Defamation - Fair Comment - Principles to apply to amendment application - Objections to proposed amendments - Fact not comment - Key factual basis for comment not pleaded - Comments do not relate to plaintiff's imputations

Defamation - Justification - Whether alternative imputation vague and meaningless - Imputation lacks necessary specificity - Whether particulars capable of sustaining imputation - Plea of justification deficient

Anderson v Nationwide News Pty Ltd [2001] VSC 335; (2001) 3 VR 619

Anderson v Nationwide News Pty Ltd (No 2) (2001) 3 VR 639

Archer v Channel Seven Perth Pty Ltd [2002] WASC 160

Bickel v John Fairfax & Sons Ltd [1981] 2 NSWLR 474

Bjelke-Petersen v Burns [1988] 2 Qd R 129

Bob Kay Real Estate v Amalgamated Television (1985) 1 NSWLR 505

Branson v Bower [2001] EWHC 460; [2002] QB 737

Clarke v Norton [1910] VicLawRp 83; [1910] VLR 494

Cock v Hughes [2002] WASC 108

Cock v Hughes [2002] WASC 263

David Syme & Co Ltd v Hore-Lacy [2000] VSCA 24; (2000) 1 VR 667

Drummoyne Municipal Council v ABC (1990) 21 NSWLR 135

General Steel Industries Inc v Commissioner for Railways of New South Wales [1964] HCA 69; (1964) 112 CLR 125

Goldsborough v John Fairfax (1934) 34 SR (NSW) 524

Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365

Hunt v Star Newspaper (1908) 2 KB 309

Jones v Skelton (1963) 1 WLR 1362

Kemsley v Foote [1952] AC 345

London Artists Ltd v Littler [1968] EWCA Civ 3; (1969) 2 QB 375

Mickelberg v 6PR Southern Cross Radio Pty Ltd [2003] WASC 209

Moyer v Flint [2002] WASC 48

Nationwide News Pty Ltd v Moodie [2003] WASCA 273

O'Shaughnessy v Mirror Newspapers Ltd [1970] HCA 52; (1970) 125 CLR 166

Pryke v Advertising Newspapers (1984) 37 SASR 175

Rocca v Manhire (1992) 57 SASR 224

Simms v Wran [1984] 1 NSWLR 317

Smiths Newspapers v Becker [1932] HCA 39; (1932) 47 CLR 279

Telnikoff v Matusevitch [1992] UKHL 2; [1992] 2 AC 343

Thompson v Truth & Sportsman (1932) 34 SR (NSW) 21

Birmingham v West Australian Newspapers Ltd [1999] WASC 19

Crane v Nationwide News Pty Ltd [1999] WASC 113

Gascoine v McGinty (1995) 14 WAR 542

Lewis v Daily Telegraph Ltd [1964] AC 234

Mirror Newspapers Ltd v Harrison [1982] HCA 50; (1982) 149 CLR 293

Monte v Mirror Newspapers Ltd (1979) 2 NSWLR 663

Morris v Newcastle Newspapers Pty Ltd (1985) 1 NSWLR 260

Slatyer v Daily Telegraph Newspaper Co Ltd [1908] HCA 22; (1908) 6 CLR 1

Smith v Littlemore (1996) 15 WAR 289

1 LE MIERE J: The plaintiff has brought an action for defamation against the first and second defendants. By application to the case Management Registrar, 27 February 2004, the defendants applied for leave to amend their defence. The Case Management Registrar has referred the application for hearing by a defamation Judge.

2 The plaintiff pleads that he is and was at all material times the chief executive officer of ERG Ltd, a corporation incorporated under the Corporations Act 2001 (Cth) and listed upon the Australian Stock Exchange. The first defendant is the publisher of "The Australian" newspaper.

3 On 20 March 2002, the first defendant published in "The Australian" newspaper an article written by the second defendant and entitled "Smart Card Darling is a Joker After All". The article commences:

"Forget about the Enrons of the world. Western Australia has its own share market blow-up in the shape of high-tech company ERG.

Once a nationwide market darling, ERG is now a serious source of embarrassment to stockbrokers who recommended their clients buy their shares.

ERG chief executive Peter Fogarty has few friends left in Sydney and Melbourne investment circles. Institutional investors have dumped the stock and Western Australian retail investors have been stretchered out in numbers."

4 The article goes on to refer to the fall in the price of ERG shares and that some analysts say ERG is still overpriced. The article then says:

"Yet Fogarty has dug in, saying he plans to hang around at ERG for another five years. Investors are screaming for change, but Fogarty appears impervious to the pressure.

He not only denies the accusations about ERG's position, but seems in denial about them."

5 The article then refers to the plaintiff having never been far from controversy and states that a number of ERG contracts with transport system operators have become the subject of legal dispute.

"But what has elevated the ERG affair to national significance is the manner in which the company's financial image has fractured. Investors, analysts and brokers look like idiots for not picking the problems earlier.

Stock market professionals hate that, and punish those they believe have spun a more optimistic line than they should. Happy to book profits when ERG shares were heading for the stratosphere, they are now baying for blood.

At issue are the multimillion dollar losses ERG has sprung on the market - $199 million last week - as more conservative accounting disciplines are imposed.

In the past, ERG counted as revenue in its accounts transactions for which no cash changed hands. In those transactions, ERG received payment in the form of shares in companies set up as part of the deal.

