First Plaintiff v Defendant

1 Mr Fenn is the managing director of Ethan Affordable Housing Limited ('Ethan Housing'). In December 2016 the Australian Broadcasting Corporation published a report concerning Mr Fenn and Ethan Housing by broadcasting it on the 7.30 television program. On the same day, the report and an edited transcript were uploaded onto the ABC website.

2 The report concerned the operation of the National Rental Affordability Scheme (NRAS) which was described as a scheme operated by the Federal Government for the past decade as an alternative to public housing, and managed by a group of companies and charities, one of which was Ethan Housing. It was described as involving the purchase of residential properties by investors, which were then rented out at a discount rate to tenants in need of affordable housing. As an incentive for letting a property at a lower rent the investor was entitled to a payment of between $10,000 and $11,000 at the end of each financial year. Funding for those incentive payments was paid first by the Department of Social Services to the charity or company which was managing part of the scheme, such as Ethan Housing. The incentive payment was then to be paid by Ethan Housing to individual investors. ABC reported that investors were experiencing delays of many months in receiving the incentive payments, and that this was causing investors financial hardship.

3 In this proceeding Mr Fenn and Ethan Housing allege the report was defamatory of them. ABC's strike out application relates only to the imputation, pleaded at paragraph 7(c) in the Statement of Claim, which reads:

Fenn is a hypocrite, in that he once sought election to the Federal Senate on a family values platform, but rather than supporting hardworking and vulnerable families, he had exploited them for his own commercial benefit and caused them financial hardship by failing to account to them for money that was due and owing to them under the NRAS, while at the same time profiting from the interest earned on that money.

4 ABC applies to strike out that pleading pursuant to r 23.02(c) of the Supreme Court (General Civil Procedure) Rules 2015; or alternatively s 48 of the Civil Procedure Act 2010 (Vic) on the grounds that:

(a) The pleading impermissibly rolls up two allegations as amounting to hypocrisy, first that Mr Fenn caused hardworking and vulnerable families financial hardship by failing to account to them for money that was due and owing to them, and second that Mr Fenn profited from interest earned on that money.

(b) The pleading is impermissibly vague in alleging as an element of hypocrisy that standing for election on a family values platform amounted to Mr Fenn representing himself as supporting hardworking and vulnerable families. ABC submits the pleaded imputation requires the ordinary reasonable reader to draw an inference upon an inference: first, that by standing as a candidate for the 'family values party Family First' Mr Fenn sought election on a 'family values platform'; and secondly, that this involved Mr Fenn representing himself as 'supporting hardworking and vulnerable families'.

(c) The imputation of hypocrisy was not capable of arising because the two elements of hypocrisy pleaded were not contemporaneous. The first element being that Mr Fenn stood on a family values platform and thus represented himself as supporting hardworking and vulnerable families; and the second, discontinuous element, being that Mr Fenn acted to exploit hardworking and vulnerable families for his own commercial benefit. ABC submitted that to be capable of arising, the imputation of hypocrisy required a contemporaneous discontinuity between Mr Fenn representing himself as holding certain ideals or beliefs on the one hand, whilst on the other acting in a manner inconsistent with those ideals and beliefs.

(d) There was impermissible ambiguity in the pleading in that it did not sufficiently define the class of hardworking and vulnerable families as being investors in the NRAS with Ethan Housing.

5 ABC submitted that uncertainty created by the current form of paragraph 7(c) in the pleading made it impossible for ABC to understand the case put against it and to properly plead a defence to that case. It was submitted that the lack of temporal connection between the elements of hypocrisy meant that the imputation could not be pleaded. Any alternative imputation relying on the same facts and matters would require amendment of the pleading because of the matters raised in [4](a), (b) and (d) above.

6 The report was introduced by the 7.30 presenter as follows:

During the past decade the Federal Government's handed out more than $1 billion to set up an alternative to public housing. It's known as the National Rental Affordability Scheme and it's run by a group of companies and charities.

But tonight a group of investors in the scheme is raising an alarm about one of the charities involved after they were left angry and out of pocket.

As Dylan Welch reports, the charity's run by a property developer who once stood for office as a Family First candidate.

Next, a family who invested in the scheme is introduced, then a property manager interviewed by the reporter describes the scheme:

[PROPERTY MANAGER] The benefits to the tenants are is [sic] that they receive 20% less rent to pay. The investors themselves would receive less rent but they would get an incentive at the end of each financial year, of approximately $10,000 to $11,000.

