Fletcher v POS Solutions Australia Pty Ltd [2004] VSC 507

Supreme Court of Victoria|2004-12-09|Before: ASHLEY J

Defamation - application for leave to file Further Amended Defence and Counterclaim - proposed "Polly Peck" defence - whether available in light of David Syme & Co and Anor v Hore Lacy [2000] VSCA 24; (2000) 1 VR 667 - proposed pleading of fair comment - rolled-up plea - need to plead the substance of alleged comment - proposed plea of qualified privilege - deficiencies of intended pleading.

The plaintiffs filed a writ on 7 July 2003. It pleaded more than one cause of action. Insofar as a plea of defamation was raised by paragraphs 8-13, it was founded upon an undated one page newsletter allegedly published by the defendants in or about November 2002. The gist of the pleaded meanings was as follows:

In the case of Tower Systems International (Aust) Pty Ltd ("Tower"), that -

* It falsely claimed that its computer software system (conveniently, "product") was reliable. It did so knowing that its product was defective, and in an endeavour to conceal its deficiencies from the business public.

* The defect in its product caused users to be disturbed in their sleep to the point that it had impacted upon the commercial viability of their business.

* Almost all persons who had gone over to use the software (conveniently, "product") of the corporate defendant, POS Solutions Australia Pty Ltd ("POS") had stated the same reasons for doing so - in essence, that the POS product was superior to Tower's defective product.

In the case of the other plaintiff, Mark Fletcher (alleged to be general manager and a director of Tower), that -

* he was lying when he said that the Tower product was reliable;

* he was complicit in Tower lying about the reliability of its product;

* he was engaging in false denigration of the POS product, and concealment of the defects of the Tower product, in the former case so as to direct attention away from the defects of the Tower product;

* he had intentionally misled the business public concerning the defects of the Tower product by lying about the quality of the POS product, back-up and reputation;

* his lies showed that what he said could not be trusted.

The defendants first filed a defence and counterclaim on 25 August 2003. It is unnecessary to refer to any of its contents. Its filing rather marked the first of a series of attempts by the defendants to plead to the statement of claim, and to raise a counterclaim.

On 17 June 2004, by summons filed the preceding day, the defendants sought, inter alia, leave to file an amended defence and counterclaim. A Master adjourned the hearing of that summons to 12 August.

On 12 August the Master entertained the defendants' application for leave to replead. At the same time he heard an application by the plaintiffs for leave to enter judgment in default of defence. That application was made by summons filed 10 August 2004.

On 3 November 2004 the Master pertinently ordered, on the defendants' summons, that on or before 8 December:

"The defendants file and serve a further amended defence and further amended counterclaim in conformity with"

Reasons which he then delivered. Otherwise his orders set up an interlocutory framework, and provided that the defendants should pay the costs of the application, including reserved costs.

By orders made the same day[1], the Master dismissed the plaintiffs' summons which sought judgment in default of defence.

Now the plaintiffs appeal, by way of rehearing, against the orders made on 3 November 2004. Central to the appeal is the defendants' most recent attempt to replead the defamation defence, and to replead a counterclaim which alleges, inert alia, defamation by the plaintiffs. That attempt is in the form of a document exhibited[2] to the affidavit of the plaintiffs' solicitor, Mr Barry Fried, sworn 11 August 2004. The plaintiffs, it should be appreciated, are not seeking to strike out a pleading which is on foot.

The structure of the proposed further amended defence and counterclaim (conveniently, "the proposed defence") is relevantly as follows. The defendants -

* Deny that it was published of and concerning the plaintiffs.

* Deny that the newsletter was, in its ordinary and natural meaning, defamatory of Tower; and deny that the newsletter meant, or was understood to mean, or was capable of meaning, any of the things alleged by that plaintiff.

* Deny that the newsletter, in its ordinary meaning, was defamatory of Mr Fletcher; and deny that it meant any of the things alleged by that plaintiff.

* Set up a Polly Peck defence in respect of each defendant - in the case of the company, by paragraph 9C; and in the case of Mr Fletcher, by paragraph 9B.

