Citation : ESSEY & ANOR -v- HARDING & ANOR [2002] WASC 209

Defamation - Libel - Defamatory words identifying corporate plaintiff - Whether necessary to call a witness who knew that plaintiff

Defamatory words not identifying Managing Director - Whether that plaintiff proved extrinsic facts were known to persons to whom words published - Distinction between publication and republication

Qualified privilege - Whether defamatory response to attack was published to persons who had an interest in receiving response - Whether qualified privilege applied - Whether qualified privilege defence protected agent

First Appellant (First Defendant) : Dr J T Schoombee

Second Appellant (Second Defendant) : Dr J T Schoombee

First Respondent (First Plaintiff) : Mr J F Hassett

Second Respondent (Second Plaintiff) : Mr J F Hassett

First Respondent (First Plaintiff) : Christensen Vaughan

Second Respondent (Second Plaintiff) : Christensen Vaughan

Andrews v John Fairfax & Sons Ltd (1980) 2 NSWLR 225

Baker v Carrick [1894] 1 QB 838

Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30

Brewer v Chase (1899) 80 NW 575

Broxton v McClelland [1995] EMLR 485

Cock v Hughes [2001] WASC 24

Consolidated Trust Co Ltd v Browne (1948) 49 SR (NSW) 86

Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1

Cross v Denley (1952) 52 SR (NSW) 112

Gordon v Amalgamated Television Services (1980) 2 NSWLR 410

Gumina v Williams (No 1) (1990) 3 WAR 342

Heytesbury Holdings Pty Ltd v City of Subiaco (1998) 19 WAR 440

Huth v Huth [1915] 3 KB 32

Jones v Amalgamated Television Services Pty Ltd (1991) 23 NSWLR 364

Lazarus v Deutsche Lufthansa AG (1985) 1 NSWLR 188

London Association For Protection of Trade v Greenlands Ltd [1916] 2 AC 15

McManus v Beckham [2002] EWCA Civ 939

Mirror Newspapers Ltd v World Hosts Pty Ltd [1979] HCA 3; (1979) 141 CLR 632

Morgan v Odhams Press Ltd [1971] 1 WLR 1239

Penton v Calwell [1945] HCA 51; (1945) 70 CLR 219

Sims v Wran (1984) 1 NSWLR 317

Slipper v British Broadcasting Corporation [1991] 1 QB 283

Smith v Streatfeild [1913] 3 KB 764

Speight v Gosnay (1891) 60 LJQB 231

State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd [2001] NSWCA 47; (2001) 51 NSWLR 399

Theaker v Richardson [1962] 1 WLR 151

Truth (NZ) Ltd v Holloway [1960] 1 WLR 997

Turner v Metro-Goldwyn-Mayer Pictures Ltd [1950] 1 All ER 449

Assaf v Skalkos [2000] NSWSC 418

Cohen v McEvoy [2001] WASC 349

Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658

Devries v Australian National Railways Commission (1993) 177 CLR 472

Jones v E Hulton & Co [1909] 2 KB 444

Ley v Hamilton (1935) 153 LT 384

Marks v Construction, Mining, Energy, Timberyards, Sawmills & Woodworkers Union (1995) 14 WAR 360

Morgan v Mallard [1997] SASC 6056; (1997) 68 SASR 184

Mummery v Irvings Pty Ltd [1956] HCA 45; (1956) 96 CLR 99

News Media Ownership v Finlay [1970] NZLR 1089

Nixon v Slater & Gordon [2000] FCA 531; (2000) 175 ALR 15

Powell v Gelston [1916] 2 KB 615

Raul Amon International Pty Ltd v Telstra Corp Ltd [1998] 4 VR 798

Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434

Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348

Warren v Coombes & Anor [1979] HCA 9; (1979) 142 CLR 531

Weir & Anor v Tomkinson [2001] WASCA 77

1 STEYTLER J: I have had the considerable advantage of reading the judgments of Pullin and McLure JJ. I agree with each of them, for the reasons which they have respectively given, that the appeal against the judgment in favour of the second respondent ("All-Fect") should be dismissed, that the appeal against the judgment in favour of the first respondent ("Mr Essey") should be allowed (although, in the case of that appeal, I would adopt the analysis of McLure J as regards the principles to be applied in distinguishing between publication and republication of defamatory material) and that the notice of contention should be dismissed.

2 As to the appeal against the dismissal of the appellants' counterclaim, I agree with McLure J that the appeal should be allowed.

3 In a nutshell, the relevant facts giving rise to the counterclaim were these. The appellants defamed All-Fect in a newsletter. The newsletter was addressed to some 178 schools in Western Australia. All-Fect did not know how many schools and other recipients had received the publication. All it knew was that it had been published to the managers of a number of school canteens and that some wholesalers and buyers of products for school canteens knew about it. All-Fect's managing director, Mr Essey, instructed solicitors to write to the first appellant, Mrs Harding, in order to ask her, amongst other things, whether she would publish a retraction. They did so by letter dated 3 October 1997. Mrs Harding was defiant. She ignored the request for a retraction. She said, in a letter dated 7 October 1997, that "truth" was her defence. All-Fect thereupon published a letter attacking the appellants and defending itself. It was sent to the canteen managers of all schools in Western Australia (some 1000 of them) and also to a number of distributors of products to school canteens (some 10 to 12 of them) and to potential buyers of the product marketed by All-Fect (the product was associated with the defamatory comments made by the appellants in the newsletter). The letter was signed by Mr Essey. It was defamatory of the appellants. All-Fect sued the appellants for damages for defamation arising from the publication of the newsletter. The appellants' counterclaimed for damages for defamation arising out of the publication of the letter dated 7 October 1997.

