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357 That dictum has been often quoted, always with approval, and applies to the measure of damages in both tort and contract. It has been followed in Australia.[96]
358 Applying that formula, it would not have been difficult to plead and present a case, if in fact any economic loss had been suffered. It would have been a fairly simple exercise to prove the loss, provided, of course, there was evidence of substance based upon primary source materials as to the income derived by the business and the downturn in income after the publication of the defamatory articles. It would not have been difficult, if it was the fact, that the publication of the defamatory articles caused a loss or downturn in custom. Production of satisfactory documents relating to past income up to the date of the first publication would have demonstrated the capacity of the business to derive income, and production of the primary documents recording the trading activities of both plaintiffs thereafter would have revealed, if it be true, a loss of custom which could be calculated with some degree of certainty. The application of the assessment formula requires the Court to consider what would have been the position if the tort had not been committed, and to compare it with what actually did happen after the commission of the tort. The hypothetical situation is compared with the actual situation.
359 In the first few days of the trial, the Court raised the question of who was conducting the Chinese medical practice. At that time, the evidence was that the company was conducting the business and employing Ms Li on a salary. Ms Li was the sole director and shareholder of the company. The company was registered on 14 June 2001. The quarterly Business Activity Statements and the company tax returns for the period from 1 July 2001 through to the present revealed that the company purported to conduct the Chinese natural therapy business, which included the sale of Forever Young capsules. On the other hand, the evidence revealed that the business name known as C.N.T. Chinese Natural Therapy, was first registered on 26 September 1996 and was continuing as a business up until 26 September 2005. The proprietor of the business was Ms Abbie Li, the first plaintiff. No documents were produced relating to the company or its acquisition of the business after it was registered. On the other hand, some of the incomplete and very rough documents produced by the accountant, Mr Dunstan, who was the accountant for both plaintiffs during the relevant period, tended to support the view that the company was operating the business. This was despite the fact that there had been a business name registration and that the name on the door of Ms Li's premises in Collins Street was not the company but the description "C.N.T. Chinese Natural Therapy."
360 The Court drew attention to the provisions of the Chinese Medicine Registration Act 2000. Part 2, which came into operation on 1 January 2002, concerned registration. A natural person could apply for registration as a Chinese herbal medicine practitioner and an acupuncturist. There is nothing in the Act which enabled a company to be so registered. The evidence established that Ms Li was registered in the year 2002. Part 5, which also came into operation on 1 January 2002, deals with offences and any unregistered person, which would include a company, who took or used the title of a registered Chinese medicine practitioner committed a criminal act. I have earlier discussed the potential liability of the company Forever Young under the Act. The problems concerning the company conducting the business were pointed out by the Court to counsel for the plaintiffs, who then informed the Court that the claims for economic loss would be made by Ms Li, and not the company, in relation to the conduct of the Chinese therapy medical practice. This was despite the fact that the Business Activity Statements, the tax returns and the few accounts that were tendered showed that the company operated the business from 1 July 2001 to the year 2005. In addition, the receipts given to patients contained a stamp which showed that it was the company that had received the money for services rendered and had provided the receipt. Mr Selimi then informed the Court that the company was no longer making the claims for lost income of the Chinese natural therapy business and that Ms Li was making the claims. He informed the Court the accountant, Mr Jones, was preparing a supplementary report.
361 This change created difficulties for the plaintiffs. What the plaintiffs sought to do was to undo what in fact had occurred, and to attempt to re-write the history between 1 July 2001 to 2005 in respect to the conduct of the business operated at the Collins Street premises.
362 When Ms Li gave evidence, no attempt was made to adduce documentary evidence of day to day accounts of the business activities. She was cross-examined about the lack of primary accounting documents. The Court reminded her counsel of the necessity of proper proofs. When criticisms were first made by the Court with respect to the inadequate evidence being called in relation to the financial position of the business, the Court was informed that the accountant, Mr Dunstan, was not going to be called as a witness. The tax returns and Business Activity Statements for the years 2002-2004 were not lodged until 2005. Apparently they were lodged by Mr Dunstan. Ms Li, in answer to a number of probing questions as to what records she had kept and why the documents were lodged so late, stated that it was the fault of Mr Dunstan. Ms Li herself did not produce any documents relating to the financial conduct of the business. She stated that she had kept daily sheets of the business activities but that she had handed them to the conman Williams. They had disappeared. Some documents from Mr Dunstan's file were made available to Mr Jones. They are copies of summaries prepared by Ms Li and some draft accounts prepared by Mr Dunstan. These documents were made available to Mr Jones when he prepared his economic loss report in December 2005. No mention is made of them in his first report. Mr Jones stated that he did not rely on them. He said that he relied on the copy of taxation returns, many of which were prepared and lodged well after the defamatory articles were published. The documents are referred to in his supplementary report, which was delivered in the course of the trial. The documents were not discovered and were made available to the defendants' lawyers only after the proceeding had commenced. Ms Schoff of counsel, for the defendants, informed the Court that her instructing solicitors had been chasing primary documents for a very long period of time, and the only documents that were eventually produced were those contained in the supplementary report of Mr Jones produced in the course of the trial. To say the least, the documents are very rough and ready and do not provide a very adequate foundation for a claim for loss of income or business loss. The reason why Mr Dunstan did not lodge the documents until the year 2005 was not explored in evidence and appeared to relate to some personal matter which was not identified.
