Defamation - Application to strike out imputations in statement of claim - Whether imputations capable of being conveyed - Whether embarrassing - Relevant principles - Claim for aggravated damages - Failure to apologise - Whether grounds for claim for aggravated damages limited to circumstances at time of publication - Defamation Act 2005 (WA), s 35 - Turns on own facts

Defamation Act 2005 (WA)

Application to strike out claim for aggravated damages dismissed

1 NEWNES J: This is an application by the defendants to strike out parts of the plaintiff's statement of claim, namely five of the six defamatory imputations pleaded by the plaintiff and a plea relied upon for a claim for aggravated damages.

2 In the action, the plaintiff pleads that he is and was at all material times from 18 July 2003 a director and the chief executive officer of Fortescue Metals Group Ltd ("Fortescue") and, between 29 July 1994 and 8 May 2002, a director of Anaconda Nickel Ltd ("Anaconda"). In addition, he was, at all material times from 26 May 2004, a director of FMG Chichester Pty Ltd ("FMG").

3 The plaintiff pleads that, on or about 11 March 2006, in the weekend edition of The Sydney Morning Herald newspaper, the defendants published an article which was defamatory of the plaintiff. The article in question is lengthy and a copy of it is attached to these reasons.

4 In par 5 of the statement of claim, the plaintiff pleads that in their ordinary and natural meaning the words of the article meant and were understood to mean that the plaintiff:

"5.1 misleads investors in companies of which he is a director;

5.2 has dishonestly misled investors in Fortescue;

5.3 has dishonestly breached his duties as a director of Fortescue;

5.4 engaged in illegal insider trading of securities;

5.5 improperly obtained intellectual property, namely contact details of clients, from his former employer, Hartley Poynton; and

5.6 misled investors in Anaconda for personal gain."

5 The plaintiff's claim includes a claim for aggravated damages. The claim for aggravated damages, pleaded in par 7 of the statement of claim, is based, among other things, on an allegation in par 7.1 that "the defendants have failed, alternatively refused, to apologise to the plaintiff."

6 The defendants seek to strike out the imputations pleaded in par 5.2 to par 5.6 on the grounds that they are not reasonably capable of being conveyed by the words complained of or are embarrassing. They seek to strike out the allegation in par 7.1 on the ground that such a plea is not available by virtue of the provisions of the Defamation Act 2005 (WA) (the "Act").

7 Senior Counsel for the defendants submitted that none of the imputations pleaded in par 5.2 to par 5.6 was capable of being conveyed by the article. The article reports the commencement by ASIC of proceedings in the Federal Court against the plaintiff and Fortescue, and refers to allegations made by ASIC in those proceedings. It is, in essence, a report of the implications for the plaintiff of the Federal Court proceedings and whether they will derail his plans to create a third force in the iron ore industry in Western Australia. The article also contains a statement that Fortescue and the plaintiff intend vigorously to defend themselves against the allegations.

8 A reasonable reader could not understand the article to mean that the plaintiff had dishonestly misled investors, as pleaded in par 5.2. The article refers to allegations made, and beliefs held, by ASIC and to the intention of Fortescue and the plaintiff vigorously to defend the proceedings. There is nothing in the article which could be understood by a reasonable reader to mean that the plaintiff had in fact committed an act of dishonesty. A reader who reached that conclusion would not be relying on the article but going beyond that and impermissibly drawing on his or her own beliefs and prejudices. Senior Counsel referred to the well-known passage in the judgment of Mason J in Mirror Newspapers Ltd v Harrison [1982] HCA 50; (1982) 149 CLR 293 at 301.

9 It was further submitted that the imputation was simply a repetition or a "subset" of the imputation pleaded in par 5.1. It is embarrassing to plead, in effect, the same meaning twice. Distinct meanings should be pleaded.

10 In relation to par 5.3, Senior Counsel submitted that the article simply reports allegations that the plaintiff had breached his duty as a director. A reasonable reader would not understand that to mean that the plaintiff had in fact breached his duty as a director.

11 It was also contended that the imputation in par 5.3 was vague and ambiguous in that it did not identify the duties allegedly breached or the character of the alleged transgression. It was not sufficient simply to repeat the language of the article. The plaintiff must formulate what he alleges is the sting conveyed by the words, setting out the precise act or condition allegedly asserted of or attributed to the plaintiff. The pleaded imputation does not do so. It was further submitted that the word "dishonestly" is a "weasel" word with a variety of meanings so that its use results in the imputation being ambiguous or equivocal.

12 It was submitted that the imputation in par 5.4 is again not reasonably capable of being conveyed by the article. The article refers to an understanding that ASIC was debating whether to add insider trading charges to its claim against the plaintiff. That is not capable of conveying an imputation that the plaintiff had in fact been guilty of insider trading. In any event, an imputation of illegal insider trading is not capable of being conveyed as a false innuendo because the ordinary reader would not have the necessary knowledge of the law to understand the words as bearing such a meaning. Counsel referred to Hill v Westfield [2003] NSWSC 437 at [10] - [14].

13 It was further submitted that the imputation failed to distil a precise act or a condition asserted of or attributed to the plaintiff.