4 The trial Judge found that the letter had been published on an occasion of qualified privilege and dismissed the counterclaim. He said that the occasion was one of qualified privilege because the defamation was in response to an original attack made by the appellants in circumstances in which Mr Essey (and therefore All-Fect) had tried to make his response "proportionate to the problem he sought to cure".

5 All-Fect (and Mr Essey) had not asked the appellants to identify the recipients of their newsletter. The trial Judge said in that regard the following:

"In my view, having been subjected to a trenchant attack, some latitude should reasonably be allowed to the plaintiffs in seeking to answer the attack. They had to move quickly. Constraints of time and circumstance did not permit them to make a full inquiry as to the scale of the defendants' operations and the circulation of its newsletter. In that regard, it is important to bear in mind that there had been exchanges between the solicitors for the plaintiffs and the first defendant and those exchanges had failed to produce a satisfactory result. The defendants were uncooperative and defiant."

6 The appellants challenge the dismissal of their counterclaim upon four bases. The first depends upon the success of their appeal against All-Fect. Because I agree with Pullin and McLure JJ that that appeal should be dismissed, I need say no more about it. The second is that, because Mr Essey was not defamed by the appellants' newsletter, he could not resort to the defence of qualified privilege in respect of his writing of the letter dated 7 October 1997 because he was not responding to any attack against him. The third is that the trial Judge wrongly applied a subjective, rather than an objective, test in considering the proportionality of All-Fect's response and, hence, erred in finding that the letter did not exceed the limits of the privilege. The fourth is that there could be no qualified privilege in respect of publication of a response to a wider audience than that which received the original attack.

7 As to the second head of challenge, I agree with Pullin J, for the reasons given by him, that Mr Essey did not sign the letter dated 7 October 1997 in any personal capacity, but only as managing director of All-Fect. Hence, he would be protected by any qualified privilege afforded to All-Fect.

8 As to the third head of challenge, I agree with what each of Pullin and McLure JJ has said in that regard and have nothing to add.

9 The fourth head of challenge, being that in respect of which Pullin and McLure JJ disagree, raises difficult questions.

10 There are two overlapping propositions which underpin the law of qualified privilege in this context. The first, identified by McLure J, is that the privilege is based on a requirement of reciprocity of duty or interest. This means that, ordinarily, a person who responds to a defamatory attack by defaming the attacker must publish the response only to those who have a legitimate interest in, or duty in respect of, its subject matter: Gatley on Libel and Slander, 10th Ed, at 14.12 and 14.67. The second is effectively that, if the reply to the defamatory attack is to attract the privilege, it must be proportionate to the attack: Heytesbury Holdings Pty Ltd v City of Subiaco (1998) 19 WAR 440 at 459. The reply must be in good faith, publishing what is fairly an answer to the attack. It must be published without malice for the purpose of answering the attack. It cannot amount only to retaliation which is neither an answer to, nor an explanation of, what was said in the course of the attack: see Brewer v Chase (1899) 80 NW 575 at 577 (Mich, 1899) and the other cases referred to by Gatley, at 14.49.

11 However, there are shades of grey. So, in respect of the second proposition, it is not always easy to say when a response to a defamatory publication ceases to be an answer to that publication and becomes a retaliation against the publisher (or, as Lord Oaksey put it in Turner v Metro-Goldwyn-Mayer Pictures Ltd [1950] 1 All ER 449 at 470, when the responder "goes beyond defence and proceeds to offence"). In Penton v Calwell [1945] HCA 51; (1945) 70 CLR 219 at 234 Dixon J conceded that "to impugn the ... general veracity of the attacker may be a proper exercise of the privilege, if it be commensurate with the occasion". Just when it will be "commensurate with the occasion" might not easily be discerned (cf Gatley, at 14.66).

12 Because there are these shades of grey, the law allows to the defamed person a considerable degree of latitude in formulating the contents of a response (Watts v Times Newspapers Ltd [1997] QB 650). Lord Oaksey, in Turner (at 471), said that the law "does not concern itself with niceties in such matters" (he went on to say, "If you are attacked by a prize fighter you are not bound to adhere to the Queensberry rules in your defence").

13 Just as there must, necessarily, be some latitude in respect of the content of the response, so, too, should some latitude be allowed as regards the extent of its publication. As McLure J has pointed out, incidental publication to persons without the requisite interest will not deprive a person of the benefit of the privilege. Gatley, at 14.75, says in this respect that:

"... where the occasion on which a libel is published is otherwise privileged the person exercising the privilege is entitled to take all necessary or reasonable means of so doing and, provided the publication does not go beyond the exigency of the occasion, the mere fact that the defamatory matter is communicated to persons who have no legitimate interest in its subject-matter will not avoid the privilege".

