Eugene Liu v Fairfax Media Publications

Judgment HER HONOUR: 1These are proceedings for defamation arising out of the publication of two articles in the Sydney Morning Herald on 21 October 2009. This judgment determines the defendant's objections to the imputations pleaded by the plaintiff in the amended statement of claim filed on 3 June 2011. 2The subject of the articles is the performance of a hedge fund referred to in the article as Astarra Strategic. The fund is said in the articles to be managed by the plaintiff, Mr Eugene Liu, and his business associate, Mr Shawn Richards. The articles report that the fund performed unusually well during a period of time when many such funds faired less well, namely, during the period of the global financial crisis. 3The first matter complained of cites the fact that the Astarra fund had, at the end of that downturn, up to $1 billion of funds under management. The article continues: "But the dream run may be coming to an end. The corporate regulator has opened an investigation into several funds, including Astarra Strategic, one of the best-performing hedge funds in the Australian market following a clamp down of similar funds by US regulators in the wake of billion dollar fund collapses and the US $50 billion Ponzi scheme run by Bernie Madoff." 4The article identifies some of the matters the subject of the regulator's investigation, described as "red flag issues", and then states: "ASIC yesterday issued an urgent interim order forcing Astarra Managed Funds, an Albury based group with more than $1 billion under management, to remove its product disclosure statements from the website immediately." 5The article then reports: "Yesterday's orders came one week after the regulator filed charges against the managers of the $118 million Strategic Fund Mr Richards and Mr Liu in the equities division (sic) of the (NSW) Supreme Court." 6The second matter complained of goes into greater detail which it is not necessary to record, save to note that the article repeats the reference to ASIC having "filed charges" against Mr Richards and Mr Liu. 7The first objection taken by the defendant is to imputation 4(a) in the amended statement of claim, which is: The plaintiff was the subject of criminal charges filed against him by ASIC in October 2009. 8Objection is also taken to an identical imputation alleged to arise from the second matter complained of, pleaded in paragraph 6(a) of the amended statement of claim. The objection is that neither imputation is capable of being conveyed by either matter complained of, by reason of the choice of the phrase "criminal charges" in each imputation. 9Mr Dawson, who appeared for the defendant, submitted that having regard as the court must to the whole of the matter complained of in each case, the imputation must be considered in the context of the reporting that the fund managed by the plaintiff was doing extremely well. He noted the favourable references to the performance of the funds until investigation by the regulator and submitted that the context prevents any reading of the later specific reference to the filing of charges as giving rise to an imputation of criminal conduct on the part of the plaintiff. 10Mr Dawson submitted further that, in respect of the second matter complained of, the argument against the capacity of the matter to convey the imputation is even stronger since in that article, aside from the reference to charges filed, ASIC's action against the plaintiff is described as, variously, its "legal case" and its "complaints against Mr Liu." 11Mr Dawson noted that the court's ruling on the question whether a publication is capable of conveying imputations alleged by the plaintiff is an important filtering process in preventing imputations that cannot arise as a matter of law from going to the jury at trial. He noted that there is nothing explicit in either matter complained of to suggest fraud or theft on the part of Mr Liu of any funds, rather there is a suggestion of a large quantity of funds being successfully managed under Mr Liu. 12It is always necessary however to have regard not only to the express words of a publication but also to the subtleties of its construction. In my view, some of the references in the matters complained of in the present case are apt to raise suspicion or scepticism as to the reported success of the Astarra fund. In respect of the first matter complained of, the title must also be taken into account. The article appeared under the headline: "Grinning all the way to the bank - until watch dog started sniffing". 13Whilst there may be force in some of the contentions put by Mr Dawson as to the context of the whole of the matter, in my view they are essentially jury points. I am satisfied that a jury could properly construe the article as conveying the meaning that the charges filed by the regulator against Mr Liu were criminal charges. In reaching that conclusion, I have had regard in particular to the phrase "filed charges" and the ordinary understanding of the word "charges". 14In my view, whilst that term may not unequivocally point to allegations of criminal conduct, in the context of its being used in reference to action taken by the regulator in the circumstances described in the two articles, it is certainly an open question and one as to which the plaintiff has a right to have his cause considered by a jury. 15The second objection taken in respect of the imputations requires consideration of imputation (b) pleaded in respect of each matter complained of (in paragraphs 4(b) and 6(b) of the amended statement of claim), which is in the following terms: The plaintiff behaved in such a way as to warrant ASIC filing charges against him in the equities division of the NSW Supreme Court in October 2009. 