When ERG came to work out its profits, it counted the shares in off-balance-sheet entities as income. The company received nothing in cash, but the profits formed a platform that allowed ERG to go back into the capital markets for more money from investors."

7 The article goes on to say that ERG has been cash flow negative for most of its corporate life. The article says that:

"ERG had the market-spin going at full speed and was able to convince investors and debt providers to keep filling up the tank."

8 The article refers to fundraising by ERG and then continues:

"Looking back, the cash flow details were there in the accounts for all to see. But the market was looking elsewhere, bewitched by spectacular headline figures on smart card contracts around the world.

Fogarty is now a pariah in the financial markets, but insists his strategy and personal involvement will restore shareholder value.

The clock is ticking."

9 The plaintiff pleads that the article gives rise to the following defamatory imputations:

(a) The plaintiff had deceived investors and their advisers about the true financial position of ERG.

(b) The plaintiff, as chief executive of ERG, had caused the company to engage in accounting practices which were calculated to deceive investors and their advisers about ERG's financial position.

(c) The plaintiff had so misconducted himself in the management of ERG's affairs that it was proper that he should resign as its chief executive.

(d) The plaintiff had become an outcast in the financial community because of the financial practices he had caused ERG to adopt.

10 The plaintiff claims compensatory and exemplary damages.

11 The defendants admit that the second defendant wrote and the first defendant published the article. They deny that the article was published of and concerning the plaintiff. The defendants deny that the article bore or was understood to bear or was capable of bearing any of the imputations pleaded by the plaintiff and deny that the plaintiff is entitled to any relief.

12 The defendants apply to amend their defence to plead two new defences. The first is a plea of fair comment. The second is a limited plea of justification. The plea of fair comment is sought to be introduced by a new par 7A. The justification plea is sought to be introduced by a new par 7B.

"Further and in the alternative if, which is denied, the matter complained of referred to the plaintiff and was defamatory of him, the first and second defendants say that it was a fair comment on a matter of public interest.

Public interest

(1) ERG Limited was at all material times a public company listed upon the Australian Stock Exchange.

(2) The plaintiff was at all material times the chief executive of ERG Limited.

Particulars of facts upon which comment is based

The following facts contained in the matter complained of:

(1) ERG Limited shares had once been very popular with share market investors nationwide.

(2) Institutional investors had dumped ERG Limited shares.

(3) Many Western Australian retail investors had suffered large losses as a result of investing in ERG Limited shares.

(4) Rarely does the share market see a fall like the fall of ERG Limited.

(5) The share price of ERG Limited shares at the close of the stock exchange on 19 March 2002 was 26 cents

(6) In mid 2000 the share price of ERG Limited shares had been $4.27.

(7) In mid 2000 ERG Limited had a market valuation close to the market valuation of Wesfarmers Limited.

(8) As at March 2002 ERG Limited had a market valuation of $221 million.

(9) As at March 2002 Wesfarmers Limited had a market valuation of about $11.1 billion.

(10) Some analysts say ERG Limited is still overpriced.

(11) Investors had been calling for change in the management of ERG Limited.

(12) The plaintiff had stated that he planned to remain as chief executive for another 5 years.

(13) A number of ERG Limited contracts with transport system operators had become the subject of legal dispute including contracts in Sydney and Melbourne.

(14) ERG Limited had announced losses of $199 million the previous week as a result of more conservative accounting disciplines being imposed.

(15) In the past ERG Limited counted as revenue in its accounts transactions for which no cash changed hands.

(16) In those transactions, ERG Limited received payment in the form of shares in companies set up as part of the transaction.

(17) When ERG Limited came to work out its profits it counted the shares in these companies as income.

(18) ERG Limited received nothing in cash but the profits claimed formed a platform that allowed ERG Limited to go back to capital markets for more money from investors.

(19) For most if not all of its life as a company ERG Limited had been cashflow negative.

(20) ERG Limited had raised close to $600 million in shares and convertible note issues in 10 years.

(21) The last $104 million was raised in January 2002 which was less than eight weeks before ERG Limited warned the market about the latest losses.

(22) The plaintiff was insisting that his strategy and personal involvement will restore shareholder value.

(1) The plaintiff had allowed ERG Limited to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company.

(2) There was pressure on the plaintiff to resign as chief executive of ERG Limited because of the poor financial performance of ERG Limited.

(3) The plaintiff had become an outcast in financial markets because of the poor financial performance of ERG Limited."

Principles to be applied to amendment application

14 The proposed amendments should not be allowed if the pleas they seek to introduce are so obviously untenable that they cannot possibly succeed or are manifestly groundless. Great care must be exercised to ensure that the party whose plea is attacked is not improperly deprived of his opportunity to put his case at trial: General Steel Industries Inc v Commissioner for Railways of New South Wales [1964] HCA 69; (1964) 112 CLR 125 at 130. A Court at first instance, and more so on a pleadings summons, should be careful not to risk stifling the development of the law, particularly in circumstances where the law is developing: Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365 at 373.

15 The plaintiff objects to this amendment on three grounds. I will consider each in turn.

16 The plaintiff submits that each of the particulars pertaining to the substance of the comment in par 7A of the proposed defence are statements of fact and not comment.