14 Whether the privilege is or is not lost, in cases of publication to persons having no relevant interest or duty, consequently raises questions of fact and degree (the test being, as McLure J has said, an objective one). Here, the attack on All-Fect was made to 178 schools. The reply was made to 1000 schools. Plainly, the vast majority of those who received the reply had no interest (in the legal sense) in reading it. Nor did they have any relevant duty. Consequently, if All-Fect and Mr Essey had known that the newsletter was published only to 178 schools (and which schools they were), there could be no question of any qualified privilege in respect of the response which was published to the other 822. However, All-Fect and Mr Essey say that they did not know to how many, and which, schools the newsletter had been sent. Had they inquired about this, and had the appellants refused to provide the necessary information, I would have had a good deal of sympathy with the position in which All-Fect found itself. However, All-Fect made no such inquiry, notwithstanding that it undoubtedly had the opportunity to do so, even given that, as the trial Judge pointed out, it had to move quickly. Of course, the possibility exists that the inquiry would have been met with more defiance, and a refusal to answer it, but the evidence did not establish that a response of that kind would have been forthcoming, more particularly (as McLure J has pointed out) if the appellants were told what would be the consequence of a refusal and if the information provided was to be kept confidential to the respondents' solicitors.

15 The effect of the authorities to which I have referred is that the degree of latitude afforded by the law as regards the extent of a publication made in response to an attack is afforded only to those who act reasonably. While it may be so, as the trial Judge pointed out, that constraints of time and circumstances did not permit All-Fect and Mr Essey to make a full inquiry as to the scale of the appellants' operations and the circulation of its newsletter, the fact is that they made no inquiry of the appellants at all (or, seemingly, of anyone else), notwithstanding that they could easily and quickly have done so. In my opinion that was unreasonable, even allowing for the defiance and lack of co-operation which had previously been demonstrated, given that All-Fect's letter (drafted in terms which trenchantly criticised the appellants) was to be published to every school in Western Australia.

16 It follows, in my opinion, that the appellants should have succeeded in their counterclaim and that the appeal in that respect should be allowed.

17 It consequently follows that the appeal against the judgment in favour of All-Fect should be dismissed, the appeal against the judgment in favour of Mr Essey should be allowed, the respondents' notice of contention should be dismissed and the appeal against the dismissal of the counterclaim should be allowed. I would hear further from the parties as to the form of the necessary orders.

18 MCLURE J: I have had the advantage of reading in draft form the reasons to be published by Pullin J. The facts are set out in his reasons and I do not intend to repeat them save to the extent necessary for an understanding of these reasons.

19 The respondents (plaintiffs) succeeded in their defamation action against the appellants (defendants). The appellants failed in their defamation counterclaim against the respondents. The appellants' appealed against the decision in the action and the counterclaim. The issues in the appeal in the action arise from the interrelationship between the identification of the respondents and the extent of the relevant publication of the words complained of. The issues include whether the respondents were identified in the defamatory material upon which the appellants were entitled to rely; if either or both of the respondents were not identified, whether the appellants had established that the relevant extrinsic facts were known to the readers of the defamatory publication; whether it is open on the pleadings to rely on the knowledge of persons to whom the defamatory material was republished; and if not, whether the witnesses with knowledge of the extrinsic facts were readers of the republished defamatory material rather than the original publication thereof.

20 The words complained of were published by the appellants in the September 1997 edition of a newsletter called "West Australian School Canteen News" ("the newsletter"). The newsletter comprised three pages. The words complained of related to the information on the packaging of a product known as JJ Noodles ("the product") and appeared on pages 1 and 2 of the newsletter. On page 3 was a reproduction of a JJ Noodle Snack label which contained the words "Manufactured by: CarJEN ... Packed for: ALL-FECT DISTRIBUTORS LIMITED ... Lidcombe NSW" and the word "CHEAT!" appearing three times next to it. That was the sole express reference to All-Fect. Mr Essey, the first respondent (first

plaintiff), was not named or otherwise expressly referred to in the newsletter.

21 The respondents in par 4 of the statement of claim refer to the defamatory words complained of which are set out in Schedule A to the pleading. Neither respondent was expressly or impliedly referred to in the words complained of as pleaded. The reference to All-Fect on page 3 of the newsletter was omitted. That is the factual context giving rise to the issues of whether the respondents were identified in the defamatory material upon which they were entitled to rely at trial.

22 The legal principles are relatively clear and, as I understand it, largely uncontentious. It is an essential part of a plaintiff's case to show that he is the person referred to in the defamatory words complained of. When the words complained of are, on their face, defamatory and refer by name to the plaintiff, it is necessary to prove only that the words complained of were published by the defendant without proving that the persons to whom it was published had any knowledge of the plaintiff: Mirror Newspapers Ltd v World Hosts Pty Ltd [1979] HCA 3; (1979) 141 CLR 632 at 639; Consolidated Trust Co Ltd v Browne (1948) 49 SR (NSW) 86 at 89 per Jordan CJ.

23 If the words complained of do not refer to the plaintiff by name and the identity of the person defamed would be apparent only to persons who had knowledge of special circumstances, it is necessary to prove that the words complained of were published to a person or persons who had knowledge of the special circumstances: Mirror Newspapers Ltd v World Hosts at 639; Consolidated Trust v Browne at 89.

24 In the second category of case, the plaintiff is relying on a true innuendo. There is no justification for distinguishing innuendoes as to identity from other true innuendoes: Gumina v Williams (No 1) (1990) 3 WAR 342 at 344.

25 It was accepted that in order to establish identification, Mr Essey had to prove that relevant extrinsic facts were known to a reader or readers of the newsletter. All-Fect contends it was entitled to rely on the words on the label on page 3 of the newsletter in support of its pleaded defamatory imputations.

26 A plaintiff must plead all the material of which he complains, including contextual material, which affects the meaning of the words complained of: Gordon v Amalgamated Television Services Pty Ltd (1980) 2 NSWLR 410 at 413. Accordingly, if a plaintiff relies on any part of a publication to support a defamatory imputation against him arising from the natural and ordinary meaning (false innuendo), the material should be included in the pleading of the words complained of which are relied on as giving rise to the imputation.