363 Overall, the Court was left in a position where there was little evidence produced, and the evidence that was produced raised more questions than it gave answers, and provided little or no certainty.
364 During the course of her evidence, Ms Li produced a number of copy tax returns for herself and the company. Her personal tax returns were for the financial years ending 30 June 2000 through to 2004. The return for the year ending 30 June 2000 was lodged on 2 April 2001 by her accountant, Mark Dunstan. The return for the following year was lodged on 21 May 2004, and the returns for the two following years were lodged on 23 March 2005. The returns were evidently prepared and lodged by Mr Dunstan. The explanation for the delay was less than convincing. Ms Li stated that she did not want to go into the reasons, other than it was the fault of her accountant. At that stage it was envisaged that he would not be called as a witness. When he was called, he accepted that he failed to lodge the returns in time. The company return for 30 June 2002, which was its first year of operation, was lodged on 21 May 2004, as was the following year's return. The return for 30 June 2004 was lodged on 23 March 2005. Again, all company returns were prepared and lodged by Mr Dunstan and again, the explanation for the delay was the fault of the accountant.
365 The Business Activity Statements lodged in the business name of Cntchinese Natural Therapy (sic) were produced by Ms Li in her evidence. The Statement for the first period to 31 December 2000 was lodged on 12 December 2001. The Statements for the following two quarterly periods were also lodged on the same date. The one to September 2001 was lodged on 28 June 2005. The following quarterly Statements up to April 2004 were all lodged on the same date. The Statement to June 2004 was lodged on 3 August 2005. Again, blame for the delay was laid at the door of Mr Dunstan. Mr Dunstan gave evidence and did not suggest otherwise. It is noted that the Business Activity Statements were lodged in the name of Cntchinese Natural Therapy. Yet it is clear from both the company returns and Ms Li's personal tax returns that in the period from mid-2001, the company was conducting the Chinese natural therapy business. The evidence of Mr Dunstan was less than satisfactory. He was vague. He could not explain why certain documents were not produced. He appeared to work off very rough summaries of the business activities prepared by Ms Li. He did not produce any company documents relating to its business activities. He produced what were rough and ready draft profit and loss statements and the company's copy tax returns. Ms Li provided him with periodic summaries of the business activities. Mr Dunstan did not produce any proper company accounts. There appeared to be real uncertainty as to whether it was the company or Ms Li who was conducting the business during the relevant period. The copy tax returns, the receipt books and the summaries prepared by Ms Li led to the conclusion that it was the company, and this conclusion was supported by the evidence of Mr Dunstan and the early evidence of Ms Li. On the other hand, the Business Activity Statements suggested otherwise.
366 Ms Li did not produce any other documentation concerning the income derived by her business of Chinese Natural Therapy and the sale of the Forever Young capsules. She was cross-examined about the lack of documentation. She said that she had daily sheets recording the financial transactions of the business, which she had handed over to Mr Williams, and that these had disappeared.
367 The bundle of documents which had not been discovered, and which had been provided to Mr Jones in December 2005 and revealed in his supplementary report, was tendered in evidence. The documents contain a number of what could be described as rough and ready draft profit and loss statements of the business prepared by Mr Dunstan, which were provided to the plaintiffs' former solicitors on or about 12 April 2005 but not discovered. They comprised draft profit and loss accounts for the financial years ending June 2002, 2003 and 2004. Behind each draft profit and loss statement was a summary of the receipts and expenses of the business in the handwriting of Ms Li, the subject matter of each transaction being in English and Chinese. It was these summaries prepared by Ms Li which formed the basis of the rough and ready profit and loss statements. They in turn were used as the source material for the taxation returns which were returned many years after the event, and well after the first publication.