17 If words are reasonably capable of being regarded as a statement of fact or of being regarded as an expression of opinion, it is for the jury to decide which they are: Jones v Skelton (1963) 1 WLR 1362 at 1379. The issue should not be taken away from the jury except in the clearest cases: O'Shaughnessy v Mirror Newspapers Ltd [1970] HCA 52; (1970) 125 CLR 166 per Barwick CJ, McTiernan, Menzies and Owen JJ, at 173 - 174.

18 Defamatory statements may be classified as either statements of fact or statements of opinion, depending upon their form and context. A statement of fact asserts some objectively verifiable matter. In contrast, a statement of comment, or opinion, expresses a deduction, inference, conclusion, criticism, judgment, remark, observation, etcetera, which is based upon factual matters: see Clarke v Norton [1910] VicLawRp 83; [1910] VLR 494 at 499, per Cussen J, recently applied in Branson v Bower [2001] EWHC 460; [2002] QB 737; Goldsborough v John Fairfax (1934) 34 SR (NSW) 524 at 531; Bjelke-Petersen v Burns [1988] 2 Qd R 129 at 131; Rocca v Manhire (1992) 57 SASR 224 at 229.

19 In order to qualify as a comment, the statement in question must be a pure expression of opinion; it must not be intertwined with or impliedly make any factual assertion: Hunt v Star Newspaper (1908) 2 KB 309 at 319; Thompson v Truth & Sportsman (1932) 34 SR(NSW) 21 at 24; Goldsborough v John Fairfax & Sons Ltd (supra) at 531; Pryke v Advertising Newspapers (1984) 37 SASR 175 at 191; Rocca v Manhire (1992) 57 SASR 224 at 229.

20 The language used and the context in which it appears must be examined in order to determine the nature of a given statement: Clarke v Norton [1910] VicLawRp 83; [1910] VLR 494 at 507; Smiths Newspapers v Becker [1932] HCA 39; (1932) 47 CLR 279 at 302 - 304; Rocca v Manhire (1992) 57 SASR 224 at 235; Bob Kay Real Estate v Amalgamated Television (1985) 1 NSWLR 505 at 511; Telnikoff v Matusevitch [1992] UKHL 2; [1992] 2 AC 343 at 358.

21 The test to be applied is objective: would the ordinary reasonable person have understood the statement as an expression of an opinion: Bickel v John Fairfax & Sons Ltd [1981] 2 NSWLR 474 at 490; Simms v Wran [1984] 1 NSWLR 317 at 323; Bob Kay Real Estate v Amalgamated Television (1985) 1 NSWLR 505 at 511; Bjelke-Petersen v Burns [1988] 2 Qd R 129 at 131; Rocca v Manhire (1992) 57 SASR 224 at 235.

22 The resolution of the question of what is fact and what is comment depends upon either the form in which the matter complained of itself is expressed or the context in which it was published, and not at all upon the form in which the plaintiff has chosen subsequently to express the imputation for which he contends: see Bob Kay Real Estate v Amalgamated Television (1985) 1 NSWLR 505, per Hunt J at 511, citing Goldsborough v John Fairfax & Sons Ltd (supra) at 531 - 532; Kemsley v Foote [1952] AC 345 at 356 - 57.

23 The defence of comment is directed to the character of the material published. In order to determine whether the defendant published a comment, the jury must consider not the imputation pleaded by the plaintiff, nor the substance of the comment pleaded by the defendant, but rather the matter which the defendant published, to see whether it was understood by the reader as having been intended to be an expression of opinion. In order to determine whether the reader understood what the defendant published as having been intended as a comment, the law requires the jury to consider the form and context of what was published, not the form in which the defendant has chosen subsequently to express the substance of the comment for which he contends. The Court must therefore, in determining whether the matter published is capable of being comment, go beyond the substance of the comment particularised by the defendant and consider the raw material of the actual words published.

24 The defendants have pleaded the substance of the comments that they submit are made by the article. To determine whether the words complained of are capable of being comment, it is necessary to examine the words of the article and determine whether they are capable of giving rise to a comment to the effect of each of the particulars of the substance of the comment pleaded by the defendants.

25 The first particular of the substance of the comment pleaded by the defendants is: "The plaintiff had allowed ERG Limited to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company."

26 Senior Counsel for the plaintiff, Mr W S Martin QC, submits that this particular raises two contentious matters. The first is the conduct of the plaintiff, that is that the plaintiff had allowed ERG to use a certain accounting practice. The second is the quality of that conduct, that is that the accounting practice presented to investors an exaggerated view of the financial position of the company. Mr Martin submits that the first matter is fact not comment.

27 In response, counsel for the defendants, Mr S M Davies, submits that the article is reasonably capable of giving rise to a comment to the effect that the plaintiff had allowed ERG to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company. The accounting practice is arguably identified by the article. The article says that ERG counted as revenue in its accounts transactions for which no cash changed hands. In those transactions, ERG received payment in the form of shares in companies set up as part of the deal. When ERG came to work out its profits, it counted the shares in off-balance-sheet entities as income. The article says that last week ERG announced to the market losses of $199 million as a result of more conservative accounting disciplines being imposed.

28 Mr Davies submits that the defendants are entitled to an inference that the plaintiff would have known of those matters and hence could be considered to have allowed them.

29 In my view, par 1 of the particulars of the substance of comment is not incapable of being a comment. An inference of fact deduced from other facts can be a comment for the purposes of the defence: Kemsley v Foote [1952] AC 345 at 356 - 357, and London Artists Ltd v Littler [1968] EWCA Civ 3; (1969) 2 QB 375 at 395 - 396.