27 There is a significant legal difference between reliance on the natural and ordinary meaning of the words complained of to establish identity and reliance on extrinsic facts for that purpose (true innuendo). In the former case the only issue is whether the words complained of are capable of and do give rise to the pleaded imputations regardless of their accuracy. In the latter case, a true innuendo must be based on existing (true) extrinsic facts known to readers: Mirror Newspapers v World Hosts (supra) at 642.

28 In this case the trial Judge, relying on the material on page 3 of the newsletter, found that the ordinary reasonable reader would conclude that the product was being distributed within Australia, and thus within Western Australia, by All-Fect and that the appellants' attack upon "Health Thieves" and "businesses in WA that are so greedy for profit" in the newsletter included All-Fect (the "identification finding"). He went on to find that the pleaded imputations involving All-Fect arose from the words complained of.

29 The appellants contend the identification finding was outside the scope of the pleadings and ought not to have been made and, further or in the alternative, that it was not open on the evidence.

30 It is necessary to outline the relevant parts of the pleadings. As already noted, the respondents' pleading of the words complained of excluded any material on page 3 of the newsletter. The imputations and particulars of identity of All-Fect are pleaded in par 6 as follows:

"The matter complained of in paragraph 4 in its natural and ordinary meaning contained the following imputations, each of which is defamatory of [All-Fect]:

(a) [All-Fect] engaged in serious breaches of the laws of Western Australia;

(b) [All-Fect] was so greedy for profits that it deliberately put the health of consumers of its product at risk in its quest for profits;

(c) [All-Fect] endangered the health of children who used its products;

(d) [All-Fect] cheated consumers by the deceptive marketing of its products.

Particulars of Identification

(i) [All-Fect] manufactured and marketed the product JJ Noodles.

(ii) The above facts were known to readers of the 'Western Australian Canteen News'."

31 The appellants (defendants) denied the allegations in par 4 of the statement of claim but pleaded further as follows:

"4.2 The Defendants further say that:

4.2.1 Schedule A to the Statement of Claim does not accurately reflect the related statements that appeared in Canteen News, and the Defendants will refer to Canteen News at the trial for its full and correct terms;

4.2.2 The relevant reports on pages 1 and 2 of Canteen News referred only to a company or companies selling marketing, supplying, distributing or importing JJ Noodles in or into Western Australia, a description that does not apply to any of the Plaintiffs."

32 Notwithstanding that the respondents purport to rely on the natural and ordinary meaning, I am satisfied that the respondents' pleaded case is confined to a claim of true innuendo having regard to their failure to plead the identification material in the words complained of and the fact and content of the pleaded extrinsic facts to establish identity. However, par 4.2.1 of the defence is in such general terms as to widen the scope of the words to which the Court must have regard in determining whether the pleaded imputations arise to include page 3 of the newsletter. That being the case, the pleadings as a whole are wide enough to support a claim that the imputations arise from the natural and ordinary meaning of the newsletter. A broad construction of par 4.2.1 of the defence is supported by the plea in par 4.2.2 which gives a very narrow construction to the pleaded words complained of and which suggest the appellants considered that the reference to All-Fect on page 3 was insufficient to link the company with imputations capable of arising from the defamatory material. Further, that is the way the appellants' case was presented in written submissions provided at the commencement of trial.

33 The appellants' second contention is that the identification finding was not open to the trial Judge on the evidence. The finding made by the trial Judge is based on the pleaded words complained of in combination with the identification material on page 3 of the newsletter. The newsletter was tendered in evidence without limitation and the appellants conceded that page 3 was attached to and formed part of the newsletter. It is clear from the terms of the trial Judge's finding that he approached the combination of that material as together constituting the words complained of in assessing whether the imputations against All-Fect arose in the natural and ordinary meaning of those words.

34 If, as I have concluded, the words on page 3 of the newsletter are to be considered in determining the natural and ordinary meaning of the words complained of, the trial Judge's identification finding was clearly open. Paragraph 13 of the words complained of are of particular significance in this regard. It refers the reader to page 3 of the newsletter to see the "offending packaging to illustrate just how some manufacturers, importers and distributors attempt to cheat and profiteer with their illegal products".

35 The natural and ordinary meaning includes inferences and conclusions that an ordinary person draws from the words used and includes "a certain amount of loose thinking": Morgan v Odhams Press Ltd [1971] 1 WLR 1239 at 1245; Mirror Newspapers Ltd v World Hosts (supra) at 641. The express reference to All-Fect and the juxtaposition of the word "cheat" compels a finding that All-Fect was included in the attack contained in the newsletter. Having regard to the scope of the publication to at least 180 school supervisors, it is clearly open to infer that a significant number of persons would have read the newsletter, including page 3. I see no proper basis for interfering with the trial Judge's finding that the appellants had defamed All-Fect.

Identification of Mr Essey - The Extent of the Publication

36 It is the identification of Mr Essey that raises the remaining issues to which I have referred. Mr Essey was not named in the newsletter and there is no express reference in it to his title or position with All-Fect. As I said, it is not in contention that the respondents had to prove extrinsic facts to identify Mr Essey as within the scope of the attack. The pleaded particulars of identification were that Mr Essey was at all material times the managing director of All-Fect, that All-Fect manufactured and marketed JJ Noodles and that these facts were known to the readers of the newsletter.

