to obtain marketing rebates. It must be acknowledged, on the other hand, that the imputation does not say that. I understand this proposition to be advanced in the context of, at least, what the defendants have to justify. Be that as it may, there is an abundance of material in schedules A and B that can be allocated to the proposition contained in imputation 9(b). 23 Similarly, imputation 9(c) relates to what is said to be a separate part of the publication which introduces the notion of "false purchase orders" and this is in respect of an entity known as "Express Data" (see lines 51-52 in schedule A, for example). 24 Mr Molomby argues that the defendants are in effect creating a paradox of which they might be the victims. If the plaintiffs, for reasons that cannot objectively be known to anyone reading a statement of claim, pleads only imputation 9(b) by reason of the plaintiffs' belief in the truth of 9(a) and (c), the defendants, on their submissions, cannot rely on the truth of (a) and (c) as contextual to (b) because of it being the same in substance. They would be relying on the truth of (c) about false purchase orders to prove the truth about an imputation about a marketing scam based on different false documentation, so the plaintiffs' argument runs. If the defendants' submissions are correct, they would not have available to them the defence of contextual truth in relation to (a) and (c). This might be an endless paradox. Insofar as the defendants could respond "well, that is the point", that is the very point that they are making - that they would be embarrassed by having to confront, in terms of truth, three identical substantial propositions, each of which might be proved by the same material. 25 Whilst I appreciate the submission made, as it is usually made, by referring to what would have to be proved by reference to the 22-year-old decision of Hunt J in Jackson v John Fairfax and Sons Ltd [1981] 1 NSWLR 36 at 41, in this instance by reference both to the language of the imputations which in my view bespeaks of difference in substance and by reference to context, namely that which was published, the plaintiffs must succeed on this aspect. 26 The final point taken by the defendants relates to imputation 9(d) (by way of example) and the use of the word "involved" and by reference to the 13-year-old decision of Hunt J in Armitage v Double Bay Newspapers Pty Ltd (NSWSC, unreported, 26 September 1991) and the embarrassment its vagueness, in strict terms, can cause. This point has been conceded by the plaintiffs. The plaintiffs accept that the imputation should be more specific as to the element of "involved in" and propose to amend the imputation to include the words "that he knowingly engaged in deceptive conduct through microprocessor remarking". 27 The plaintiffs have succeeded overall. 28 The formal orders are:

1. The plaintiffs within 14 days are to file an amended statement of claim in accordance only with these reasons.
2. The defendants are to pay the plaintiffs' costs.
3. I place the matter in the Registrar's Defamation Directions List on 11 July 2003.

APPENDIX A [photograph of Ngat Doan with caption "APD MD Ngat Doan"] $3 MILLION MARKETING SCAM EXPOSED A three-month investigation by CRN and a team of lawyers, audit specialists and international investigators has uncovered a multi million dollar channel racket in the IT channel. Chipmaker AMD was the victim of a marketing rebate scam involving Australian component distributor APD International. Investigators working with a legal firm Baker McKenzie have prepared documents which indicate that, over a period of several years, APD International had been obtaining a benefit by deception in that invoices obtained form media companies and elsewhere were falsified for the purposes of obtaining marketing rebates from AMD. The scam is understood to have netted more than $3 million. The NSW Commercial Crime Agency (CCA) is believed to be about to investigate APD. Among the documents which have been handed over to CCA are several sworn statements and more than 100 false invoices. Baker McKenzie investigators, including former Federal Police officers, are also making inquiries into a Sydney based media company and advertising agency linked with several IT vendors. The investigation was prompted after auditors for AMD in the US and Singapore became suspicious of media rebate claims being made by APD International. An investigation across three continents discovered hundreds of false claims for media advertising. In many cases original invoices issued by IT media companies had been overstated by as much as 300 percent for the purpose of claiming inflated vendor rebates. APD managing director Ngat Doan is described in ASIC documents as being both a director and company secretary of APD International, which is based in Silverwater, NSW. Doan, a Vietnamese national, was first listed as a director of APD International in 1996. John Girvan, director of internal audits and control for AMD in the US, said that his company initiated the investigation last year following queries of invoices supplied by APD International. "AMD became suspicious when irregularities were noticed in invoices supplied by APD to AMD. "We flew an audit team to Australia and what we discovered was major irregularities. We subsequently put together an investigation team spanning Asia and Australia. Evidence was collected indicating that APD had been obtaining a benefit through the deception of