30 The article arguably identifies the relevant accounting practice. That that practice presented to investors an exaggerated view of the financial position of the company is capable of being understood by readers to be a statement of the author's opinion.

31 The remaining question is whether a reasonable reader could arguably have understood the author to be saying, as a matter of opinion not fact, that the plaintiff allowed ERG to use that accounting practice. In my view, the particular of the substance of the comment pleaded by the defendants is ambiguous. It might mean that the plaintiff knew that ERG used the accounting practice and agreed to or tolerated it. Alternatively, it might mean that the plaintiff permitted involuntarily the use of the accounting practice by neglect. A reasonable reader could arguably have understood the author to be saying the second meaning as a matter of opinion, but not the first. The pleaded substance of the comment is not confined to the second meaning. The pleaded substance of the comment at least includes the first meaning. Indeed, it is more likely to be understood by a jury to carry that meaning than the second meaning. In those circumstances, I will not grant leave to amend the defence to plead that the article was a fair comment to the effect pleaded in particular 1 of the particulars of the substance of the comment.

32 It would be different if the defendants pleaded that the plaintiff knew that ERG had used the accounting practice and pleaded that that was one of the facts upon which the comment was based. Counsel for the defendants submitted that that knowledge might be inferred from the fact that the plaintiff was the CEO of ERG and from the other facts pleaded as particulars of facts upon which comment is based. In my view, it would be necessary for the defendants to plead, as particulars of facts upon which the comment is based, that the plaintiff was the CEO of ERG and that it is to be inferred from that and other stated facts that the plaintiff knew at the material times that ERG had used the accounting practice. In my view, if the defendants had pleaded in that form it would be arguable that the reasonable reader could understand the author to be saying as an expression of opinion that the plaintiff had allowed ERG to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company. The article says that ERG had a market valuation of $221 million. The announced losses of $199 million are manifestly very significant to the company. The plaintiff is the chief executive of the company. It is arguable that a reasonable reader could understand the author to be saying, as a matter of opinion and not fact, that the plaintiff, as CEO of the company, had allowed ERG to use the accounting practice. That does not, of course, mean that a jury would find that the words complained of were a comment to the effect set out in par (1) of the particulars of the substance of the comment, rather than a statement of fact. That would be a matter for the tribunal of fact.

33 Paragraph (2) of the particulars of the substance of the comment is: "There was pressure on the plaintiff to resign as chief executive of ERG Limited because of the poor financial performance of ERG Limited".

34 Counsel for the defendants says that, in the context of the article, this is capable of being a comment. Counsel said that there was pressure on the plaintiff to resign is really a matter of opinion based on how one construes or draws conclusions from what is happening with the investors and so forth.

35 In my view, par (2) of the particulars of the substance of comment is reasonably capable of being understood by a reader as a comment. The article says that the plaintiff has few friends left in Sydney and Melbourne investment circles. Institutional investors are said to have dumped the stock and Western Australian retail investors "have been stretchered out in numbers". The article goes on to say that investors have been calling for change but the plaintiff appeared to be impervious to the pressure. That there was pressure on the plaintiff to resign as chief executive of ERG because of the poor financial performance of ERG is capable of being understood by the reader as a comment upon the facts stated in the article. Of course, the defence of fair comment will fail if the defendant is not able to establish the facts on which the comment is pleaded to be based, including that investors have been calling for change in the management of ERG, that is the resignation of the plaintiff.

36 The plaintiff makes a further complaint about par (2) of the particulars of the substance of the comment. Mr Martin QC submitted that "it's not a defamatory imputation because it doesn't identify a quality, act or conduct on the part of the plaintiff that would lower him the esteem of right-thinking members of the community. It just says there are other people out there who are doing these things. So put another way, in the familiar language, it's not the final distillation of the defamatory sting." In my view, the pleading of the substance of the comment does not need to be the final distillation of the defamatory sting. The defendants are not pleading an alternative defamatory imputation. The defendants are pleading the substance of the comment.

37 The third particular of the substance of the comment is, "The plaintiff had become an outcast in financial markets because of the poor financial performance of ERG Limited."

38 The plaintiff submits that that statement is not a characterisation of the plaintiff's conduct, but rather a statement of fact.

39 In my view, the particular is capable of being understood by a reasonable reader to be a comment by the author, not a statement of fact. The article says that the plaintiff has few friends left in Sydney and Melbourne investment circles, that institutional investors have dumped the stock, Western Australian retail investors have been stretchered out in numbers, and that investors are screaming for change. The article sets out the reasons the author says has led to that situation. Those reasons might be understood by a reasonable reader to be the poor financial performance of ERG, in particular the large losses announced.

2. Key factual basis for comment not pleaded

40 The plaintiff submits that none of the comments pleaded, or proposed to be pleaded, by the defendants are capable of arising from the facts pleaded under the heading "the particulars of facts upon which comment is based". The plaintiff says that is because there is almost no reference at all to the plaintiff in any of those facts.

41 The defendants submit that the first pleaded comment, that the plaintiff had allowed ERG to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company, is capable of arising from the facts particularised at subpars (14) to (21) of the proposed par 7A, together with the fact pleaded in par 7A under the heading "Public interest", that the plaintiff was at all material times the chief executive officer of ERG.