368 Ms Li's evidence as to her financial position was unsatisfactory and, bearing in mind her overall lack of credibility, must be viewed with enormous suspicion in relation to any value that can be placed upon it. Her evidence as to the amount that she earned from her job at the Hyatt Hotel in more recent times was also vague. She asserted that she cleared about $1,000 a week. Mr Dunstan's evidence was also somewhat vague. No proper accounts for either the business or the company were produced. Despite the fact that a company was apparently operating the business, there were no company accounts and no attempts to produce any annual returns or any records of any annual meetings of the company. Ms Li was not able to enlighten the Court as to whether any such accounts existed, or had ever existed, or whether any annual meetings took place. It is noted from the company search that annual returns were lodged, but apparently late. Despite the fact that it appeared that the company took over the business some time in mid 2001, no documents evidencing any transfer of the business were produced. The question was raised with Mr Dunstan. No documents were forthcoming. Mr Dunstan was unable to enlighten the Court either as to these important questions or as to the preparation and adoption of proper accounts for either business. The evidence was left in an entirely unsatisfactory state.
369 In my opinion, it is impossible for the Court to determine with any degree of certainty whether there had been any loss of income by either Ms Li or the company after the publication of the articles. The appointments book revealed that business appeared to fall off for the balance of the year 2003 after the publication of the first article. The three women who had been working in the premises did not work after the publication of the first article. There were no other source materials available. Ms Li did not produce any receipt books. However, there is some evidence to suggest that business did fall away, although to what extent cannot be ascertained with any degree of certainty. Of course, having found that the assertion that she was conducting a brothel was established, it is not surprising that the three women disappeared and that business dropped off. Reference to the appointments book up to the publication of the first article on 26 May 2003, showed that in the preceding month the business was busy. As earlier stated, it would not have been a difficult exercise to prove, if it was the fact, that the publication of the articles caused a drop in the income of the business. Production of reliable accounts from before and after the first publication, and deposed to as being accurate and truthful by Ms Li, would have been a basis for establishing a loss. No documents were forthcoming. The evidence that was produced could only be described as extremely doubtful, incomplete and uncertain. It did not need an expert witness to prove the loss.
370 The evidence of Mr Jones as an expert was also unsatisfactory. If he did read the code of conduct prescribed by Order 44 of the Rules of this Court in respect to the evidence of an expert, he did not understand the code. He asserted in his first report that he understood his duty to the Court. I do not accept that he did so understand.
371 The first exercise that Mr Jones performed in his revised report was to determine the loss of income of the Chinese medical practice carried on by Ms Li. He determined the loss of profit from 1 July 2003 to 31 December 2005 at a figure of $94,853. His evidence was not expert evidence. That is not to say that a court may not be assisted by an accountant preparing a summary of the source material to determine the levels of income on an annual basis. The tribunal of fact is usually assisted by an accountant preparing a summary of the source material. However, it is not expert evidence. It is a summary to assist the tribunal of fact and to avoid the time spent by the tribunal of fact in calculating the loss from the proven source material itself.[97] However, a summary has no evidentiary value if the source material is not tendered in evidence. The source material must provide an accurate basis for the summary. What Mr Jones did was to project the business income at the end of the financial year 30 June 2003 based upon the growth over the previous four years' trading. In order to ascertain the previous four years' trading, he treated the business, which was at that time conducted by the company, as being conducted by Ms Li because of the problems with the Act. He determined that there had been a 49% growth over this four year period and he then projected an expected business income increase of 49% for the year 1 July 2003 to 30 June 2004. His approach was fallacious. It was nonsense. He then added another substantial increase from the year 2004 to 2005, and then capped the amount for the following two years. His exercise was fallacious, had no basis in logic and was pure speculation. Assuming that one could place any reliance upon the financial figures that were produced by Ms Li and Mr Dunstan, and indeed they were scanty, incomplete and uncertain, there is no way that one could add from 1 July 2003 to 30 June 2004 an anticipated increase of 49% based on the past trading. I reject his evidence. An exercise could be carried out but the uncertainty of the basic figures makes it extremely difficult to come up with any figure that would satisfy any test of certainty. In addition, there is the problem of who, in fact, was deriving the income. The fact was it was the company. It would be contrary to law to permit it to claim a loss, taking into account that it had no legal right to conduct a business of Chinese natural therapy.
372 Mr Selimi finally, and somewhat desperately, submitted that Ms Li would be entitled to loss of income based upon the fact that she was receiving $36,400 gross salary from the company during the relevant period. However, I am not satisfied that there is any evidence that she received less than that thereafter. Indeed, her evidence was that when she was working at the Hyatt she took home about $1,000 a week.