AMD". Paul Brown, a partner in the international legal practice at Baker McKenzie, has been heading the legal side of the investigation. He said " We have been investigating APD International and related companies for several months. We have collected hundreds of invoices that indicate to us that APD has been involved in systematic deception." CRN is aware that AMD has been presented with false invoices for marketing rebates. The invoices presented to AMD were not original invoices and had media organisation mastheads "cut and pasted" onto them. In each of these instances, the original invoice figure had been changed to a higher amount than had first been invoiced. CRN has in its possession copies of 43 false invoices. Of 29 of those invoices, the originally billed amount for media placements was $17,900. APD International changed the invoices and presented them to AMD as being copies of original invoices totalling $110,315. Several other invoices in CRN's possession show that original amounts have been exaggerated by as much as 300 percent. In one case, the original media invoice for $1900 has been presented as $4500. In another case, an amount of $2900 has been changed to $6000 for a single page of advertising. "We are currently investigating several organisations, including marketing companies, media buying companies and advertising agencies", said Brown. Investigators have questioned distributor Express Data over APD making up allegedly false purchase orders for products from Express Data. The purchase orders - ostensibly for products to be used in bundling deals with AMD processors - would then be shown to AMD and APD would claim a rebate from AMD. When CRN put the allegations to Ngat Doan that he and his company had been involved in the falsification of marketing rebate invoices, he said: "I know of no such allegations: You need to ask AMD about this". "We have not been involved in any problems associated with marketing rebates or any other claims", he said. Express Data managing director Ross Cochrane said the distributor was recently approached by a legal firm representing AMD and was shown documents that appeared to be false. "These documents were for the purchase of products from Express Data", he said. In May 2000, CRN revealed that Perth-based distributor Direct Memory Access (DMA) had received shipments from APD containing 170 Athlon processors that had been remarked. Microprocessor re-marking is a process by which a supplier tampers with a chip's casing and inner workings to over-clock the processor and them labels it as a chip with a higher clock speed than the manufacturer intended. AMD AND APD: THE BACKGROUND APD International was terminated as an AMD distributor late last month. Prior to its termination, APD managing director Ngat Doan claimed the company was responsible for 70-80 percent of AMD's distribution in Australia. The distributor was distributing a minimum of 15,000-20,000 AMD pieces per month, according to Doan. Late last month Doan said he had been planning for the event [APD's termination notice] for the past three months. He said that although he was no longer doing business with AMD his business would be "stronger than ever". "My hand is free, I don't have to be controlled by anybody who can tell me what product to sell", he said. Doan said he had money and "things to do on my hand now". He said that he now had a choice of products to choose from and his hands were no longer tied. "Now I can do it my way, control [the business] on my hand, not other people…I knew this was going to happen", he said. He said that AMD and his company had different ideas about marketing the chip manufacturer's products in Australia. Doan also claimed APD International had been spending $40,000-$50,000 per month promoting AMD products in the Australia-New Zealand market. APD was targeting revenues in excess of $100 million in the local market for its year ending June 30, 2002. Ngat Doan, 49, started Beam Computers in the early 1980's, originally as a distributor for Acer Computer. He had arrived in Australia in 1975 and holds a degree in electrical engineering from the Queensland University of Technology. Less than two years before starting his degree in the late 1970's, Doan worked as a storeman and packer during the day, while he learnt to speak English at night. APPENDIX B MARKETING REBATE RORT EXPOSED by David Richards, iTnews Friday, 3 May 2002 A three-month investigation by CRN Australia and a team of lawyers, audit specialists and international investigators has uncovered a multi million dollar marketing rebate racket in the IT channel. Chipmaker AMD was the victim of a marketing rebate scam involving Australian component distributor APD International. Investigators working with a legal firm Baker McKenzie have prepared documents which indicate that, over a period of several years, APD International had been obtaining a benefit by deception in that invoices obtained form media companies and elsewhere were falsified for the purposes of obtaining marketing rebates from AMD. The scam is understood to have netted more than $3 million. The NSW Commercial Crime Agency (CCA) is believed to be about to investigate APD. Among the documents which have been handed over to CCA are several sworn statements and more than 100 false invoices. Baker McKenzie investigators, including former Federal Police officers, are also making inquiries into a Sydney based media company and advertising agency linked with several