14 It was submitted in relation to par 5.5 that there was nothing in the article which would suggest to the ordinary reasonable reader that the plaintiff had done anything "improper" or that the contact details of clients of Hartley Poynton were the intellectual property of Hartley Poynton. There was nothing to suggest that that information had been improperly obtained by the plaintiff and there was nothing which could reasonably cause an ordinary reader to understand it in that way.

15 It was also submitted that the word "improperly" was so vague as to make the imputation embarrassing, the word being capable of referring to a wide range of improper conduct of differing degrees of seriousness.

16 Senior Counsel for the defendants argued in relation to par 5.6 of the statement of claim that there was nothing in the article to suggest the plaintiff had misled investors in Anaconda "for personal gain". The passages referring to Anaconda state that the plaintiff could be "over enthusiastic" or that "controversy is never far from his entrepreneurial activities", but that is quite different to conduct of the nature referred to in the imputation.

17 It was further submitted that the imputation was not sufficiently separate or distinct from the imputation pleaded in par 5.1 and it should be struck out on that ground also.

18 In relation to the plea of aggravated damages, it was argued that the allegation in par 7.1 - that the defendants had failed or refused to apologise - was not open in light of the provisions of the Act. Section 35(2) of the Act expressly provides that when considering whether to make an award of aggravated damages the Court can only have regard to "the circumstances of the publication of the defamatory matter". That is, the Court may only look at the circumstances at the time of publication and not to subsequent events.

19 That intention is evident when s 35(2) is contrasted with s 36 of the Act, which directs a court, in awarding damages, to disregard malice or other state of mind of the defendant "at the time of the publication of the defamatory matter to which the proceedings relate or at any other time" [emphasis added]. There is therefore a clear distinction drawn in the Act between events occurring at the time of publication and events which take place later in time.

20 Accordingly, in a claim for aggravated damages it is not open to the Court to consider a subsequent failure to publish an apology. The plea in par 7.1 should therefore be struck out.

21 It was submitted on behalf of the plaintiff that the approach of the defendants had been to dissect the publication in a way which would not be done by the ordinary reader. The article had to be read as a whole including the headline and the sub-headline. Those headlines contribute to setting the tone of the article.

22 It was submitted that the article was far from a simple report of the Federal Court proceedings and the allegations made by ASIC. The article is generally disparaging of the plaintiff and reports the allegations of ASIC in the context of other assertions to the discredit of the plaintiff which suggest that the allegations are well-founded.

23 It was submitted that the article was clearly capable of conveying the imputation in par 5.2, that the plaintiff has dishonestly misled investors in Fortescue. In the context of reporting allegations by ASIC that the plaintiff had made misleading statements by publicly stating that Fortescue had executed a binding contract and that it had finalised a contract with China Railway Engineering Corporation, the article reports that "Forrest may well rue his public comments ... It was the word 'finalise' that has landed the company and Forrest in trouble."

24 The authors of the article go on to state that "there was no binding agreement ... What hadn't been agreed on were the trifling issues of the railway's cost and route, the engineering studies, government requirements and assurances that all titles were available along the railway's route." The words "trifling issues" were a sarcastic comment designed to emphasise the alleged disparity between the plaintiff's statements and the reality.

"On November 5, Fortescue released more statements that 'binding contracts' had been agreed, and the company's share price took off like a rocket on huge trading volumes.

But as with the previous negotiations, nothing concrete had been agreed upon. It was a fledging relationship, where details on costs and the projects themselves had yet to be negotiated.

... Fortescue had merely entered into preliminary negotiations, not binding contracts."

26 The article referred to a document published by Fortescue in response to an enquiry from the Australian Stock Exchange, as containing a "mind-boggling statement" as to the achievements of the project. The article goes on to say that:

"At no point did Fortescue say that the agreements were non-binding.

Needless to say, ASIC alleges 'a reasonable person would expect' to have learnt from the additional information that the contracts were not binding and, if that had been disclosed, it would have had a 'material effect' on Fortescue's share price." [emphasis added]

"As 2004 drew to a close, Fortescue's share price continued to climb into the stratosphere. Before the announcements in November, it was trading at around $1.

By January 2005, it had hit $3 ...

The following month, as it headed towards $4, [the plaintiff] sold $13.5 million worth of shares. ASIC now is weighing up whether to pursue Forrest over that transaction, given it believes the earlier statements were deliberately misleading."

28 It was submitted that in that context, it was clearly arguable that a reasonable reader would have understood the article to mean that the plaintiff had deliberately misled investors in Fortescue and, at a time when the share price was high because of the misleading statements, he had sold a large quantity of shares. There is no suggestion of inadvertence on the plaintiff's part and the clear inference is that his conduct was dishonest.

29 It was submitted that the imputation in par 5.2 was quite distinct from par 5.1. The evidence that will be required to prove the truth of the imputation in par 5.1 would need to go further than the evidence required to prove the truth of the imputation in par 5.2.

30 In relation to par 5.3, it was submitted that, based on the above and other material in the article, it was plainly capable of conveying the imputation that the plaintiff had dishonestly breached his duties as a director of Fortescue.