* Further and alternatively, plead that if the newsletter was defamatory of the plaintiffs, so far as it consisted of facts was true in substance and fact; and so far as it consisted of matters of opinion, that such matters were fair comment based on such facts on a matter of public interest - that is "the comparative performance of the service and products of" Tower and POS.

* Further and alternatively, plead that the newsletter was published on an occasion of qualified privilege, that having its genesis in a number of documents published by the plaintiffs to the relevant business community over a period of years. Those documents, the defendants seek to plead, had caused confusion as to the relative merits of the competing products, and as to the veracity of competing claims made about those products by the plaintiffs' and defendants' sides.

* Deny that the meanings pleaded by the plaintiffs were false.

* Plead by counterclaim that six documents published by the plaintiffs in the period 14 January 1994 - 25 November 2002 - each of which is relied upon in connection with the Polly Peck defences - were defamatory of them.

Pausing for a moment, the proposed defence, all other things apart, would put the plaintiffs to their proof on the defamation claims, and to their proof on claims brought under the Trade Practices Act 1974 (Cth). I cannot see any reason why the defendants should be refused leave to file an amended defence which joins issue in that way.

Again, by their proposed counterclaim the defendants (it is convenient to continue to refer to them thus) seek to agitate claims based upon a series of allegedly defamatory documents published by the plaintiffs concerning them over a period of years; and as well claims founded on the provisions of Trade Practices Act and the tort of injurious falsehood. I see no reason in principle why the defendants should not have leave to replead so as to allege the substance of that counterclaim - of which, more later.

Concerning Mr Fletcher, paragraph 9B of the proposed defence seeks to allege that the ordinary and natural meaning of the impugned newsletter was that he -

" (a) had been circulating libellous and misleading information within the newsagency industry about the systems and services of POS; (b) has said things about the service and software of POS that are untrue; (c) has repeatedly published material which attacks the service and software of POS";

and that in each of those meanings the newsletter was true in fact.

The plea that the newsletter was true in fact in those meanings is particularised - essentially by reference to matters elsewhere set out. For that reason is so it is best to go to paragraph 9C. It is that paragraph which pleads the Polly Peck defence in the case of Tower and it is there that particularisation reaches its zenith - or, the plaintiffs would say, its nadir.

Paragraph 9C pleads that the ordinary and natural meaning of the newsletter was that Tower -

"(a) had been circulating libellous and misleading information within the newsagency industry about the systems and services of POS;

(b) supplies software that continually needs to be re-indexed;

(d) supplies software that causes inconvenience to the owners of businesses in which that software is engaged;

(e) has said things about the service of software of POS that are untrue;

(f) has repeatedly published material which attacks the service and software of POS";

and that in those meanings it was true in substance and fact; the plea of truth being very extensively particularised.

Pausing for a moment, it can be seen that paragraph 9C(a)(e) and (f) mirror paragraph 9B(a)(b) and (c). Each of those meanings is concerned with publication - written or oral - of material adverse to the defendants. Within those alleged meanings are two components: first, that the particular plaintiff had published material or said things about the POS product. Second, that what had been published or said was libellous, misleading, untrue, or attacked POS service and software.

Paragraph 9C(b)(c) and (d) are not replicated in paragraph 9B. The meanings there alleged, all set in the present tense - and thus on their face referable to the time of publication of the newsletter in November 2002 - concern the quality of the Tower's product. The defendants there allege that some part of what was said by the newsletter conveyed meanings that Tower supplied a product which, colloquially, was no good; and that such was the truth of the matter.

Whilst the meanings alleged by paragraph 9C(b)(c)(d) are set in the present tense, evidently they call upon events preceding the day of publication. It could only be said in November 2002 that the plaintiff then supplied software which continually needed to be re-indexed, or which froze regularly if not re-indexed, if for a period prior thereto the software had been exhibiting those features. But such an assertion would not be established by proof that those deficiencies had been present years before; still less by proof that other deficiencies had been present years before.

The scope and limits of a Polly Peck defence in this State have been laid down consistently. To be permissible, such a defence must plead a meaning not more serious and not substantially different from the meaning pleaded by the plaintiff[3].