42 I have said earlier that the proposed pleading is defective in that the defendants have not pleaded, as facts upon which the comment is based, that the plaintiff was at all material times CEO of ERG, that it is to be inferred that the plaintiff knew at the material time or times that ERG had used the accounting practice and the facts from which that inference is to be made.

43 I am not satisfied that the defendants' position is so manifestly unarguable or untenable that leave should not be granted to amend if the defendants pleaded, as facts on which the comment is based, the additional facts concerning the plaintiff I have referred to. The defendants say that the inference is reasonably open that the plaintiff knew of, and allowed, the identified accounting practice to be used. The inference might be drawn from the facts that the plaintiff was at all material times the chief executive officer of ERG and the accounting practice related to the transactions undertaken by ERG which generated the profits that allowed ERG to go back to capital markets for more money from investors. The significance of the profits generated from those transactions is shown by the further alleged fact that for most, if not all of its life as a company, ERG had been cash flow negative.

44 The defendants submit that the second pleaded comment, that there was pressure on the plaintiff to resign as chief executive officer of ERG Ltd because of the poor financial performance of ERG Ltd, is capable of arising from all of the facts particularised considered together. I accept that the pleaded comment is arguably capable of arising from the facts particularised.

45 The defendants submit that the third pleaded comment, that the plaintiff had become an outcast in financial markets because of the poor financial performance of ERG Ltd, is also capable of arising from all of the facts particularised considered together. Again, I consider that that plea is not so manifestly untenable that it should not be allowed.

3. Comments do not relate to the plaintiff's imputations

46 The plaintiff submits that the alleged comments do not relate to the imputations upon which the plaintiff relies - contrary to the principle in Anderson v Nationwide News Pty Ltd [2001] VSC 335; (2001) 3 VR 619

47 In Anderson v Nationwide News, the plaintiff was the chief executive officer and managing director of BHP Ltd. He sued the defendant for defamation in respect of a newspaper article concerning BHP's merger with Billiton Plc. The plaintiff alleged that in its ordinary and natural meaning, the article meant and was understood to mean that the plaintiff had promoted and supported the merger for ulterior personal purposes, that he had contrived the merger for those purposes and that he had thereby breached his duties to BHP and its shareholders. By its defence, the defendant denied the plaintiff's imputations and in par 8 alleged that in its ordinary and natural meaning the article meant and was understood to mean that the plaintiff was promoting and supporting the merger on terms which did not favour BHP or its shareholders, that the plaintiff was promoting and supporting the merger on terms which were not as favourable as they should have been to BHP and its shareholders, and that in each of those meanings the article was true in substance and in fact. Paragraph 9 of the defence alleged that the article was fair comment on a matter of public interest. The plaintiff requested particulars of (a) the meaning or meanings in which it was alleged that the article was fair comment, (b) the material facts on which the comment was based, and (c) the matters of public interest. The defendant responded under cover of objection, (a) that the meanings it relied on were those pleaded in par 8 of the defence, (b) that it relied on the facts stated in the article and, in particular, that BHP shareholders were paying too much and losing control of the company, and (c) that the merger, takeover, control and operation of one of Australia's largest and most prominent companies were matters of public interest and the subject matters of the article. The plaintiff applied for orders striking out pars 8 and 9 of the defence. Ashley J dealt first with the challenge to the plea of justification in par 8. His Honour held that although the meanings pleaded by way of justification were capable of arising, they were impermissible because they were substantially different from the plaintiff's pleading meanings. The sting of the libel as pleaded by the plaintiff was that the plaintiff had acted for ulterior motives and that was radically different from the sting which the defendant sought to justify. Ashley J then turned to the challenge to the plea of fair comment in par 9 of the defence. His Honour held that having regard to the further and better particulars under par 9 of the defence, it could not be said that the meanings in which the defendant alleged the article was fair comment were not open. His Honour then held that a defendant pleading fair comment is obliged to specify the substance of the alleged comment. It is not sufficient for the defendant to identify the matter of public interest commented on. However, the plaintiff is not entitled to particulars of the meanings in which it is alleged that the article is fair comment. His Honour held that where a plaintiff sues on an entire article, alleging that it bears a particular defamatory meaning (not necessarily the only defamatory meaning of the article) a defence of fair comment is untenable unless it pertains specifically to the defamatory meaning pleaded or a permissible variation thereof. His Honour did not strike out par 9 of the defence because the defendant had not been asked to provide and had not provided particulars of the substance of the alleged comment.

48 Subsequently, the defendant provided particulars that the substance of the comment "was that the plaintiff was promoting and supporting a merger of BHP and Billiton on terms: (a) which did not favour BHP or its shareholders; (b) which were not as favourable as they should have been to BHP and its shareholders." The plaintiff made a fresh application to strike out par 9 of the defence. That application was heard by Bongiorno J in Anderson v Nationwide News Pty Ltd (No 2) (2001) 3 VR 639. Bongiorno J struck out par 9 of the amended defence on the ground that it did not disclose a defence to the plaintiff's claim. His Honour held that the sting of the libel alleged by the plaintiff was the allegation that he had an ulterior motive; the comment, pleaded by the defendant, went only to a lack of business judgment. It did not meet the libel. If the article meant no more than the defendant contended, then the defendant would succeed in the action, not because of any fair comment defence, but because the plaintiff would not have established the libel of which he complained.