31 Counsel argued it was not necessary for the plaintiff to plead specifically which directors' duties the plaintiff is imputed to have breached. The thrust of the article is that the plaintiff has breached his duties as a director. The article itself refers to allegations of the plaintiff having "breached his duty as a director"; allegations which the article suggests are well-founded. A plaintiff is entitled to plead by way of imputations the actual words of the publication where they sufficiently reflect the natural and ordinary meaning of the words, which they do in this case. In addition, where the words of the article are general, as they are in this case, the plaintiff is entitled to plead an imputation of similar generality.

32 Counsel argued that there was nothing vague about the use of the adverb "dishonestly". It plainly means that the plaintiff breached his duties as a director, not inadvertently or in good faith, but dishonestly or in bad faith. There is no ambiguity or uncertainty about what is pleaded.

33 In relation to par 5.4, the references in the article, in particular, to the announcements made by the plaintiff and the reference to the sale of shares by the plaintiff at a time when the price had "climbed into the stratosphere", were clearly arguably capable of conveying the meaning that the plaintiff had engaged in illegal insider trading. The article also refers to ASIC's statement that the plaintiff sold $13.5 million worth of Fortescue shares at a time when it alleges the market was misinformed, as being "of concern for [the plaintiff]".

34 It was not necessary to plead extrinsic facts to support the imputation, as an ordinary reasonable reader would understand what was meant by "insider trading", at least to the extent of knowing that it was an illegal dealing in shares.

35 In relation to par 5.5, it was submitted that the imputation was reasonably arguable. The relevant part of the article conveys to a reasonable reader the meaning that in telephoning most of Hartley Poynton's clientele, the plaintiff had done something which was inappropriate and for which many people thought poorly of him.

36 It was submitted in relation to the imputation in par 5.6, that when read in the context of the overall tenor of the article, it was clearly capable of being conveyed. Counsel referred, in particular, to the words:

"... Some shareholders ... feel they have been taken for a ride. Just ask the US bond holders who tipped $800 million into his previous mining venture, Anaconda Nickel - an ambitious plan to extract the metal from laterite deposits in the West Australian desert.

The company still exists, although under another name. But Forrest was dumped from the group in 2001 - albeit much richer for the experience - amid recriminations and accusations from investors ..."

37 The plaintiff's involvement in Anaconda is described in the article as a "debacle".

38 It was submitted that it is plainly arguable that the article imputes that the plaintiff misled investors in Anaconda and that he did it for personal gain. Counsel argued that the imputation was different to the imputation in par 5.1 and the evidence required to justify it was quite different.

39 In relation to the application to strike out the reference to apology in the claim for aggravated damages, it was submitted that the Act did not have the effect alleged. In the first place, s 6(2) of the Act provides that the Act does not affect the general law in relation to defamation, except to the extent that the Act expressly or by necessary implication provides otherwise. Section 35(2) of the Act only applies to a claim for aggravated damages where the damages for non-economic loss exceed the prescribed maximum.

40 Secondly, the Act does not impose any restriction on the matters to which the Court can have regard in respect of a claim for aggravated damages. The terms of s 35 and s 36 are quite different and the implication sought to be drawn from s 36 has no foundation. Counsel argued that if the defendants' argument were correct, it would mean that no conduct subsequent to the publication, no matter how grave or aggravating, could be relied upon in a claim for aggravated damages. That cannot have been the intention of the legislature and there is nothing in the Act which would justify such a drastic outcome.

41 The relevant principles were not seriously in issue on the application. In my view, they are, so far as relevant to the present application, as follows.

42 An imputation will be struck out at this stage if it is plainly incapable of being conveyed by the words complained of: Gumina v Williams (No 1) (1990) 3 WAR 342, at 346; Taylor v Jecks (1993) 10 WAR 309, at 319; or if, as framed, it would be likely to prejudice, embarrass or delay the fair trial of the action.

43 The principles to be applied in determining whether the defamatory imputations alleged are capable of being conveyed by the words complained of were discussed in the well-known passage from the judgment of the Privy Council in Jones v Skelton [1963] 1 WLR 1362 at 1370 - 1371:

"In deciding whether words are capable of conveying a defamatory meaning the court will reject those meanings which can only emerge as the product of some strained or forced or utterly unreasonable interpretation. In Capital and Counties Bank v George Henty & Sons [1882] 7 AC 741, 745 Lord Selborne LC said:

'The test, according to the authorities, is, whether under the circumstances in which the writing was published, reasonable men, to whom the publication was made, would be likely to understand it in a libellous sense.'

The ordinary and natural meaning of words may be either the literal meaning or it may be an implied or inferred or an indirect meaning: any meaning that does not require the support of extrinsic facts passing beyond general knowledge but is a meaning which is capable of being detected in the language used can be a part of the ordinary and natural meaning of words. See Lewis v Daily Telegraph Ltd [1963] 2 WLR 1063; [1963] 2 All ER 151 HL(E). The ordinary and natural meaning may therefore include any implication or inference which a reasonable reader guided not by any special but only by general knowledge and not fettered by any strict legal rules of construction would draw from the words. The test of reasonableness guides and directs the court in its function of deciding whether it is open to a jury in any particular case to hold that reasonable persons would understand the words complained of in a defamatory sense."