37 The trial Judge found that Mr Essey was essentially the controlling figure in All-Fect and that ordinary reasonable readers with knowledge of that fact would draw the defamatory imputations which were that Mr Essey caused All-Fect to engage in the conduct pleaded against All-Fect. The crucial question at trial was the extent of the relevant publication and what had been proved (directly or by way of inference) as to whether persons with knowledge of the extrinsic facts would have or did read the newsletter.

38 Based on the trial Judge's rulings both prior to and at trial, the case was conducted on the basis that liability for republication was outside the scope of the pleadings. The respondents' notice of contention, which claims that the trial Judge erred in ruling that evidence of republication was not admissible because there was no plea of republication in the statement of claim, must be dismissed for the reasons given by Pullin J. The sole question is the proven extent of the pleaded publication.

39 It is accepted that the appellants published the newsletter by two means. The first was by sending the newsletter with an invoice in a sealed envelope addressed to the canteen supervisor of the second appellant's existing customers. In addition, the newsletter was available on the front counter of its business premises. The second appellant carried on business as a wholesaler and distributor of products to school canteens.

40 All-Fect was incorporated, and Mr Essey was resident, in New South Wales. Mr Essey had business connections with a number of distributors in Western Australia. A number of Western Australian industry representatives (wholesalers or distributors) gave evidence that they knew Mr Essey was the principal of All-Fect and some had read the newsletter. One of the industry witnesses, Mr Stace, obtained a copy of the newsletter from a sub-wholesaler. Another, Mr Verbunt, did not give evidence as to whether and, if so, where he obtained the newsletter. A distributor, Mr Fraser, gave evidence that he saw the newsletter and associated the article concerning JJ Noodles with All-Fect (without reading page 3). He knew Mr Essey was the owner of All-Fect and what it did could be attributed to Mr Essey. Mr Fraser confirmed the newsletter was not sent to him by the appellants. He saw the newsletter on one occasion at a school canteen. It was lying on a bench inside the canteen. He was accustomed to going into school canteens in the course of doing business with the people working in the canteens. By the look of it, he did not understand the newsletter to be a private document. He read it by picking it up, as one reads a magazine while waiting for someone to arrive.

41 The trial Judge also referred to the evidence of witnesses involved in the canteen at Perth Modern School that the newsletter was pinned to a noticeboard in the canteen.

42 The trial Judge found that the persons to whom the publication was made "included those persons by whom the publication would ordinarily be read. Such readers include persons entering into school canteens and persons entering into the [appellants'] premises where the newsletter was on the front counter".

43 The appellants' submission was that the readers of the newsletter should be characterised narrowly as those persons to whom the newsletter was sent with periodical accounts. In response to that submission the trial Judge said (at pars 97 - 99):

"I am not prepared to make such a finding. In my view, the format of the newsletter made it inevitable that the document would be read by persons other than the direct recipient. The newsletter served a promotional purpose and was intended to be read generally by persons coming to school canteens or by those who came to the defendants' premises. I find that it was in fact read by persons other than those to whom the defendants' accounts were mailed.

Accordingly, I consider that the readership of the newsletter extends beyond those persons who received the newsletter with their accounts and included visitors to school canteens such as Mr Fraser and other sales representatives. To the extent that such a finding is necessary, I find that the defendants authorised republication to such persons.

It follows from this discussion that, in my view, readers of the defendants' publication included visitors to the defendants' premises and to school canteens. Some readers such as those sales representatives who were involved in the distribution of the plaintiffs' products were aware that All-Fect traded also as Millers Distributing Co and that the first plaintiff, Fred Essey, was the principal figure in those organisations. The defendants adduced evidence to this effect from several witnesses including Mr Stace and Mr Fraser. I find that Mr Fraser picked up and read the defendants' publication in a school canteen in the manner described in his evidence, and concluded that the distributor of JJ Noodles under attack was Mr Essey."

44 The trial Judge made no express finding that people in the industry (in particular, sales representatives) attended at the second appellant's premises where the newsletter was available. The uncontradicted evidence of the appellants was that some copies of the newsletter were available for customers who visited their premises. If the trial Judge did by inference find that industry representatives with knowledge of Mr Essey's role with All-Fect would attend at the appellants' business premises and read or take a copy of the newsletter, such a finding is not open on the evidence.

45 A number of people involved in the wholesaling and distribution of products to school canteens in Western Australia would be aware of Mr Essey's role with All-Fect. The appellants' customers did not have that knowledge. Mr Fraser read the article in the newsletter whilst attending a school canteen in the course of his business. The trial Judge found that other industry representatives would have obtained access to and read the newsletter in that way. The question is whether a publication of that nature is a republication and thus outside the scope of the pleadings.

46 Publication is a material element of the cause of action in defamation; it is the communication of defamatory matter to a person other than the plaintiff. Republication in the law of defamation has a special meaning. The issue of republication arises in the law of defamation in circumstances in which a publisher of defamatory material ("original publisher") is sought to be held liable as publisher for a subsequent publication of the defamatory material by an independent third party acting voluntarily (that is, without compulsion): Gatley on Libel and Slander 10th Ed at 6.35 and 6.36; Jones v Amalgamated Television Services Pty Ltd (1991) 23 NSWLR 364 at 367 - 378. Republication in the law of defamation involves a separate and subsequent act of publication by a third party. Excluded from that category would be the original publisher's agent for the distribution (publication) of the relevant material. The original publisher is liable for any republication if he authorises it (short of the third party being an agent for publication) or intends it. There is a conflict of authority as to whether an original publisher is also liable for republication if it is the natural and probable consequence of his conduct: Speight v Gosnay (1891) 60 LJQB 231; cf Broxton v McClelland [1995] EMLR 485; McManus v Beckham [2002] EWCA Civ 939; Gatley at par 6.35.