It is then reported that the previously introduced family bought two apartments in Darwin, and had their financial incentive managed by Ethan Housing. The reporter continues:

[REPORTER] Ethan affordable housing is one of the largest participants in the rental scheme.

It is owned by Ashley Fenn. He ran for the Federal Senate with the family values party Family First.

His company is responsible for making the incentive payments to [investor family].

For four years their annual incentive payments have been getting progressively later. Last year it was 13 months overdue.

[PROPERTY MANAGER]: ... It hits them hard. Financially, they're giving up their property to this scheme and taking 20% less rent.

They still have got all their body corporate fees and rates to pay. They wait for that incentive at the end of the year to be able to get back on track and to wait a further 10 months.

I could give you numerous investors who are in a situation where they may have to sell their properties or even are defaulting on their mortgages because of this.

...

If you speak to some of the investors, they've been waiting for 10 months, or even longer.

Some investors still haven't received it from 2014 and 2015. Where is that money?

A second investor whose incentive is managed by Ethan Housing is then interviewed:

[SECOND INVESTOR]: Well, is it the NRAS scheme or the NRAS scam, that's what I want to know.

[REPORTER]: This year, Ethan Affordable Housing is five months overdue and counting.

[SECOND INVESTOR]: Well what goes through my mind is that obviously the money has been put across into Ethan and they've banked it. While that money is sitting in the bank obviously it's going to be making interest isn't it?

[REPORTER]: 7.30 has spoken to more than a dozen other Zest [apartment block] investors. They all share similar stories.

They all feel like their payments have been unnecessarily delayed sometimes by more than a year and they're all hurting financially.

They're furious with Ethan Affordable Housing.

Today, Ashley Fenn told 7.30 that Ethan Affordable Housing provides over $14 million of rental discounts per year to thousands of low-income families.

It was unfortunate, he said, that some investors had experienced delays in their incentive payments, but it was the fault of a previous management team at the Department of Social Services.

However, DSS told 7.30 they had issued most payments to Ethan Affordable Housing and subsequent delays were due to the company.

7 Hypocrisy is defined in the Macquarie Dictionary as:

1. The act of pretending to have a character or beliefs, principles, etc, that one does not possess.

2. Pretence of virtue or piety; false goodness.[1]

8 ABC relied on the judgment of Mossop AsJ in McMillan v The Federal Capital Press of Australia Pty Ltd,[2] in which his Honour stated:

Each of these definitions emphasises, consistently with the defendants' submission, the need for a discontinuity between contemporaneous thoughts or statements on the one hand and actions on the other. In my view, because the concept of a hypocrite involves the temporal connection between two inconsistent things, the imputation is one which could not arise from the article. The imputation could only arise if the concept of "a hypocrite" extended beyond the reasonably available meaning of that term. As a consequence it must be struck out.[3]

Does the pleading impermissibly roll up two actions as amounting to hypocrisy?

9 ABC submitted that imputation 7(c) alleges as hypocrisy two separate acts or actions by Mr Fenn, and thus represents a rolled up plea with the potential to cause confusion.[4] The separate acts which the pleading alleges the report attributes to Mr Fenn are first, causing hardworking families hardship by failing to account to them for money due and owing and second, profiting from interest earned on that money.

10 The sting of imputation 7(c) is that Mr Fenn is a hypocrite. That sting is made out in the pleading by the allegation that Mr Fenn is reported to have represented himself as supporting 'hardworking and vulnerable families', whilst exploiting those same families for his own commercial benefit. The action which it is alleged amounts to exploiting hardworking and vulnerable families is failing to account to those families for money due and owing to them under the NRAS. Mr Fenn submitted that in order to make out the imputation of hypocrisy it is necessary to plead the precise act attributed to him in the report at the degree of particularity or precision that the publication allows;[5] and that properly understood the one action (retaining the money) has two consequences. First, it caused the families financial hardship, because they did not have access to the incentive payments to which they were entitled. Secondly, it allowed Mr Fenn to profit from interest earned on that money while it was being withheld by him. It was submitted that either of those consequences pleaded separately may not have been sufficient by themselves to make out the imputation of hypocrisy.

11 I agree with the submissions for Mr Fenn. The single imputation pleaded in that subparagraph is that Mr Fenn is a hypocrite. That imputation is based on the one act or action alleged to be attributed to Mr Fenn by the report, that is, failing to account to NRAS investors for money due and owing to them. That act or action is pleaded to have two consequences relevant to the imputation of hypocrisy, first that it caused those investors financial hardship, and second that it enabled Mr Fenn to profit from interest earned on the money withheld. In my view, paragraph 7(c) does not impermissibly roll up two distinct or separate imputations.