44 The person to whom it is alleged the words were spoken will be assumed to be a reasonable person, not unusually suspicious or unusually naive, nor avid for scandal. In Lewis v Daily Telegraph Ltd [1964] AC 234, Lord Reid said (at 258):

"The ordinary man does not live in an ivory tower and he is not inhibited by knowledge of the rules of construction. So he can and does read between the lines in the light of his general knowledge and experience of world affairs."

"When an imputation is made in a general way, the ordinary man is not likely to distinguish between hints and allegations, suspicion and guilt. It is the broad effect that counts and it is no use submitting to a judge that he ought to dissect the statement before he submits it to the jury ... it is the broad impression conveyed by the libel that has to be considered and not the meaning of each word under analysis. A man who wants to talk at large about smoke may have to pick his words very carefully if he wants to exclude the suggestion that there is also a fire ..."

46 In Favell v Queensland Newspapers Pty Ltd [2005] HCA 52, Gleeson CJ, McHugh, Gummow and Heydon JJ at [6] referred with approval to Jones v Skelton (supra) and the judgments of Lord Reid and Lord Devlin in Lewis v Daily Telegraph Ltd (supra).

47 The meaning that the ordinary person will attribute to words will often be a first impression. As such, when attempting to discern the meaning conveyed by words courts should avoid subjecting the words to an "over meticulous scrutiny": Random House Australia Pty Ltd v Abbott [1999] FCA 1538; (1999) 167 ALR 224 at 257. In Lewis v Daily Telegraph Ltd (supra), Lord Reid observed (at 260) that the meaning attributed to words "must be a matter of impression" and Lord Morris (at 266) commented that it should not rest "upon any technical process of analysis or construction, nor upon a process of analysis or construction, nor upon a process of critical reading".

48 The meaning a reader gives to a newspaper article may be affected by matters such as the order in which things are dealt with, the language employed, the emphasis which is given to different aspects of it and the headlines which are used: John Fairfax Publications Pty Ltd v Rivkin [2003] HCA 50 per McHugh J at [26], Callinan J (with whom Gleeson CJ agreed) at [187]. It is therefore necessary to approach the exercise of determining whether the imputations are arguably capable of being conveyed with appropriate circumspection.

49 In terms of form, what must be clear from the pleading is the meaning the plaintiff contends was conveyed to a reasonable reader by the words complained of. That is, an imputation must specify what the plaintiff claims was "the precise act or condition asserted of, or attributed to" the plaintiff: Monte v Mirror Newspapers Ltd [1979] 2 NSWLR 663 and Taylor v Jecks (supra) at 319.

50 But as Gleeson CJ pointed out in Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135, (at 137), the requirement that a plaintiff must "specify" the act or condition which he claims was attributed to him is one which, in its practical application, raises questions of degree. Whilst the principles relevant to the plaintiff's obligation to 'specify' the act or condition which he claims was attributed to him remain constant, their practical application may depend upon the facts and circumstances of the given case, and the relevant circumstances may include the manner in which the defendant, or the author of the defamatory matter, has expressed the defamatory matter.

51 It is self-evident that the proper pleading of imputations in a defamation action is a matter of importance in ensuring a fair trial of the action. As Brennan CJ and McHugh J observed in Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 at 531 - 532, where the plaintiff pleads a false innuendo the plaintiff gives a shape and focus to the cause of action.

52 But that is not a licence for defendants to pursue the refinement of the pleaded imputations with excessive zeal. In Buckeridge v Walter [2006] WASCA 22, the Court of Appeal (per Steytler P at [4], per Pullin JA at [23]) endorsed the comments of Kirby J in Favell v Queensland Newspapers Pty Ltd (supra), to the effect that excessive refinement of pleading issues is to be discouraged and courts should discourage, or minimise, the impediment to a fair trial presented by the process of "trial by interlocutory ordeal", which is especially prevalent in defamation proceedings.

53 I consider that the imputation in par 5.2 of the statement of claim is arguably capable of being conveyed and I would not strike it out. Having regard, in particular, to the passages referred to by the plaintiff's counsel, in my view it is arguable that the statements in the article go beyond simply a report of allegations by ASIC and impute that the plaintiff had in fact dishonestly misled investors in Fortescue.

54 While reporting statements attributed to the plaintiff that binding contracts had been entered into, the article states expressly that in fact no binding agreements had been concluded. It is arguable that a reader would also understand from comments in respect of the "trifling issues" that had not been agreed, the "fledgling relationship" and the "preliminary negotiations", that what had been agreed was in fact a very long way from binding agreements of the nature claimed. It is also arguable that such a reader would understand the article to endorse ASIC's allegation that if the non-binding nature of the contracts had been disclosed that would have had a material effect on Fortescue's share price. The article then states that the share price having climbed (apparently on the basis of the plaintiff's statements) into the "stratosphere" from $1 "towards $4", the plaintiff sold $13.5 million worth of shares.

55 As Gleeson CJ, McHugh, Gummow and Heydon JJ pointed out in Favell v Queensland Newspapers Pty Ltd (supra), while a mere statement that a person is under investigation, or that a person has been charged, may not be enough to impute guilt, if it is accompanied by an account of circumstances that point towards a likelihood of guilt, then the position may be otherwise.