49 It has at times been suggested in that in Moyer v Flint [2002] WASC 48 McLure J declined to follow Anderson v Nationwide News. However, at [29] of her judgment, McLure J said:

"It is not suggested that what the defendants have identified as fair comment goes outside the realms of the imputations capable of arising from the words complained of. The only question in issue in this case is whether the defendant should be obliged to state the substance of the comment. I accept that there may be occasions when it is appropriate for a defendant to do so, for instance, where it is unclear whether it is capable of satisfying the test of fair comment by reference to the range of permissible meanings: Control Risks Ltd v New English Library Ltd (1989) 3 All ER 577; Sian Lloyd v Express Newspapers Plc [1997] EWCA Civ 1319 ..."

50 In Cock v Hughes [2002] WASC 108, Hasluck J followed Anderson v Nationwide News. His Honour held, at [46] of his reasons, that the fair comment plea must be directed not simply to the matters discussed in the words complained of, but to the sting of the libel.

51 In Archer v Channel Seven Perth Pty Ltd [2002] WASC 160, Hasluck J held that the defendant will be required to plead the substance of the comment where it is necessary to do so, so that the plaintiff will know with precision the case to be met.

52 In Cock v Hughes [2002] WASC 263, McLure said at [8]:

"The genesis of the rule in the Anderson cases is the limitation imposed on the Polly Peck justification defence by the Victorian Court of Appeal in the decision of David Syme & Co Ltd v Hore-Lacey [2000] VSCA 24; (2000) 1 VR 667. It is said that, by parity of reasoning, the substance of the comment cannot be "substantially different" from the imputations alleged by the plaintiff. This is the test applied by the Court of Appeal in Hore-Lacey to the Polly Peck defence and followed by Ashley J and Bongiorno J in the Anderson cases.

I remain of the view I expressed in Vitale v Bednall [2001] WASC 278, and Moir v Flint [2002] WASC 48. That is, it is arguable that the test of permissible variation for the plaintiff's imputations is too narrowly formulated in the Court of Appeal in Hore-Lacey."

53 McLure J appears to accept that the substance of a comment must be a permissible variation of the plaintiff's pleaded imputations. It was the test of permissible variation that her Honour considered to have been arguably too narrowly formulated by the Victorian Court of Appeal in Hore-Lacey.

54 In Mickelberg v 6PR Southern Cross Radio Pty Ltd [2003] WASC 209, Master Newnes said that in all but those cases where the comment is obvious, a defendant should plead the substance of the comment relied on so that the plaintiff knows the case they have to meet. The Master added that, in relation to the pleading of the substance of the comment, he should not be taken as necessarily accepting the view expressed in Anderson v Nationwide News, that a defence of fair comment is liable to be struck out if the substance of the comment indicates that the defence relies on meanings substantially different from those pleaded by the plaintiff.

55 In Nationwide News Pty Ltd v Moodie [2003] WASCA 273, the defendant sought to advance a Polly Peck plea that the words complained of did not have the meaning contended for by the plaintiff, but a different meaning and in that meaning they were true. The issue before the Court was whether the defendant should be permitted to advance the Polly Peck plea. Each member of the Full Court held that the Polly Peck plea must be a permissible variant of the imputations pleaded by the plaintiff. However, their Honours differed as to what is a permissible variant of the imputation pleaded by the plaintiff. Anderson J held, in effect, that a Polly Peck plea is confined to an alternative meaning which is not substantially different from or more serious than the imputations pleaded by the plaintiff. Steytler J held that the meanings pleaded by the defendant were permissible because they were comprehended within the meanings pleaded by the plaintiff, were no less injurious than those pleaded by the plaintiff, were not substantially different from those pleaded by the plaintiff and did not focus on some different factual basis. McLure J held that the test that the Polly Peck plea must be a nuance or variant not substantially different from or more serious than that proposed by the plaintiff, as formulated by Ormiston JA in David Syme & Co Ltd v Hore-Lacy [2000] VSCA 24; (2000) 1 VR 667, is arguably unduly narrow and it was arguable that a Polly Peck defence may be pleaded in respect of a meaning "less injurious to the plaintiff's reputation but still defamatory of him."

56 In my view, Nationwide News Pty Ltd v Moodie is authority for the propositions that a defendant who pleads a Polly Peck defence is limited to meanings upon which the plaintiff himself would be entitled to a verdict on the pleadings as they stand and that those meanings are meanings which are not substantially different from or more serious than the imputations pleaded in the statement of claim: see Anderson J at [10] - [14], Steytler J at [60].

57 In my view, the same principles apply to a plea of fair comment. That is, a defence of fair comment will be struck out if the substance of the comment particularised by the defendant indicates that the defence essentially relies on meanings substantially different from those pleaded by the plaintiff.

58 That principle is described by Tobin and Sexton in "Australian Defamation Law and Practice" at [25,195], as a novel proposition and one that is likely to add a further layer of complexity to a defence that ought to be - and perhaps is - conceptually quite straightforward. The authors say that if at trial the comment defence is premised on meanings substantially different from those pleaded by the plaintiff - and are found to arise - then it would simply fail. In my view, that illustrates why the principle explained by Ashley J in Anderson v Nationwide News is sound and should be followed.