47 In determining whether a publication is a republication by the original publisher it is necessary to firstly identify the publication complained of and by whom that publication was made. An example may assist. From the gathering of defamatory matter from a source to its publication to the general public in a newspaper there are numerous separate publications, each of which gives rise to a separate cause of action in defamation. It generally involves, at least, the publication of the defamatory matter from the source to the journalist, from the journalist to the publisher (used in the commercial, not technical sense), from the publisher to the printer, from the printer to the vendor and the vendor to the general public. This final publication is usually the publication complained of. Although each publication of a single edition of the newspaper to readers is itself a separate cause of action, it is for pleading purposes treated as a single publication. Each of these participants in the process of the publication of the newspaper to readers will prima facie be liable for the publication by them of the defamatory matter as well as for the subsequent publications by other persons leading up to and including the final publication.

48 In this scenario, if the source who published the defamatory material to the journalist authorised or intended the defamatory material to be published to the newspaper's readers, the source is liable for each of the subsequent and the final publications, each of which is a republication for the purposes of the law of defamation.

49 It is necessary to distinguish republication from direct or vicarious liability for a publication by virtue of a person's direct and active participation in, or in securing, the publication complained of: Gatley at 6.15. Some participants who are part of a commercial publishing organisation may be liable in this way for publication rather than for republication. It is because of this distinction and the potential overlap that there has been a trend to confine republication to a publication by a third party over whom the original publisher has no control (that is, an independent third party): State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd [2001] NSWCA 47; (2001) 51 NSWLR 399.

50 Another scenario is where material is published in the course of and prior to its publication to the intended addressee. In such a case the publication complained of occurs prior to the publication of the defamatory matter to the intended addressee, in which case a defendant will be liable if the defendant knew there may be incidental publication or such publication was a natural and probable consequence of the defendant's act: Theaker v Richardson [1962] 1 WLR 151.

51 If a plaintiff intends to rely on liability for republication, he must plead it either as a separate cause of action or alternatively as relevant to the assessment of damages flowing from the original publication the subject of the action. The respondents made it clear before trial that they did not intend to rely on republication as a cause of action and they were unsuccessful in their attempt to amend their pleading to rely on republication in the assessment of damages flowing from the publication complained of.

52 Any publication from the second appellant's business premises can be ignored as there is no evidence the newsletter was read by persons with the relevant knowledge of the extrinsic facts. Otherwise, the newsletter was sent with invoices to existing customers. I infer the addressees (or their agent) would place the newsletter in the canteen to facilitate wider distribution within the canteen. As a result, Mr Fraser read the newsletter. That is a publication by the canteen supervisor to Mr Fraser. There is no finding or evidence that the canteen supervisor was the appellants' agent for the purpose of publication (distribution) of the newsletter to persons working in or visiting the canteen. The appellants' authority (short of agency) or intention does not determine whether they are (directly) liable for the publication by the addressee or alternatively, liable for its republication. The addressees were independent third parties. In those circumstances any further publication by a canteen supervisor was a republication and, thus, outside the scope of the pleading.

53 It is not suggested that anyone other than industry representatives had knowledge of the relevant extrinsic facts. Accordingly, it is not open to find that the appellants published the matter complained of to persons with that knowledge. Mr Essey's claim must fail.

54 As a result of this conclusion, it is unnecessary to deal with the appellants' grounds of appeal relating to the appellants' intention, the admission of hearsay and the adequacy of the trial Judge's findings and reasons on the extent of the publication (grounds 2, 2A, 4A and 4B). However, it should be noted that if the respondents had pleaded that the appellants authorised or intended republication of the defamatory material to industry representatives, the appellants may have adduced further evidence.

55 The appellants' counterclaimed against the respondents in relation to defamatory material contained in a letter dated 15 October 1997 signed by Mr Essey for and on behalf of All-Fect. The trial Judge found that the letter defamed the appellants but upheld the respondents' defence of qualified privilege and dismissed the counterclaim. In particular, the respondents were successful in their claim that the letter was published in reply to the defamatory attack in the newsletter.

56 The appellants challenge the finding of privilege on three grounds. The first is consequential upon the success (if any) of their appeal in the action. In particular, it is contended that there had not been any relevant prior publication or identification of the respondents in the newsletter. The second is that the letter was published to a substantially wider audience than that which received the newsletter. The third is that the trial Judge applied the wrong test in determining whether the response was proportionate and should have concluded that the content of the letter exceeded the limits of the privilege.

57 I have concluded that All-Fect but not Mr Essey was defamed. However, I agree for the reasons given by Pullin J that he signed the letter in his capacity as managing director and representative of All-Fect and is protected by any privilege to which All-Fect is entitled in relation to the letter.

58 The second issue relates to the extent of the publication of the letter. The newsletter was published to the second appellant's existing customers, comprising approximately 180 schools. On the other hand, the letter was sent to all schools in Western Australia, (of which there were some 1000), to all distributors known to the respondents in Western Australia (10 to 12), and to other potential buyers of JJ Noodles in Western Australia.