56 I consider that the article arguably goes beyond a mere report of allegations by ASIC that the plaintiff's public statements were deliberately misleading and is arguably capable of conveying to a reasonable reader that the plaintiff had in fact dishonestly misled investors in Fortescue. I do not consider that in the context the word "dishonestly" is so vague as to be embarrassing.

57 Similarly, it seems to me that the imputation pleaded in par 5.3 is arguable. The article reports allegations that "Forrest breached his duty as a director" of Fortescue. The respect or respects in which the plaintiff is alleged to have breached his duty as a director are not specified in the article. It is arguable that having regard, in particular, to the passages of the article to which reference has been made, that a reasonable reader would understand the article to mean that the allegation was well-founded.

58 When consideration is had to the terms of the article, I do not consider that it is incumbent on the plaintiff to plead the imputation with a greater degree of specificity. In any event, I do not consider that it is necessary for particular director's duties to be specified. It is enough to allege that the plaintiff has breached his duty as a director. In my view, further refinement of the imputation is not necessary for a fair trial.

59 There is, however, a question as to whether the article imputes that the plaintiff breached his "duties" as opposed to his "duty", albeit it was not a distinction to which counsel for the plaintiff attached any great significance. As the plaintiff's case was put, I consider that any arguable imputation is limited to "duty".

60 In respect of the imputation pleaded in par 5.4 of the statement of claim, I do not accept the submission made on behalf of the defendants that a reasonable reader would not understand the concept of illegal insider trading of securities. In the first place, I do not accept that nowadays it is clearly a term of art which would not be generally understood in the community. It is defined in the Macquarie Dictionary to mean "(in company law) the statutory offence of dealing in a company's securities by a person who through some connection with a company has special information about them which would materially affect the price of the securities if it were generally known." It is nowadays an expression not uncommonly used in the news media and, in my view, is arguably a concept generally understood in the community.

61 Moreover, its meaning is arguably made clear for the reader by the context in which the express reference to insider trading charges occurs in the article, namely immediately following reference to an ASIC statement that the plaintiff sold $13.5 million worth of Fortescue shares at a time when it alleges the market was misinformed by the plaintiff's public statements. The fact that it is illegal is arguably made clear by the reference to ASIC debating whether to bring insider trading charges.

62 I do not consider that Hill v Westfield (supra) assists the defendants. In that case two articles fell for consideration. In the first there was no reference in the words complained of to "insider trading". Simpson J said (at [13]) that it may well be the case that many members of the public are aware, in some sense at least, of the concept of insider trading, and even that it constitutes a criminal offence, but her Honour was not satisfied that the public understanding was such as to warrant the conclusion that, from the factual matter in the article, the ordinary reasonable reader would understand that the assertions amounted to insider trading. In respect of the second article there was an express reference to insider trading but it did not identify it as a criminal offence nor explain the concept. Simpson J concluded that the concept of insider trading was not sufficiently widely known in the public arena, and the ordinary reasonable reader was not aware that it was a criminal offence, so her Honour struck out an imputation that the plaintiff had committed the criminal offence of insider trading.

63 In the present case, in my view, it is arguable that the article makes sufficiently clear what the concept involves and the reference to charges makes it clear that it is an offence. I would, in any event, respectfully disagree with Simpson J that it is clear that the concept is not sufficiently understood in the community so that such an imputation should be struck out at an interlocutory stage.

64 I consider that the imputation pleaded in par 5.5 is embarrassing and should be struck out. In the first place, it does not seem to me that the words complained of are capable of conveying to the ordinary reasonable reader that the plaintiff had "improperly" obtained intellectual property from his former employer. Secondly, I consider that the use of the word "improperly" is too vague. It is capable of referring to a wide range of conduct, from conduct which is unlawful through to conduct which is legal but which is generally regarded as unethical or sharp practice. The use of the word "improper" in an imputation is objectionable unless the nature of the alleged impropriety is clear: Gascoine v McGinty (1995) 14 WAR 542; Morris v Newcastle Newspapers Pty Ltd (1985) 1 NSWLR 260. In my view, in the current context, it is not clear.

65 I consider that the imputation pleaded in par 5.6 is arguable. I accept the plaintiff's submission that, in particular, from the passage referred to by the plaintiff's counsel, in the overall context, it is arguable that a reasonable reader would understand the article to bear the meaning pleaded.

66 I also consider that each of the pleaded imputations is sufficiently different. There is, in my view, a sufficient distinction between an imputation that a person "misleads investors in companies of which he is a director" (par 5.1), and an imputation that he has "dishonestly misled" investors in a particular company (par 5.2) and an imputation that he has misled investors in another company "for personal gain" (par 5.6).

67 It is necessary then to turn to the defendants' attack on the plea of aggravated damages in par 7.1 of the statement of claim.

68 Section 35 of the Act provides, so far as relevant:

"(1) Unless the court orders otherwise under subsection (2), the maximum amount of damages for non-economic loss that may be awarded in defamation proceedings is $250 000 or any other amount adjusted in accordance with this section from time to time (the 'maximum damages amount') that is applicable at the time damages are awarded.

(2) A court may order a defendant in defamation proceedings to pay damages for non-economic loss that exceed the maximum damages amount applicable at the time the order is made if, and only if, the court is satisfied that the circumstances of the publication of the defamatory matter to which the proceedings relate are such as to warrant an award of aggravated damages."