59 In my view, the comment the substance of which is set out in par 1 of the particulars of the substance of the comment in par 7A of the proposed defence is not sufficiently different from the imputations pleaded by the plaintiff for the plea to be struck out. The comment is a less injurious imputation than but not substantially different from imputations (a) and (b) pleaded by the plaintiff.

60 Senior Counsel for the plaintiff submits that the second and third particulars of the substance of the comment are substantially different from the imputations pleaded by the plaintiff and should not be permitted. Senior Counsel submits that the substance of those comments deals with the views of third parties, whereas imputations (c) and (d) pleaded by the plaintiff focus on the conduct of the plaintiff.

61 Imputations (c) and (d) pleaded by the plaintiff focus on the conduct of the plaintiff. Particular (2) of the substance of the comment focuses on the attitude and actions of third parties. In my view, if the jury was to find that the article gave rise to the meaning that there was pressure on the plaintiff to resign as chief executive officer of ERG because of the poor financial performance of ERG, the plaintiff would not be entitled to a verdict. That is because it is a substantially different imputation from that pleaded by the plaintiff. It follows that particular (2) of the particulars of the substance of the comment is an impermissible plea.

62 Particular (3) of the particulars of the substance of the comment is superficially similar to imputation (d) pleaded by the plaintiff. The comment and the imputation both commence with the notion that the plaintiff had become an outcast in financial markets or the financial community. The comment and the imputation then go on to specify why the plaintiff has become such an outcast. The reasons specified in the comment and the imputation respectively are different. The reason specified in the imputation is the financial practices the plaintiff had caused ERG to adopt. The reason specified in the comment is the poor financial performance of ERG. In my view, the plaintiff would not be entitled to a verdict if the jury found that the article gave rise to the meaning that the plaintiff had become an outcast in financial markets because of the poor financial performance of ERG. It follows that particular (3) of the substance of the comment is an impermissible plea.

63 I would refuse leave to amend the defence in accordance with par 7A.

64 The defendants seek leave to plead justification in proposed par 7B of the defence in these terms:

"Further and alternatively to par 7A hereof, if, which is denied, the matter complained of is not wholly a matter of fair comment, the first and second defendants say that the only imputation that arises from the words referred to that is not a comment is that the plaintiff had allowed ERG Limited to use an accounting practice that had presented to investors an exaggerated view of the financial position of the company, which was true in substance and in fact.

(i) As at 30 June 2001 ERG Limited had recorded in its accounts as assets certain values attributed to shares held by ERG Limited in other companies including $14.174 million attributed to shares in Prepayment Cards Limited; $27.426 million attributed to shares in Triumphant Launch Ltd; $23.752 million attributed to shares in ECard Pty Ltd (hereafter the 'Other Company Shares').

(ii) As at 30 June 2001 ERG Limited's accounts disclosed total net assets of $273.185 million.

(iii) Prior to 30 June 2001 ERG Limited had a practice of accepting 'non-cash licence fees' in the form of shares in other companies that acquired a licence to use ERG Limited's technology.

(iv) The 'non-cash licence fees' were treated in the accounts as revenue in the year in which they were received.

(v) The shares received by way of 'non-cash licence fess' were also treated as an asset of ERG Ltd.

(vi) Some of the Other Company Shares were shares that had been received as 'non-cash licence fees'.

(vii) During the year ended 30 June 2001 ERG Limited received from a German company called 'card.etc.AG' shares in that company by way of a 'non-cash licence fee'.

(viii) The directors of ERG Limited regarded the 'non-cash licence fee' from 'card.etc.AG' as having a value of $31 million.

(ix) For the purposes of the preparation of the accounts of ERG Limited for the year ended 30 June 2001 the auditors of ERG Limited advised ERG Limited that the business plan of 'card.etc.AG' was not sufficiently advanced to be able to form an opinion as to the value of the 'non-cash licence fee' from card.etc.AG.

(x) For the purposes of the preparation of the accounts of ERG Limited for the year ended 30 June 2001 the auditors of ERG Limited advised ERG Limited that they would not recognise the 'non-cash licence fee' from 'card.etc.AG' as representing revenue of $31 million in the year ended 30 June 2001.

(xi) On or about 20 November 2002 ERG Limited issued a prospectus to raise $104 million.

(xii) The prospectus referred to the Other Company Shares as being assets valued at $65.351 million.

(xiii) The prospectus did not disclose, as was the fact, that the advice that the auditors of ERG Limited had given to ERG Limited in relation to the value of 'non-cash licence fees' cast doubt on:

(A) The value of the Other Company Shares as recorded in the accounts for the year ended 30 June 2001 and as recorded in the prospectus.

(B) The ability of ERG Limited to continue to treat the receipt of 'non-cash licence fees' as revenue in the year in which they were received.

(C) The ability of ERG Limited to continue to treat 'non-cash licence fees' as assets.

(xiv) On or about 8 January 2002 the capital raising was completed and ERG Limited had raised additional share capital from investors in the amount of approximately $104 million.

(xv) On or about 11 March 2002, ERG Ltd announced that it had suffered losses in the half year to 31 December 2001 of $199 million.

(xvi) The losses were caused principally by:

(A) The writing down of the carrying value of the Other Company Shares to nil.

(B) ERG Limited not being able to recognise as revenue a 'non-cash licence fee' in the sum of $55 million received during the half year by way of 'non-cash licence fees'.

(xvii) The writing down of the carrying value of the Other Company Shares was necessary in order to apply to the Other Company Shares accounting standards that were consistent with the advice hat had been given by the auditors referred to in paragraphs (ix), and (x) hereof.