59 The respondents' solicitors wrote to the first appellant, Mrs Harding, on 3 October 1997 informing her of the intended commencement of defamation proceedings and requesting the publication of a retraction. Mrs Harding responded by letter of 7 October 1997 stating that "truth is my defence" and ignored the request for a retraction. The respondents thereafter published the letter. However, at the time of the publication of the letter the respondents did not know the extent of the publication of the newsletter. They had not requested that information from the appellants.

60 Although the respondents were aware that the material in the newsletter was known to a number of people in the industry, including Mr Joyce, Mr Stace and Mr Fraser, there is nothing in the evidence to suggest that persons involved in school canteens other than people connected with the appellants' existing customers came to hear of the defamatory attack in the newsletter. Thus, the respondents published their letter to a large number of schools that were not shown to have any relevant knowledge of the content of the newsletter, whether or not as a result of a publication for which the appellants may be legally liable.

61 The privilege is based on a requirement of reciprocity of duty or interest so that publication to a person who does not share in the reciprocity is not generally privileged. As a general rule, a defendant should make his communication only to those persons who have a legitimate interest (or duty) in relation to the subject matter: Gatley at 14.67. Prima facie, that is to the persons to whom the newsletter was published. I assume, without deciding, that the scope of the publication in fact is the relevant question and not the publication for which a defendant is, or has been shown to be, legally liable. The publication of the letter to all schools in Western Australia goes well beyond publication to persons who have the requisite interest or duty in receiving the respondents' response to the appellants' attack.

62 However, incidental publication to persons without the requisite interest will not deprive a person of the benefit of the privilege. That encompasses publication to typers, printers and the like. The protection goes beyond incidental publications of that nature. As stated by Gatley (at 14.75), a person exercising the privilege is entitled to take all necessary or reasonable means of responding to the attack provided the publication does not go beyond the exigency of the occasion, in which event the mere fact that the defamatory matter is communicated to persons who have no legitimate interest in its subject matter will not avoid the privilege. The test is objective. The cases cited by Gatley in support of this proposition involve situations where the publication is regarded as a reasonable means of communicating the defamatory matter to the persons to whom its publication is privileged.

63 The American position on this subject (as stated in Restatement, Second, Tort SS 604) is materially different. It incorporates a hybrid subjective/objective test: if a person knowingly publishes material to others outside the scope of the privilege, he will continue to be entitled to the privilege if he reasonably believes the publication is a proper means of communicating the defamatory matter to persons within the scope of the privilege. On the other hand, if the publisher mistakenly believes that all of the recipients are within the scope of the privilege, the communication will remain privileged if the belief is based on reasonable grounds.

64 Whether or not the means is objectively reasonable in the circumstances depends upon what is known of the extent of the publication (in a non-technical sense) of the newsletter. The scope of the publication of the letter was significantly wider than the audience for the newsletter because the respondents did not know to whom the newsletter was published. Neither the respondents nor their solicitors requested information as to the extent of the publication of the newsletter before the letter was published. The inference from the statement of claim is that the respondents' solicitors wrongly regarded the newsletter as in the same category as a newspaper to which different rules apply. For example, in the case of publication of a newspaper, it is unnecessary to plead the persons to whom it was published because newspapers as such are published to the public at large. That also impacts on the appropriate means of responding to a defamatory attack: Penton v Calwell [1945] HCA 51; (1945) 70 CLR 219.

65 The trial Judge's reasons for rejecting the defence are as follows:

"The first plaintiff's evidence at trial was to the effect that he sought to send his reply to those same schools he thought had received the matter complained of. His evidence as a whole suggests he tried to make his response proportionate to the problem he sought to cure. In my view, having been subjected to a trenchant attack, some latitude should reasonably be allowed to the plaintiffs in seeking to answer the attack. They had to move quickly. Constraints of time and circumstance did not permit them to make a full inquiry as to the scale of the defendants' operations and the circulation of its newsletter. In that regard, it is important to bear in mind that there had been exchanges between the solicitors for the plaintiffs and the first defendant and those exchanges had failed to produce a satisfactory result. The defendants were uncooperative and defiant."

66 The trial Judge does not identify the steps (if any) the respondents actually took to identify the schools or the basis for Mr Essey's evidence that he tried to send the letter to the recipients of the newsletter. These matters were not addressed in evidence. That information would be relevant to the question whether the respondents acted reasonably having regard to the exigencies of the situation. The failure to explore these matters suggests the trial Judge did not apply a purely objective test. Mr Essey agreed that the relevant information was not sought from the appellants. The form and content of the newsletter does not justify an inference that it was sent to all schools in Western Australia. The only written communication between the parties before the publication of the letter was the solicitors' letter of 3 October. Even if it is correct to characterise the appellants' response to the solicitors' letter as unco-operative and defiant (as the trial Judge appears to do), that does not render the respondents' conduct necessary or reasonable.

67 The reasonable course was for the respondents or their lawyers to advise the appellants of the intention to respond to the attack and request information as to the recipients of the newsletter. I am not satisfied that the appellants would have refused the request, particularly if they understood the consequences of their refusal and the information was to be confidential to the respondents' solicitors. In any event, they were not given the opportunity. Further, the respondents had sufficient time between when they engaged solicitors (some time on or before 3 October) and when the letter was sent (15 October) to request the information. In my view, the publication of the letter to all schools was not a necessary or reasonable means of replying to the attack in the newsletter and, thus, the defence of qualified privilege must fail. That being so, the appellants should have succeeded on their counterclaim.