69 Section 6(2) provides that the Act does not affect the operation of the general law in relation to the tort of defamation except to the extent that the Act, expressly or by necessary implication, provides otherwise.

70 There is no definition of aggravated damages in the Act so that what is referred to in s 35(2) is the common law concept of aggravated damages.

71 I do not accept that the effect of s 35 of the Act is to limit the circumstances to which the Court may have regard in considering a claim for aggravated damages to those which are contemporaneous with the publication. It has long been accepted at common law that in assessing damages the Court or jury (as the case may be) is entitled to look at the whole of the conduct of the defendant "from the time the libel was published down to the time they give their verdict": Praed v Graham (1889) 24 QBD 53 per Lord Esher MR at 55.

72 Thus, for example, in Triggell v Pheeney [1951] HCA 23; (1951) 82 CLR 497, the High Court (at 514) held that where the manner in which the defence of the action had been conducted was lacking in bona fides, improper or unjustifiable, that was a ground for an award of aggravated damages. So too, for instance, may a repetition of the libel, or improper or unjustifiable conduct calculated to deter the claimant from proceeding with the action, or persecution of the plaintiff by other means, be a ground for an award of aggravated damages: Sutcliffe v Pressdram Ltd [1991] 1 QB 153, per Nourse LJ at 184.

73 The defendants' submission, if upheld, would mean that the effect of s 35 would be to reverse long-standing and well-established principles of the common law in relation to aggravated damages. I do not consider that s 35 was intended to have that effect. If it were intended to alter the common law in the manner suggested, it is to be expected that that would clearly appear from the Act. It does not, in my view, appear at all, and nor is there anything in the Attorney-General's Second Reading speech to suggest that any such alteration is intended. There, the Attorney-General simply referred to the Bill "retain[ing] the ability of courts to award aggravated damages in appropriate cases ...".

74 In my view, the purpose of s 35 is rather more modest. It is directed simply to the circumstances in which the "maximum damages amount" may be exceeded; namely where an award of aggravated damages is warranted.

75 The question then is whether the plea in par 7.1 discloses an arguable cause of action under the general law.

76 There is no doubt that at common law a refusal to publish an apology requested by the plaintiff may be a ground for an award of aggravated damages. A more difficult question is whether the failure to publish an unsolicited apology is also a ground. In Morgan v Oldhams Press Ltd [1971] 1 WLR 1239, Lord Reid (at 1247) doubted that it was. But in Cassell & Co Ltd v Broome [1972] UKHL 3; [1972] AC 1027, Lord Hailsham suggested that it was open to a jury to find that a failure to publish an unsolicited apology was in the circumstances conduct that was unjustifiable, improper or lacking in bona fides and therefore warranted an award of aggravated damages.

77 In Carson v John Fairfax & Sons Ltd [1993] HCA 31; (1993) 113 ALR 577, the majority of the High Court expressed difficulty in understanding how the mere absence of an apology could aggravate damages.

78 Subsequently, however, in Clark v Ainsworth (1996) 40 NSWLR 463, the New South Wales Court of Appeal (at 465, 473) considered that the view expressed by the majority in Carson v John Fairfax & Sons Ltd did not preclude an award of aggravated damages for a failure to apologise if, in the circumstances, the failure of the defendant to do so was lacking in bona fides, or was otherwise improper or unjustifiable. The Court of Appeal of Victoria reached a similar conclusion in Cooke v Wood, unreported; CA SCt of Vic; 11 December 1997. See also the decision of the Full Court of the Federal Court in Random House Australia Pty Ltd v Abbott (supra).

79 I consider it is arguable that a failure to offer an apology is a ground for an award of aggravated damages and that there is nothing in the Act which would preclude the plaintiff from relying upon such a ground. The application so far as it relates to par 7 of the statement of claim must therefore fail.

80 I would strike out par 5.5 of the statement of claim but, subject to the amendment of "duties" to "duty" in par 5.3, would otherwise dismiss the application. I will hear the parties on the precise terms of the appropriate orders and on costs.

His plan was to create a third force in Australia's booming iron ore industry. But the corporate regulator has other ideas for Andrew Forrest.

On the hilltop above Perth's exclusive Cottesloe Beach sits Pinelodge, a sprawling Federation dwelling built in 1895 by retail magnate Frank Zimpel, which has been exquisitely and faithfully restored to its turn-of-the-century glory. The property's grand turret is the vantage point from which the owner, a 44-year-old unruly stockbroker-cum-mining promoter - can survey his domain.

Venture past the pine trees and onto the wrap-around verandah on the mansion's ground floor, past the hand-carved jarrah fireplaces, and a showcase of memorabilia awaits - proof of the days when the name Forrest represented one of Western Australia's great pioneering families.

A great, great uncle, Sir John Forrest, was the state's first premier, and considered by many as the man who built the state. Forrest's family were cattle barons with vast land holdings in the Pilbara until debt problems forced them to sell up a decade ago.

Nine days ago, John Andrew Henry Forrest's fascination with returning the Forrest name to its former glory hit an obstacle.

A series of civil charges brought by the corporate regulator halted, at least temporarily, Forrest's relentless climb to the top, to carve himself a place in Australian corporate history.