Is the pleaded imputation impermissibly vague or incapable of being conveyed?

12 The first element of hypocrisy pleaded is that the report conveyed that Mr Fenn 'sought election to the Federal Senate on a family values platform' which involved Mr Fenn representing himself as 'supporting hardworking and vulnerable families'.

13 ABC submits that the pleading is impermissibly vague, because it leaves the reader to divine what a family values party stands for, and to infer that by standing for such a platform Mr Fenn was representing himself as supporting hardworking and vulnerable families. ABC submitted that as a matter of notoriety or intuition 'family values' in the context of the former Family First party is associated with social conservatism or espousing conservative values consistent with the traditional Judeo-Christian set of social values, all of which an ordinary reasonable reader would associate with Family First, rather than support of vulnerable or disadvantaged working families. Further, there is nothing else in the report that explains to the reader, or from which the reader can infer, what a 'family values platform' is, or what a 'family values party' stands for. The words of the report simply refer to Mr Fenn as a former 'Family First candidate' and as having run for 'Federal Senate with the family values party Family First'.

14 Mr Fenn submitted that the substance of the pleading that he was reported to have sought election on a family values platform came direct from the publication itself, that the degree of specificity of a pleading depends on the content of the publication,[6] and that the inference that standing for a family values platform involved Mr Fenn representing himself as supporting hardworking and vulnerable families was reasonably capable of being conveyed.

15 The principles to be applied when determining whether an imputation has been properly pleaded or is too vague and imprecise were discussed by Kaye J in Trkulja v Google Inc Llc,[7] where his Honour said:

First, the question whether an imputation has been properly pleaded is to be determined as a matter of practical justice, rather than as an exercise of close semantic or linguistic refinement...Secondly, the question whether a particular imputation is sufficiently pleaded depends, essentially, on the context in which it is pleaded...[8]

In relation to this issue, ABC placed particular reliance on the distinction identified by Mason J in Mirror Newspapers Ltd v Harrison,[9] where his Honour said:

A distinction needs to be drawn between the reader's understanding of what the newspaper is saying and judgments or conclusions which he may reach as a result of his own beliefs and prejudices. It is one thing to say that a statement is capable of bearing an imputation defamatory of the plaintiff because the ordinary reasonable reader would understand it in that sense, drawing on his own knowledge and experience of human affairs in order to reach that result. It is quite another thing to say that a statement is capable of bearing such an imputation merely because it excites in some readers a belief or prejudice from which they proceed to arrive at a conclusion unfavourable to the plaintiff. The defamatory quality of the published material is to be determined by the first, not by the second, proposition. Its importance for present purposes is that it focuses attention on what is conveyed by the published material in the mind of the ordinary reasonable reader.[10]

16 The question which arises on this application is whether the imputation of hypocrisy, which depends on an inference that standing for the family values party Family First involved Mr Fenn representing himself as supporting hardworking and vulnerable families, is reasonably capable of being conveyed by the report to the ordinary reasonable reader. There is nothing in the report which clarifies or explains what values Mr Fenn was espousing by standing for the family values party Family First. Even allowing for a degree of loose thinking, reading between the lines and a capacity for implication,[11] it is not clear how an ordinary reasonable reader could understand from watching or reading the report that by standing as a candidate for Family First Mr Fenn therefore represented himself as 'supporting hardworking and vulnerable families'.

17 It might be understood by a person viewing the report that the two investors interviewed as part of the report, and perhaps many others who invested in the NRAS through Ethan Homes, qualify as 'hardworking and vulnerable families'. However, to make out the imputation it is necessary that the report be reasonably capable of being understood to mean that Mr Fenn falsely presented as supporting hardworking and vulnerable families. That conclusion could only be reached by a reader adopting his or her own beliefs or prejudices, and not from an understanding of the content of the report.

18 In my view there is an impermissible leap between the report that Mr Fenn '... ran for the federal senate with the family values party Family First', and the pleading that the report could be understood to mean that Mr Fenn represented himself as 'supporting hardworking and vulnerable families'. For that reason I conclude that the pleading in its current form should be struck out.