(xviii) The non recognition of the 'non-cash licence fee' in the sum of $55 million was necessary in order to apply to that item accounting standards that were consistent with the advice that had been given by the auditors referred to in paragraphs (ix) and (x) hereof."

65 The plaintiff objects to the proposed plea of justification on two grounds. First, that the alternative imputation pleaded in par 7B is vague and meaningless and secondly that the particulars relied on in support of the plea are incapable of sustaining the imputation that is asserted.

66 The plaintiff submits that the imputation that is sought to be justified is vague and embarrassing. What, for example, the plaintiff submits, does "exaggerated view" mean? Does it mean exaggerated favourably or unfavourably, is it referring to the balance sheet or the profit and loss statement. What does "view" mean in the context of a set of accounts, which state facts?

67 In my view, that objection is well-founded. It is customary for accountants and directors to certify that accounts represent a true and fair view of the affairs of a company. However, to refer to an exaggerated view does not disclose the criticism of the financial position of the company being presented to investors. What was exaggerated? The profits of the company? The company's asset position? All of those?

68 Counsel for the defendants submitted that, read in its context, the word "exaggerated" means "presenting a more favourable view of the financial performance of the company. I do not think that is an answer to the objection raised by the plaintiff. It begs the question: more favourable than what?

69 A defendant who pleads a Polly Peck plea of justification must specify the defamatory imputation with the same precision as a plaintiff. Ordinary principles of pleading and fairness to the plaintiff require that the defendant specify the act or condition asserted of or attributed to the plaintiff. Almost any attribution of an act or condition to a person is capable of both further refinement and further generalisation. In any given case, a judgment needs to be made as to the degree of particularity or generality which is appropriate to the occasion, and as to what constitutes the necessary specificity. If a problem arises, the solution will usually be found in considerations of practice justice rather than philology: Drummoyne Municipal Council v ABC (1990) 21 NSWLR 135 per Gleeson CJ at 137.

70 The imputation pleaded by the defendants lacks the necessary specificity. If the imputation is that the published accounts of the company fell short of some standard, then the standard should be specified. If the defendants wish to frame their imputation in comparative language then they must make clear the standard with which the comparison is being made. For example, if the imputation is that the accounts failed to comply with some accounting standard or fails to present a true and fair view of the financial position of the company, then the imputation should clearly say so.

71 The plaintiff's second objection is that the particulars relied on in support of the plea are incapable of sustaining the imputation that is asserted. The particulars refer to the treatment in the ERG accounts of shares in other companies received by way of "non-cash licence fees". The particulars refer to the shares in other companies including Prepayment Cards Ltd, Triumphant Launch Ltd and E Card Pty Ltd. The particulars then refer to a German company called "card.etc.AG" and say that ERG received shares in that company by way of a non-cash licence fee. The directors of ERG are said to have "regarded" the non-cash licence fees from card.etc.AG as having a value of $31 million. It is pleaded that the auditors of ERG advised ERG that they would not recognise the non-cash licence fees from card.etc.AG. It is pleaded that the auditors of ERG advised ERG that they would not recognise the non-cash licence fees from card.etc.AG as representing revenue of $31 million in the year ended 30 June 2001. There is a reference to ERG announcing losses for the half year to 31 December 2001 of $199 million that were caused principally by the writing down of the carrying value of the other company shares and ERG not being able to recognise as revenue a non-cash licence fee received during the half year. It is said that the writing down of the carrying value of the other company's shares was necessary in order to apply to the other company shares accounting standards that were consistent with the advice that had been given by the auditors.

72 It is not pleaded at any time that the treatment of the shares and non-cash licence fees was contrary to any accounting standard. It is not pleaded that treating the non-cash licence fees in the accounts as revenue in the year in which they were received was contrary to any accounting standard or presented a misleading view of the accounts or a view that was not a true and fair view of the accounts.

73 The particulars, in effect, say that the auditors of ERG did not agree with the treatment of the non-cash licence fees in the accounts as revenue in the year in which they were received and would not recognise the non-cash licence fee from a specified company as representing revenue in the year ended 30 June 2001. That falls short of establishing that the treatment of the non-cash licence fees in the accounts caused the accounts to fail to meet some specified standard of accuracy or honesty.

74 Senior counsel for the plaintiff further objected that the particulars fail to plead that the plaintiff allowed ERG to use the identified "accounting practice" or to plead facts from which that might be inferred. Counsel for the defendants submits that the defendants have pleaded elsewhere that the plaintiff was the CEO of the company and it might be inferred from that fact, together with the other facts set out in the particulars, that the plaintiff allowed ERG to use that accounting practice. In my view, the particulars of justification must set out all of the relevant facts relied on to prove the truth of the pleaded imputation. The plaintiff should not be required to trawl through the rest of the defence and form a judgment as to facts pleaded elsewhere that might be relied upon to prove the truth of the pleaded imputation. Furthermore, if the defendants seek to establish the fact that the plaintiff allowed ERG to use the accounting practice by way of inference from other facts, then the particulars should state both the facts from which the inference is to be drawn and the inference which the defendants say should be drawn.

75 In my view, the plea of justification is deficient and should not be allowed.

76 For the reasons given, the proposed amended defence is deficient and leave should not be given to amend in the form proposed.