Counsel for the defendants submitted that the meaning pleaded by paragraphs 9B and 9C fell within those confines. Counsel for the plaintiffs submitted, though by reference to the particularisation of those paragraphs, that this was not the case. In my opinion, the defendants' submission could not be accepted.

By paragraph 9B of their proposed defence, the defendants seek to justify meanings which are, I consider, quite different to those pleaded by the statement of claim. Such meanings do not respond, at all, to Mr Fletcher's plea that the article meant that -

* He lied about the reliability of the Tower product.

* He denigrated the POS product, back-up and business reputation to distract the relevant business community from defects in the Tower product, lying in what he said about the POS product.

* His lies showed that he was a man who could not be trusted.

Further, so far as the meanings alleged by paragraph 9B address denigration of the POS product they do not meet the sting of the meanings alleged by Mr Fletcher. There is a distinct difference between factual inaccuracy and lying inaccuracy in things written and said.

Not only do the meanings alleged by paragraph 9B address only some of the meanings alleged by Mr Fletcher, and miss the sting of those meanings so far as they are addressed, in one respect, or perhaps two, they are more serious. So, sub-para (a) refers to the circulation of libellous material; and publication of material "repeatedly" - see sub-para (c) - may go further than the meanings alleged by Mr Fletcher.

It follows from what I have said that in my opinion paragraph 9B does not raise a proper Polly Peck defence. Any problems with particularisation aside, I would not permit it.

I should add this: counsel for the defendants submitted that meanings alleged by the statement of claim were either not defamatory,[4] or contrived or artificial. It is for the ultimate trier of fact to determine those matters. It is not for the defendants to correct those deficiencies under cover of Polly Peck defence which asserts a quite different series of meanings.

I go to paragraph 9C. For reasons explained in connection with identical meanings sought to be alleged by paragraph 9B(a), (b) and (c), I would not permit the defendants to plead the meanings alleged by paragraph 9C(a)(e) and (f).

That takes me to paragraph 9C(b)(c) and (d). Those meanings focus upon the Tower product. Their thrust is that the newsletter meant that Tower supplied a product which was defective and inconvenienced owners of businesses who used it. In my opinion those meanings do not at all meet the sting of the meanings alleged by Tower. The latter focus upon lies allegedly told by Tower about its product; and, so far as paragraph 8(c) and (d) of the statement of claim are concerned, upon reasons given by almost all newsagents who had moved over to use the POS product why they had done so.

Even if it was true that the plaintiffs' product was unreliable, which is what the meanings alleged by paragraph 9C (b) and (c) propose, there is a great difference between those meanings and the core meaning proposed by Tower - that is, that it had lied in claiming that its product was reliable. Paragraph 9C (b) and (c) of the proposed defence do not come to grips with a meaning that Tower lied about its own product as distinct from what it said being simply untrue. That is so notwithstanding paragraph 10(a)-(d) of the statement of claim, which allege that the Tower meanings were false because, inter alia, the Tower product was in fact reliable.

Concerning paragraph 9C (d), the meaning assigned by the defendants is that the plaintiffs' product in fact caused inconvenience to business users. That does not at all meet the meaning assigned by Tower - that is, that almost all newsagents who had moved over to use the POS product had given the "very same reasons" for doing so - reasons to do with the comparative merits of the competing products.

In my opinion, then, paragraph 9C does not raise a proper Polly Peck defence. Quite apart from any problem with particularisation - and it was argument about particularisation which dominated counsel's submissions, although reference was made to Hore Lacy - I would not permit it.

In Anderson v Nationwide News Pty Ltd[5], I ordered that a Polly Peck defence should be struck out. But I permitted the defendant to elaborate upon its bare denial of the meanings alleged by the plaintiff by asserting the meanings which it said the impugned article bore.[6] Presumably the defendants have now identified exactly what it is that they say the newsletter meant; and that such is the content of paragraphs 9B and 9C - that is, excepting the allegation of truth. As presently advised, I see no reason why the defendants should not be permitted to allege those meanings as an elaboration of the bare denials of the meanings alleged by Mr Fletcher and Tower. It will be understood that if the defendants were to elect to do so, no question would arise of them seeking to prove the truth of the meanings alleged - for the defence would not be pleading justification. In that event, the particulars subjoined to paragraphs 9B and 9C would be irrelevant, and should not be pleaded.