IT vendors. The investigation was prompted after auditors for AMD in the US and Singapore became suspicious of media rebate claims being made by APD International. An investigation across three continents discovered hundreds of false claims for media advertising. In many cases original invoices issued by IT media companies had been overstated by as much as 300 percent for the purpose of claiming inflated vendor rebates. APD managing director Ngat Doan is described in ASIC documents as being both a director and company secretary of APD International, which is based in Silverwater, NSW. Doan, a Vietnamese national, was first listed as a director of APD International in 1996. John Girvan, director of internal audits and control for AMD in the US, said that his company initiated the investigation last year following queries of invoices supplied by APD International. "AMD became suspicious when irregularities were noticed in invoices supplied by APD to AMD. "We flew an audit team to Australia and what we discovered was major irregularities. We subsequently put together an investigation team spanning Asia and Australia. Evidence was collected indicating that APD had been obtaining a benefit through the deception of AMD". Paul Brown, a partner in Baker McKenzie's international legal practice has been heading the legal side of the investigation team. He said " We have been investigating APD International and related companies for several months. We have collected hundreds of invoices that indicate to us that APD has been involved in systematic deception." CRN is aware that AMD has been presented with false invoices for marketing rebates. The invoices presented to AMD were not original invoices and had media organisation mastheads "cut and pasted" onto them. In all cases, the original invoice totals figure had been changed to a higher amount than first invoiced. CRN has in its possession copies of 43 false invoices. Of 29 of those invoices, the originally billed amount for media placements totalled $17,900. APD International changed the invoices and presented them to AMD as being copies of original invoices totalling $110,315. Several other invoices in CRN's possession show that original amounts had been increased by as much as 300 percent. In one case, the original media invoice for $1900 has been presented as $4500. In another case, an amount of $2900 has been changed to $6000 for a single page of advertising. "We are currently investigating several organisations, including marketing companies, media buying companies and advertising agencies", said Brown. Investigators have questioned distributor Express Data over APD making up allegedly false purchase orders for products from Express Data. The purchase orders - ostensibly for products to be used in bundling deals with AMD processors - would then be shown to AMD and APD would claim a rebate from AMD. When CRN put to Ngat Doan allegations that he and his company had been involved in the falsification of marketing rebate invoices, he said: "I know of no such allegations: You need to ask AMD about this". "We have not been involved in any problems associated with marketing rebates or any other claims", he added. Express Data managing director Ross Cochrane said the distributor was recently approached by a legal firm representing AMD and was shown documents that appeared to be false. "These documents were for the purchase of products from Express Data", he said. In May 2000, CRN revealed that Perth-based distributor Direct Memory Access (DMA) had received shipments from APD containing 170 Athlon processors that had been remarked. Microprocessor re-marking is a process by which a supplier tampers with a chip's casing and inner workings to over-clock the processor and them labels it as a chip with a higher clock speed than the manufacturer intended. The distributor quarantined 100 of the re-marked, over-clocked chips while recalling 50 back from customers. Around 20 were still not accounted for. At the time, DMA webmaster Jai Ketteridge said the company purchased the re-marked units from APD International. Ketteridge said that it was likely that the re-marked units were shipped from one of APD's suppliers, without APD knowing that the products had been remarked. However, AMD's John Robinson said at the time: "This would not be the case. Processors like those found by DMA would not have been shipped out of an AMD manufacturing plant." Ketteridge said the casing on some of the 170 re-marked Athlon processors had been repainted, which is an obvious sign of re-marking. Resistors on chip PCBs had been tampered with, upping the CPU speed multiplier, while some chips had also the CPU voltage changed via resistors on the main logic board. "They'll solder a few things, put on a few labels and make 700MHz chip out of a 500MHz," said Ketteridge at the time. Tampering with a chip unit can also affect performance. The chip will appear to run normally, but components are working harder and the failure rate of the chip increases, said Ketteridge. "It has financially hurt us and our resellers. It also has the potential to harm AMD's reputation," he said. When contacted by CRN in May 2000, APD's Ngat Doan declined to confirm that APD had received a shipment of re-marked chips. "I have to leave it to AMD [to sort out]," he said. "I ask you not to put information in your magazine, I would appreciate that," he said.

Last Modified: 06/26/2003 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.