19 ABC submitted that the imputation of hypocrisy depended on the report being capable of conveying that Mr Fenn represented himself as 'supporting hardworking and vulnerable families' whilst contemporaneously undertaking acts or actions which were inconsistent with that representation, that is, Mr Fenn's acts to exploit those families for his own financial benefit. This submission relied on the ordinary definition of hypocrisy, and the decision of Mossop AsJ in McMillan,[12] which require a degree of contemporaneity between the alleged elements of hypocrisy.

20 Paragraph 7(c) of the pleading states that the report meant and was understood to mean that Mr Fenn 'had once sought election' on a family values platform and that he 'had exploited [hard working and vulnerable families] for his own commercial benefit'. The pleading does not specify when either of these elements of hypocrisy occurred.

21 Mr Fenn accepted that there needs to be a temporal connection between his reported ideals and beliefs on the one hand and actions by him inconsistent with those ideals and beliefs on the other, but sought to distinguish McMillan[13] on factual grounds. In McMillan,[14] the article in question conveyed that the plaintiff's views had altered over time, and that a position for which he advocated in the 1970s was materially different to the position he adopted some decades later. Mr Fenn submitted whilst the temporal connection may be lost if there is a period of decades between reported words and inconsistent actions, the temporal connection needs to be viewed in context, and that on the facts of the current case it was an issue which should be left to the jury to determine after hearing all of the evidence. It was submitted the context provided by the report is particularly important because the reference to Mr Fenn standing for the 'family values Party' is immediately followed in the report by details of treatment of the first investor family. In this context - where the reference to Family First and family values is mentioned immediately before the reference to the treatment of the case study family, a sufficient temporal connection between words and actions is established.

22 The report was broadcast on 12 December 2016. It refers to the NRAS as having operated over the previous decade. The first investor family are reported to have invested in the scheme in 2012. The report does not make clear when the second investor commenced investing in the NRAS. It is reported that for some years there has been a delay by Ethan Housing in accounting to investors for incentive payments. Specifically in relation to the first investor family the reporter states:

For four years their annual incentive payments have been getting progressively later. Last year it was 13 months overdue.

The written submissions filed for ABC in this application record that Mr Fenn was a senate candidate for Family First at the 2013 federal election, and that he quit the party in 2015.

23 The two elements of hypocrisy pleaded as being conveyed by the report are first that Mr Fenn represented himself as having certain ideals and beliefs by seeking election for Family First; and second, that Mr Fenn exploited hardworking and vulnerable families for his own financial benefit. Those elements of hypocrisy may be found by a jury to have occurred at the same time, or to be sufficiently temporally proximate, to make out the imputation. I reject the argument of ABC on this point.

Is the pleading ambiguous because the class of hardworking and vulnerable families is not sufficiently defined?

24 ABC submits there is ambiguity in the pleading because the class of 'hardworking and vulnerable families' referred to is not defined and is therefore completely at large. I disagree. The reference to 'hardworking and vulnerable families' in subparagraph 7(c) is relevant for two purposes. First, in relation to the allegation that the report should be understood to mean that Mr Fenn represented himself as 'supporting hardworking and vulnerable families'. This element goes to the report of Mr Fenn's ideals and beliefs, and could reasonably be understood as relating to hardworking and vulnerable families generally. And second, that the report should be understood to mean that Mr Fenn exploited hardworking and vulnerable families for his own commercial benefit. The pleading of the reported actions of Mr Fenn is restricted to exploiting hardworking and vulnerable families to whom he had an obligation to account for money due and owing under the NRAS. In other words, the class of vulnerable families which the pleading alleges Mr Fenn is reported to have exploited are those families who invested in the NRAS through Ethan Housing. I find against ABC on this point.

25 ABC's objection to paragraph 7(c) of the plaintiff's pleading is made out on one basis raised, set out at [4](b) above. I will strike out the pleading, give the plaintiff leave to re-plead that subparagraph and order, subject to argument, that Mr Fenn pay ABC's costs of the application.

[1] Macquarie Dictionary Publishers Pty Ltd, 6th ed., 2013.

[2] [2016] ACTSC 286 ('McMillan').

[4] Franchise Central & Ors v Fairfax Media & Anor [2011] VSC 379 [23] (Beach J) ('Franchise Central').

[5] Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 ('Drummoyne').

[6] Drummoyne (1990) 21 NSWLR 135 quoted in Franchise Central [2011] VSC 379 [24].

[7] [2010] VSC 226.

[9] [1982] HCA 50; (1982) 149 CLR 293.

[11] See Sultanov v Age Company Ltd [2009] VSC 145 [11] (Kaye J) and authorities cited therein.

[12] [2016] ACTSC 286.