373 Mr Jones in his report then turned to the loss of business value. Again, a problem arises with respect to valuing the business. The Chinese natural therapy business was in fact conducted by the company during the relevant period. This was contrary to law. Mr Jones carried out an exercise in which he sought to determine the future maintainable profits on an annual basis of what were described as the "personal services" provided by the business and the "associated herbal tonic sales", which apparently were the Forever Young capsules. Having done that, he then multiplied that figure by three. The case as presented was that the impact of the defamatory articles was such that it destroyed the Chinese natural therapy business, including the business selling the Forever Young capsules. One method to determine the loss suffered is to value the business as a going concern for the purposes of sale to a willing but not over-anxious purchaser. In valuing the business as a going concern, one method is to take the annual future maintainable profits and adjust for any particular extraordinary items and then determine an appropriate multiplier to reach the value of the business. The multiplier must be the subject of expert evidence. I was not persuaded that Mr Jones was an expert in the area of valuing Chinese natural therapy businesses or indeed similar types of businesses. Mr Jones frankly admitted that the choice of the multiplier of three was based upon a general rule of thumb across businesses. He was unable to provide an appropriate multiplier based upon any study of the sale of Chinese medical therapy businesses. His so-called expert evidence in relation to the multiplier I do not accept. I am not persuaded that he was an expert in that area. This claim has real problems, again, because the company was operating the business. I am by no means persuaded that there was any goodwill. Indeed, it may be said that the business was very personal, in that it depended upon Ms Li's ability as a Chinese medical therapist and masseuse, and that it did not have any goodwill at all. There was no evidence as to the number of Chinese medical therapist businesses in this State. Indeed, they are clearly of recent establishment in this State and whether there is any real market for the businesses was not established. In my opinion, the plaintiffs have failed to prove what value should be put on the loss of the business. In any event, the business was conducted by the company. As a matter of law it was not permitted to conduct the business.
374 Mr Jones also sought to carry out an exercise to determine the loss on a book that had been published by Ms Li. The evidence revealed that she had published a book called Eating for Life. I am by no means persuaded that she was ever able to sell these books. Indeed, the evidence was that she gave many of them away. Reference to the book shows a number of English errors which, quite frankly, made it difficult to understand what the book was about. I am not persuaded by any of the evidence that there was a market for this book. Accordingly, any such claim for loss of profit from the sale of that book has not been proven. Mr Jones' evidence was pure speculation. He was not an expert in the field of the sale of books. Ms Li's evidence relating to the book was vague and uncertain.
375 Mr Jones then did an exercise on the publication of a second book. The evidence revealed that Ms Li, with the assistance of others, had drafted another book called Forever Young, Ancient Chinese Secrets for Eternal Youth. The manuscript had been prepared and was tendered in evidence. She evidently started work on the book in early 2003. She had contact with a publisher and some discussions took place. She was given a draft agreement by the publisher to consider and the stage was reached where negotiations had commenced but had not been finalised. The project was aborted as a result of the publication of the first article. The publisher, Mr David Tenebaum, gave evidence to the effect that he thought the book may have sold. He admitted that he had never published a similar book before. He stated that he expected the first print would be 3,000 books and that hopefully, over a number of years, they could be sold. If this had occurred, Ms Li would have received 10% of the sale price, which means she would have made approximately $3 per book. He thought that she may be involved in the direct selling of another print of 5,000 books. All this evidence was based upon hope and expectation. Mr Tenenbaum was a publisher and had been for some years, but had never published this type of book. Whether or not Ms Li's second book would have had any success was highly debatable. The Court notes that there are any number of books on the market promising all types of things about staying young and the effect of certain diets. Doing the best I can on what would be described as a hope and an expectation of future sales, if I had to assess an amount of damages in respect to this head of damage, I would assess it at $10,000.
376 A claim was also made for the production and distribution of the Forever Young capsules. This would have been a claim by the company. It manufactured the capsules and apparently sold them. Mr Jones did an exercise to show that he thought the company over a five year period would have earned a profit in the order of $218,602. His exercise was based on the fact that he thought the company could sell about 30,000 bottles of capsules. The problem with his exercise is that there is no credible evidence in the past to support future sales of such a quantity of pills. Again, this was an area where Ms Li could have given evidence, if indeed there was any evidence, as to the sales of the product in the past and whether there were any clients who were prepared to purchase the pills. There was some evidence that clients did purchase the capsules and that there were some repeat clients. But there was a complete absence of any reliable record of past sales. To talk about the future of the product in the absence of credible evidence of past sales is nothing more than pure speculation. Of course, to read the future is impossible. But in determining what the future may hold for a product, the history of the sales of the product provides a springboard to reach a conclusion. The evidence as to the past was absent. This claim would also fail.