16The first point made by Mr Dawson in respect of that imputation was that, if the defendant's argument as to imputation (a) was unsuccessful, the phrase "filing charges" would be understood to mean filing criminal charges, in which event it may be seen that the two imputations ((a) and (b)) do not differ in substance. Mr Dawson submitted that they really are just two formulations of an imputation of the kind discussed in the decision in Mirror Newspapers v Harrison [1982] HCA 50; (1982) 149 CLR 293. In that case, Mason J said (at 301.6, [18]): Although Sugerman A.C.J. in Rochfort (1972) 1 NSWLR 16 stated that a report of the kind discussed is incapable of bearing an imputation other than what it actually states, namely that the plaintiff has been arrested and charged with an offence, I think that it is capable of bearing the imputation that the police suspected him of having committed the offence and that they had reasonable cause for doing so. That in my opinion is what the ordinary reasonable reader would understand to be conveyed by such a report. 17The reference to that authority leads to Mr Dawson's second point in respect of those imputations, which is that they should properly be pleaded so as to make explicit that which is implicit in a statement that a person has been charged with an offence. Mr Dawson submitted that the reason such a statement is defamatory is that the ordinary reasonable reader understands that, before bringing a charge, police (or in the present case the regulator) must have formed a reasonable belief or suspicion that the person in question had committed the offence charged. 18Mr Richardson, who appeared for the plaintiff, responded that whilst the imputations could have been pleaded in accordance with the formulation proposed by Mason J in Mirror Newspapers , there is no vice in the formulation of the imputations pleaded by the plaintiff. They are not imprecise and they are capable of being pleaded to. Mr Richardson submitted further that there is no law that says such an imputation must be pleaded in accordance with the common formula. 19In my view, Mr Richardson's submission on that issue is correct and should be accepted. I am satisfied that it is open to the plaintiff to argue that the matter complained of is capable of conveying the imputation of having been the subject of a criminal charge and that an imputation in that form is not objectionable, it being the form of imputation the plaintiff has chosen to make as the ground for his case. I think it should stand. 20In those circumstances Mr Dawson accepted that the remaining objection to imputation (b) (of not differing in substance from imputation (a)) would fall away and that those two imputations should stand in their present form. 21The final objection was to imputation (d) which is pleaded only in respect of the first matter complained of. That imputation is: The plaintiff was suspected by ASIC of running a Ponzi scheme similar to the one run by Bernie Madoff. 22The objection to that imputation was as to both capacity and form. As to capacity, I am satisfied that a jury could properly infer that the article conveys an imputation that similarity between a Ponzi scheme and the structure of the funds managed by the plaintiff was the object of ASIC's suspicion. In coming to that conclusion I have had regard to the headline, which in my view, contrary to Mr Dawson's submission, suggests that there was something for the watch dog to sniff at. That coupled with some of the suspicious circumstances with which the article is coloured in my view leaves open the suggestion that a jury could properly conclude that a Ponzi style scheme was the very concern the regulator wished to investigate. 23The second objection was to the use of the phrase in the imputation "a Ponzi scheme similar to the one run by Bernie Madoff". I confess I have not found it easy to determine whether an imputation in that form should be allowed to go to the jury as a meaning alleged to arise from the natural and ordinary meaning of the words published, as opposed to arising as a true innuendo. For what it is worth, it may be noted that the phrase "Ponzi scheme" has found its way into the Macquarie dictionary, which defines that term to mean: a fraudulent investment scheme in which investors are paid dividends using the income derived from later investments rather than real profits [named after Charles Ponzi (1882 to 1949) who first used this scheme in the US in 1920]. 24On balance, I am satisfied that the term has found its way into the common usage of the English language to a sufficient extent to allow the imputation to stand in its present form. To the extent that it may be understood or accepted at the trial to be an obscure phrase, that may be a matter sounding in damages but I do not think the imputation in its present form is liable to be struck out save as to one qualification which I think ultimately was agreed upon by the parties, which is that the words, "similar to the one run by Bernie Madoff" should be struck from the imputation. 25In those circumstances, my ruling is that, subject to the qualification I have stated, the imputations pleaded by the plaintiff may go to the jury. 26I order the defendant to pay the plaintiff's costs of the application.