The question now is whether he will be famous for all the wrong reasons.

The Australian Securities and Investments Commission has alleged Forrest and his Fortescue Metals Group has misled investors. The $3.6 million it is seeking in damages won't even make a dent in Forrest's $500 million Fortescue stake.

Allegations Forrest breached his duty as a director carry more serious consequences, putting him under immense pressure as a chief executive.

Also of concern for Forrest is ASIC's statement that he sold $13.5 million worth of Fortescue shares at a time when it alleges the market was misinformed.

The Herald understands that ASIC is debating whether to add insider trading charges to its claim as well as seeking that Forrest be banned as a company director.

Until ASIC's bombshell last week, Andrew Forrest had made it in the conventional sense. When he arrives at work it is to a mirrored-glass building in West Perth emblazoned 'Fortescue House'. He has been known to sit at a desk bearing a brass plaque referring to his pioneering ancestors.

His Cottesloe house features a tennis court and seven-car garage. He owns farms in the nearby Perth hills and in the country playground for Sydney's wealthy, the Southern Highlands. Among his toys is a shiny motor launch, Perth's favourite success measure, and he has been publicly pushing for a redevelopment of Cottesloe's waterfront. Reverend Malcolm Potts of Cottesloe's St Philip's Anglican Church says the 'vivacious and engaging' Forrest family attend his services.

In February, Forrest was photographed with Olympic gold medallist Cathy Freeman, who has championed Fortescue's Aboriginal hiring policies, and legendary athlete Herb Elliott sits on the Fortescue board.

All this had been enough to muffle the din from Forrest's local detractors. They are the older members of Perth's broking establishment, with memories long enough to recall a young stockbroker's departure from local firm Hartley Poynton. He defected to rival Jacksons where he reputedly, in typical Forrest fashion, telephoned most of Hartley Poynton's clientele to explain the benefits of doing business with him.

A shameless self-promoter, Forrest has self-belief in spades.

His swag of private companies has included JAHF Pty Lid (presumably John Andrew Henry Forrest), AF Nickel (presumably Andrew Forrest Nickel) and the self-explanatory AF Australia Investments. Back in his stockbroking days, there were Bourse Management and Flux Holdings. There was his dabble in an alpaca farming venture in the 1990s which finished in a courtroom - though his sister, Janie Hicks, and mother, Jude Street (who is now married to Sir Laurence Street's brother Phil), have a flourishing alpaca stud, Coolaroo, at Mittagong.

Forrest has also been endowed with an uncanny ability to make himself money. Some shareholders he has taken along on the ride have become wealthy by his energetic attempts to get difficult and complex mining projects - arguably projects few others would touch - off the ground. Others feel they have been taken for a ride. Just ask the US bond holders who tipped $800 million into his previous mining venture, Anaconda Nickel - an ambitious plan to extract the metal from laterite deposits in the West Australian desert.

The company still exists, although under another name. But Forrest was dumped from the group in 2001 - albeit much richer for the experience - amid recriminations and accusations from investors.

'He could be accused of being over-enthusiastic,' says Albert Wong, a former business partner.

The pair ran the Sydney stockbroking firm Intersuisse before a falling out and the inevitable legal action, which was settled just before the matter reached court.

'But,' Wong adds, 'I believe he's genuinely out to build something.'

By mid-2004, Forrest was well and truly into the next phase of his career. Undeterred by the Anaconda debacle, he had unleashed a grand plan to export vast amounts of iron ore from the Pilbara region to feed China's insatiable demand for steel.

In late August that year, the forbidding Australian Embassy in Beijing swung open its heavily guarded gate to the Perth entrepreneur and his contingent from Fortescue, and its potential Chinese customers - not to mention a swathe of local journalists and foreign correspondents.

Fortescue was to sign an agreement with the China Railway Engineering Corporation (CREC) in one of the embassy's function rooms, where Forrest took the podium.

According to Fortescue, 'it had executed a binding agreement to build and finance the railway component of its project'.

Fortescue's chief financial officer, Chris Catlow, celebrated long into the night in the Grand Hyatt's swanky and dimly lit Redmoon bar, along with the federal member for Kalgoorlie, Barry Haase.

'Finalising this contract with CREC now paves the way to finance the rest of the project,' he said in the now controversial media statement.

It was the word 'finalise' that has landed the company and Forrest in trouble.

Earlier that evening, Forrest himself had been exceedingly upbeat at an alcohol-fuelled dinner in the hotel's fancy Noble Court Chinese restaurant, where, according to local etiquette, he took the position reserved for the most important attendee - at the head of the table.

The celebrations, it appears, were a little overdone.

There was no binding agreement. According to the statement of claim lodged by the corporate regulator, Fortescue and CREC had 'merely agreed that they would in the future jointly develop and agree on matters.'

What hadn't been agreed on were the trifling issues of the railway's cost and route, the engineering studies, government requirements and assurances that all titles were available along the railway's route.

Just over a month later, Fortescue negotiated yet another 'binding contract'.

This time it was with the China Harbour Engineering Company (CHEC), which supposedly agreed on October 1 to build the port facilities required for the project. By October 20 Fortescue had China Metallurgical Construction (Group) Corporation (CMCC) lined up to build the mine and processing plant.