Paragraph 9D of the proposed defence is in the terms following:

"Further, and alternatively, if the newsletter referred to the plaintiffs and was defamatory of the plaintiffs (neither of which allegations is admitted but is expressly denied) in so far as the newsletter consists of statements of fact, it is true in substance and in fact; in so far as it consists of matters of opinion, it is fair comment based on such facts on a matter of public interest, namely the comparative performance of the service and products of the second plaintiff and POS."

The plaintiffs complain that the basis for pleading fair comment is not set out in that paragraph. It is not made clear that it is directed to the defamatory publication. The defendants, counsel submitted, needed to be addressing the fairness of their own comments in their November 2002 publications, based upon facts which they intended to prove. Further, the pleadings referred to the issue of comparative performance, presumably - counsel ventured - as at November 2002. Yet no particulars were provided concerning that issue.

For the defendants, counsel submitted that what was pleaded by the proposed paragraph 9D was the orthodox rolled-up plea. Where it is pleaded, the plaintiff is not entitled to particulars of what is comment and what is fact.[7]

The learned Master held that there was nothing to the objections raised for the plaintiffs. It was obvious, he concluded, that the facts and opinions upon which the defendants were basing their fair comment defence were to be found in the meanings proposed by paragraphs 9B and 9C of the proposed defence. He had not been referred to any authority which required the defendants to identify which of the imputations for which they contended were statements of fact, and which were statements of opinion.

Fair comment having been pleaded by the rolled-up plea, the plaintiffs are not entitled to particulars of what was allegedly comment and what was fact. Paragraph 9D is not defective in that respect. On the other hand, I held in Anderson that a defendant should be obliged to specify the substance of the alleged comment[8]. That was not a case involving the rolled-up plea. But my conclusion should extend to such a case. It does not conflict with Watt.

There is another matter which I should mention in the context of the proposed fair comment defence. In Anderson, obiter dicta, I concluded, in effect, that a fair comment defence needed to address the case advanced by the plaintiff, or a permissible variation of it.[9] As I noted a few moments ago, the rolled-up plea was not employed in that case; but I do not consider that my provisional conclusion should be the less applicable. It is very likely that the "statements of fact" and, "fair comment based on such facts" comprehended by paragraph 9D would be well-removed from the meanings attributed to the newsletter by the plaintiffs. So, on the view which I have provisionally taken, the pleading would not make out a good defence. But the issue is certainly doubtful, and I consider that the pleading should be permitted. The rolled-up plea has a confining effect upon the facts which a defendant can seek to establish. Whether, within such confines, the defendants should be permitted to attempt to prove the truth of facts upon which they wish to rely is properly a matter for determination by the trial judge, assisted by full argument.

In the event, I consider that the defendants should be permitted to plead paragraph 9D largely in the form set out in the proposed defence, but subject to them particularising the substance of the alleged comment.

Paragraph 9E of the proposed defence is, by intent, a very detailed pleading of a defence of qualified privilege. The gist of the paragraph is that on a series of occasions over the years the plaintiffs, or one or other of them, had communicated with greater or lesser numbers of people in the newsagency business, both propounding the virtues of the Tower product and denigrating the POS product, back-up and reputation. That created a climate of uncertainty and confusion amongst newsagents[10]. The comparative strengths and weaknesses of the competing products and claims made about them by Tower and POS was a matter of public interest for such persons. POS had an interest or a public or moral duty to address the issues, and the recipients of the impugned newsletter had a corresponding interest in obtaining a publication which did so[11]. The publication of the newsletter was no wider than was necessary to address the issues.

The learned Master considered that paragraph 9E, though subject to modification, should be permitted in a repleaded defence and counterclaim. I agree, although I have reached somewhat different conclusions about the changes required. I must make a number of observations concerning the paragraph as drafted.