377 A feature of Mr Jones' original report and later report concerned what he described as a head of damage being the loss of commercial opportunity to generate future income for a herbal tonic, namely, the capsules. He stated in his original report that an important part of the loss was connected with the trademark registration. He was of the view that a trademark registration would have protected the business from future potential competition, but would not have affected the pursuit of the commercial opportunity. In his first report he did an exercise and said that a loss related to the trademark registration. He reported that the collapse of the sales of the capsules allegedly caused by the publication of the defamatory articles resulted in a loss of $2,850,000. His exercise is flawed and his result is nonsense. He misunderstood the effect of a registered trademark. The registered trademark provides protection to a distinctive mark or device attached to or accompanying an article intended for sale, the purpose being to inform the world that it was manufactured or sold by a particular business. In other words, it is the means by which the product is advertised to the world. The phrase "Forever Young", as the evidence revealed, was already the subject of a registered trademark by others. The distinctive accompanying mark or device is what is protected. Mr Jones in his original report proceeded on the assumption that Ms Li did have a trademark and that it would contribute to the value of the "Forever Young" product. He proceeded on the assumption that there was no restriction to "Forever Young" selling the trademark and that it had value. He then valued the loss of the potential of the trademark over a period of five years and came up with a figure of $2,850,000. In his supplementary report, he noted that in fact that Ms Li did not have a registered trademark. Nevertheless, he did another exercise and came up with a figure of $1,000,093.11. His reasoning is flawed. It is based on pure speculation. He is not an expert in the area of valuing trademarks. He is not an expert in valuing the loss of the business which may have had a form of trademark. The fact is that the business could continue to sell the product in the way it was always sold, irrespective of whether the trademark was registered or not. There was no evidence that the publication of the articles caused a drop in sales. There was no evidence that the publication of the articles had any effect on a so-called trademark. I do not accept the evidence of Mr Jones. His evidence was also double dipping. His earlier exercise concerned the alleged loss of the business. Part of the business was the sale of the capsules. If there was a loss of that part of the business dealing with the sales of the capsules, the loss should be calculated as part of the loss of the business.
378 The defendants' solicitors engaged a chartered accountant, Mr Joe Dicks, who prepared a report dated 25 January 2007. He considered the original report of Mr Jones. He drew attention to the fact that when seeking to calculate the alleged loss of profits as a result of the publications, there was insufficient information to make a proper assessment. In respect to the alleged loss of business value, he drew attention to the fact that Mr Jones used a multiple of three and he questioned the methodology used. Mr Dicks concluded that the alleged loss on the publication of the first book by Ms Li was based upon insufficient evidence, and he was unable, on the evidence before him, to reach any conclusion as to the expected publication of the second edition. He again noted the lack of evidence in relation to the claim assessed by Mr Jones as to the production, sale and distribution of herbal tonic, and made a rough estimation that it could be $120,000. Of course, in the end, it is a matter for the Court based upon the evidence placed before it. He also noted the claim by Mr Jones concerning the value of the trademark and noted that neither Mr Jones nor he had the necessary expertise. I agree entirely with the criticisms made by Mr Dicks of the attempts by Mr Jones to prove any economic loss.
379 In conclusion, the presentation of the case on damages for economic loss was totally inadequate, lacking in evidence and based on speculation. It would not have been a difficult exercise to work out the loss of income, if there was any, and any loss of business value due to the publication of the defamatory articles. Other than the possibility of a loss on the sale of the second manuscript, and this is highly doubtful, it is difficult to determine what pecuniary loss was suffered as a result of the publication of the articles.
CONCLUSION
380 The defendants have established justification to the defamatory imputations in each of the articles the subject of the eight causes of actions brought by Ms Li. Accordingly, her claim must be dismissed. In my opinion, the second plaintiff, the company, was not defamed in its business or trading reputation and its claims must also fail. But if I am wrong in relation to that conclusion, I am satisfied that insofar as the business was conducted by Ms Li in the business name of Forever Young, and if the trading reputation of that business name was defamed by any of the four articles specified, the defendants have proven the truth of the imputations made on the basis that Ms Li was conducting the business, and the defamatory imputations established as true against her must also result in the claims brought by the company failing.
381 Subject to submissions by counsel, I propose to dismiss the proceeding. There will be judgment for the defendants. I will hear the parties on the question of costs.
Attachment "A"
Attachment "B"