On November 5, Fortescue released more statements that 'binding contracts' had been agreed, and the company's share price took off like a rocket on huge trading volumes.

But as with the previous negotiations, nothing concrete had been agreed upon. It was a fledgling relationship, where details on costs and the projects themselves had yet to be negotiated.

ASIC's statement of claim notes that the nature and extent of the work could 'vary significantly and would not be known until sites had been identified and detailed engineering and other studies had been carried out.'

For all three crucial stages of the project - building the mine, the railway and the harbour - Fortescue had merely entered into preliminary negotiations, not binding contracts.

The huge run on the shares prompted the Australian Stock Exchange to issue Fortescue a 'please explain'.

In response, Fortescue published a document, 'Additional information on China Harbour and China Rail Agreements'.

Again, the company was upbeat. Two detailed pages of information began with 'Fortescue Metals is pleased to announce further developments to the agreements signed with China Harbour'.

It referred to 'inexorable progress towards becoming the "new force in iron ore" in Australia'.

The second page concluded with the mind-boggling statement: 'In summary the project achievements of the last few days have been extensive and provide a continuing platform for these component parts of the project to be advanced in parallel to ensure the detailed feasibility study process is finalised within the set time frame.'

At no point did Fortescue say that the agreements were non-binding.

Needless to say, ASIC alleges 'a reasonable person would expect' to have learnt from the additional information that the contracts were not binding and, if that had been disclosed, it would have had a 'material effect' on Fortescue's share price.

As 2004 drew to a close, Fortescue's share price continued to climb into the stratosphere. Before the announcements in November, it was trading at around $1.

By January 2005, it had hit $3 and Forrest exercised 63 million options at 8c, a gesture he described to The Australian newspaper as a 'remarkably selfless corporate act'.

The following month, as it headed towards $4, he sold $13.5 million worth of shares. ASIC now is weighing up whether to pursue Forrest over that transaction, given it believes the earlier statements were deliberately misleading. It's not the first time Andrew Forrest has incurred the wrath of investors over his remuneration.

In 1997 he declared that he would gladly have swapped the $1 million bonus he had earned in getting Anaconda's Murrin Murrin nickel laterite project off the ground for more time with his children. The very next year he went to Anaconda's shareholders to approve a $9 million options package.

Fortescue and Forrest, for their part, aim to vigorously defend themselves against the regulator's accusations.

'Clearly the timing of these things is never right,' says Graeme Rowley, Fortescue's executive director of operations.

At Fortescue House they are bunkering down against what is being painted as a conspiracy to prevent a third iron ore producer starting up in the Pilbara. It's the classic case, says one observer, of the self-obsessed individual blaming everyone but himself.

What Forrest can't deny is that controversy is never far from his entrepreneurial activities.

He did not respond to the Herald's repeated attempts to contact him this week.

The question is whether he has become a liability for the $2.3 billion Chichester iron ore project he has been promoting.

Certainly he has been accused of being that before. Back in the days of Forrest's last mining venture, Anaconda Nickel, the biggest shareholders believed he had passed his use-by date. The giant South African mining group Anglo American went so far as to publish a series of allegations for the benefit of shareholders. 'What is wrong at Anaconda?' it asked. 'Too much debt, unrealistic forecasts and failure to deliver, over-ambitious expansion plans and poor corporate controls' was its reply.

Meanwhile, in the case of Fortescue Metals, its project trundles along.

'This is not impacting the project in any way ... we have a project which has not seen the equal in Australia for a long, long time,' a clearly exasperated Rowley told the Herald this week.

He believes that through a share placement approval to issue 55 million shares to three yet-to-be-made-public investors lapsed this week, it won't hinder the group's efforts to raise equity.

Fortescue can issue as much as 15 per cent of new equity in the company at any time, he says. If it wants to place more than that it must seek shareholder approval, but with Forrest controlling more than 40 per cent of the company, that is a lay-down misere.

'We have not lost any equity opportunities,' he says. The reason it needs equity, Rowley says, is to be able to get on with raising debt.

The latest plan is to raise between $500 million and $1 billion by selling off part of the mine. The second step will be to raise that much again in the debt markets.

Despite the problems, there are still investors willing to buy Fortescue shares.

The US-based Harbert Management Corporation is still a believer, if you believe buying shares is an endorsement.

Philip Falcone, who is responsible for Harbert's Distressed/Event Team, is the man behind the buying.

The objective of his fund is to: 'generate superior, risk-adjusted returns by investing in distressed and high-yield debt securities'. Falcone did not return the Herald's telephone calls.

While Forrest has had hurdles to jump in his career as a mining entrepreneur, he has faced even more formidable hurdles in attempting to rebuild the Forrest name.

In ABC Television's Dynasties series, Forrest's father Don recalled the disappointment felt by his two sons, David and Andrew, when in October 1998 he sold Minderoo, the Pilbara station that had been in the family for more than a century.

He had agreed to sell it to his sons. But the price they offered was not enough to clear the property's debt.

'They've always held it against me a bit, for the reason that I reneged on it, having made a verbal agreement.'

His brother David runs Nullaki Air Services, which Fortescue paid $104,701 last year for 'aviation services at commercial rates'."