First, qualified privilege is a defence. Its starting point is that the defendant published material defamatory of the plaintiff. Paragraph 9E as drafted is not predicated upon a finding - that is, contrary to the defendants' preferred position - that the newsletter was defamatory of the plaintiffs.

Second, paragraph 9E(f) refers to a letter dated 20 April. It is said to be annexure "F" to the proposed defence. Paragraph 9E(g) refers to the so-called "SA Flyer". It is not described as an annexure. Paragraph 9E(h) refers to a letter dated 14 January 1994. It is said to be annexure "H" to the proposed defence. The annexures do not include the letter of 20 April 1995, and the annexure lettered "F" is the SA Flyer. There is an apparent muddle.

Third, paragraph 9E(i) refers to publications by the plaintiffs of documents similar to those particularised earlier, which documents might number as many as 200, in the period November 1996 - November 2003 (sic). The gist of paragraph 9E is that those documents, all details of which were essentially unknown to the defendants either at the time of publication or when the proposed defence was drafted, were publications constituting attacks on the defendants to which the November 2002 newsletter was a response; or were documents which, together with others, gave rise to the alleged confusion which spawned a duty on the part of the defendants to publish the newsletter, and an interest on the part of the newsagents to receive it. The learned Master considered that the sub-paragraph should be permitted, that the issues which it raised should be left until trial. It appears to me, however, that paragraph 9E(i) is altogether too speculative. The Court should be reluctant to permit a pleading the substantial intent of which seems likely to be the authorisation of an exercise in trawling through the documents of the opposing side.

Fourth, each of paragraph 9E(j), (k), (l), (m), (n) and (o), identifying the alleged issues of concern and confusion, refers to -

* The relative strengths and weaknesses of the POS and Tower products; and

* The veracity of the claims made by POS and Tower in relation to the products of the former.

Further, paragraph 9E(j) pleads that the concern and confusion developed "as a result of the publications by the plaintiffs".

Now paragraph 9E(a) - (h) propose meanings of the alleged publications by the plaintiffs which are wholly adverse to the product, service and reputation of POS. There is no other side to the coin. There could be no concern and confusion in 1994, 1995, 1998 and 2002 - or at least in late 2002 - unless there was another side. Nothing is pleaded by paragraph 9E to show that POS made any claims in relation to its product, still less what those claims were, in the timeframe to which sub-paragraphs (a) - (h) relate.

It appears to me, in the event, that paragraph 9E as drafted is deficient in that it pleads a non-sequitur. The defendants should plead both sides of the coin, and then the allegation of resulting concern and confusion.

Fifth, it is implicit in paragraph 9E(l), (m), (n) and (o) that the defendants contend that the newsletter was in fact a response to the alleged concern and confusion created by the plaintiffs' publications. But that is no were plainly stated; and it should be.

Sixth, it is true that some of the publications relied upon by the defendants were very old as at November 2002. It is also true that two of them, as it appears, were published to a single recipient, and that the scope of publication of others is uncertain. Those circumstances do not mean that paragraph 9E should be rejected. They do raise matters that might well be pertinent at trial.

Seventh, it is true that paragraph 9E(a)-(h) specify defamatory meanings which the defendants contend were the meanings of the various publications. Strictly, I think, that would not be necessary. But the defendants, even absent the Polly Peck defence[12] pursue a counterclaim founded upon most of the publications, and I think there is no harm in stating the meanings relied upon in paragraph 9E rather than in the body of the counterclaim - where they are incorporated by reference.

Consequential Alterations to the Proposed Defence

In light of what I have said about paragraphs 9B and 9C of the proposed defence, paragraphs 10 and 11 thereof will need to be recast. So also paragraph 15, which addresses the claim brought under s. 52 of the Trade Practices Act. It is, of course, open to the defendants simply to deny the allegations made by paragraphs 10, and 11 and 15 - always bearing in mind the fact that they deny that the newsletter conveyed any of the meanings alleged by the plaintiffs.

The defendants, I consider, should be able to plead a counterclaim very largely in the form in which it appears in the proposed defence. Some changes are, however, required.

Paragraph 39 of the proposed defence will need to be recast. That is not to deny the counterclaimants' right to specify, within paragraph 39, the matters set out in particulars (e) (i) - (xl) to paragraph 9C of the proposed defence. A similar observation applies with respect to paragraph 45 of the proposed defence.

Further, I consider that "malice", a necessary element of the tort of injurious falsehood, is insufficiently pleaded. There is some doubt what is comprehended by the concept. See, for example, the judgments of Gummow, Kirby and Callinan JJ in Palmer Bruyn & Parker Pty Ltd v Parsons[13]. Assuming that it extends to publication with intent to injure, the formulation appears to be "an intent to injure without just cause or excuse". It appears to me that paragraph 51 of the proposed defence does not address the absence of just cause or excuse; and assuming paragraph 52 is directed to malice, it likewise fails to plead such absence. It may be that the pleader's intention to plead absence of just cause or excuse could be inferred from the circumstances of alleged publication of falsehoods with, colloquially, an intention in the ordinary course of harming the defendants. But still, in my opinion, the draft paragraphs are deficient.

Those matters to one side, I think that there was nothing to the criticisms made of the proposed counterclaim. In particular, it is speculative whether a limitation defence is available to, and if available will be taken by, the defendants to counterclaim in respect of any of the publications referred to in the counterclaim. To reject the counterclaimants' attempt to plead a cause of action reliant on a particular publication in anticipation of a limitation defence would be premature.

Further, I agree with the learned Master's conclusion that whilst the counterclaimants must provide particulars of their alleged economic loss in their claim founded on injurious falsehood, they should not be denied an opportunity to plead that cause of action because they have not yet quantified that loss.

The appeal on the defendants' Summons filed 16 June 2004 must be allowed, for my conclusions are not altogether the same as those reached by the learned Master. Nonetheless, it is the consequence of my Reasons that the defendants should have leave to file and serve a Further Amended Defence and Counterclaim in accordance with those Reasons. Accordingly, the appeal by the plaintiffs in respect of their Summons filed 10 August 2004 should be dismissed. As I earlier noted, the orders made by the learned Master on that Summons have not been authenticated. But that should not prevent my disposing of the appeal against the orders which were in fact made.

Subject to anything that counsel may wish to say as to form, I will make orders in accordance with the following minutes:

On the Plaintiffs' Summons filed 10 August 2004

Appeal allowed. Orders made 3 November 2004 set aside. In lieu thereof order that -

1. The defendants have leave to file and serve by 17 January 2005 a Further Amended Defence and Counterclaim in conformity with the Reasons of the Honourable Justice Ashley delivered this day.

2. The plaintiffs file any Reply and Defence to Counterclaim by 7 February 2005.

3. The parties file and serve affidavits of documents by 14 March 2005.

4. The parties give inspection of discovered documents by 4 April 2005.

5. The proceeding be listed for further directions before the Listing Master on 11 April 2005.

6. The defendants pay the plaintiffs' costs of the application, including any reserved costs.

7. The plaintiffs and defendants bear their respective costs of the appeal.

[3] David Syme Pty Ltd and anor v Hore Lacy [2000] VSCA 24; (2000) 1 VR 667 at [21], [22], [24] per Ormiston JA, and at [46] [52]-[54] and [60]-[61] per Charles JA. The Herald and Weekly Times Ltd and anor v Popovic [2003] VSCA 161 at [20] per Winneke P, and at [275]-[279], [287], [302]-[305], [307]-[318], [324] and [347] per Gillard AJA. Anderson v Nationwide News Pty Ltd [2001] VSC 335 at [14] and [17]; and Gutnick v Dow Jones & Co Inc (No 2) [2003] VSC 79 at [18]- [20].

[4] See paragraph 9(c) of the statement of claim.

[7] Citing Watt v Herald & Weekly Times Ltd [1998] 3 VR 740 at 744-747.

[12] Which sought to make use of those alleged meanings, see paragraph 9C(a) and particulars (a) and (c) subjoined thereto.

[13] [2001] HCA 69; (2001) 208 CLR 388, respectively at 407, 425 and 447-448.

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