68 The final ground of appeal on the counterclaim relates to the content of the letter. The content of the reply must be relevant and reasonably proportionate to the attack in the newsletter: Heytesbury Holdings Pty Ltd v City of Subiaco (1998) 19 WAR 440 at 459.

69 Although mere retaliation which cannot be characterised as an answer or explanation is not protected, a defendant is allowed a considerable degree of latitude in the content of his response, including legitimate self-defence: Gatley at 14.49 and the authorities referred to therein.

70 The appellants contend the letter was disproportionate because it failed to deal with the deficiencies in the labelling of JJ Noodles, attacked the appellants' association with Mamee Noodles on wrong and untested facts and attributed improper motives to the appellants. The respondents were entitled to reply to the substance of the defamatory imputations, not matters of detail which did not justify the imputations. The attack on the appellants' motives and association with Mamee Noodles was, in my

view, within the scope of legitimate self-defence. I would dismiss this ground.

71 I have concluded that All-Fect's appeal should be dismissed, Mr Essey's appeal be allowed, the notice of contention dismissed and the appeal against the dismissal of the counterclaim allowed.

72 PULLIN J: This is an appeal against the judgment of Hasluck J, awarding general damages for defamation to each of the respondents against each of the appellants and dismissing the appellants' counterclaim for damages for defamation.

73 The appeal and a notice of contention by the respondents raises the following main issues:

(a) Was the second respondent ("All-Fect") defamed if it were not named in the defamatory article identified in the statement of claim, but was named on another page in the newsletter which contained the defamatory article?

(b) Did the appellants publish the article to any person who knew extrinsic facts allowing them to identify the first respondent ("Mr Essey") who was not named in the article?

(c) If not, and in view of the way the case was conducted, was it open to Mr Essey to prove that the words were republished with the appellants' authority to someone who did know the extrinsic facts?

(d) Was the letter written by Mr Essey, on behalf of All-Fect replying to the attack in the newsletter (which letter was defamatory of the appellants), published to an audience which was too wide to allow the respondents to succeed on the defence of qualified privilege?

(e) Further, if Mr Essey was not defamed in the article in the newsletter, was Mr Essey protected by the qualified privilege defence of All-Fect?

75 The first appellant ("Mrs Harding") was a director of the second appellant ("Pinegate"). All-Fect and Pinegate were food distributors who conducted business in Western Australia. All-Fect was a New South Wales company, but sold its goods in Western Australia through

distributors and other wholesalers. Included in its line of products was a product called "JJ Noodle Snack" which was manufactured by Carjen Foods in Malaysia. All-Fect planned to sell JJ Noodles in Western Australia through a distributor called Confectionary Distributors. Pinegate traded as GUYS School Canteen Supplies and, as its business name suggested, it sold products to school canteens. One of Pinegate's products was a product called Mamee Noodles.

76 All-Fect wished to sell JJ Noodles to school canteens and sent a sample to Pinegate to look at, hoping that Pinegate would agree to distribute the product to the canteens. Pinegate, as well as being a food distributor, published a newsletter called "West Australian School Canteen News" ("Canteen News"). The Canteen News was a newsletter. It was A4 in size. The typeface used in the title, along with the words in the title, gave the title a resemblance to the masthead of "The West Australian" newspaper.

77 When the sample of JJ Noodles was received by Pinegate, Mrs Harding examined it and then wrote a review of JJ Noodles. The review was published in the September 1997 edition of the Canteen News ("September Canteen News"). Under the masthead appeared the words "Statewide Edition" and those words were repeated on the second page. The words of the article appeared on pages 1 and 2 of the September Canteen News. They are the words the subject of the respondents' claim and `they were reproduced in Schedule A to the statement of claim and included the following:

"...

6 ... Marlene was requested by a canteen supervisor to comment on a 'new product' that looked like it might be suitable for schools. GUYS is always on the look out for new, cost effective, nutritional products that will suit the requirements of school canteens, Marlene was pleased to take the time to do so!

7 Once again, disappointment reigned when the sample of the 'new' product arrived at GUYS Morley warehouse from the canteen supervisor!

8 The product had already been rejected by GUYS. And a long stretch of the imagination would be needed to consider the product to be suitable for schools!

9 Illegal marketing through claims made on the packaging, and what GUYS considers to be downright cheating on the nutritional panel put the product outside any consideration it might have got on it's true merits. And GUYS questions the very legality of the product.

10 ... Can there really be any businesses in WA that are so greedy for profit - or so ignorant of the law relating to their business that they deliberately put people in danger by compromising the dietary information on foodstuffs they sell?

11 Unfortunately the answer is yes!

12 This type of cheating has become such a common occurrence that unless we do something to say ... NO MORE! we might be in danger of accepting it as normal business practice.

13 To the end, GUYS has chosen to use the offending packaging to illustrate just how some manufacturers, importers and distributors attempt to cheat and profiteer with their illegal products. Especially at the expense of our children.

...

26 The cheating and illegally packaged J.J. Noodles are imitations of the very acceptable and legally manufactured Mamee Noodles ..."

78 This article was located under the banner headline "Health Thieves!". The respondents were not named in the article on pages 1 and 2. However, par 13 of the words set out above may have sent an interested reader looking to see if the offending packing was indeed reproduced to illustrate how the cheating occurred. On page 3 a reader would have come across the reproduction of a JJ Noodle Snack label with the words on it "Manufactured by Carjen ... Packed for All-Fect Distributors Ltd ... Lidcombe NSW" and the words "Cheat!" appearing three times next to it.

79 The September Canteen News, like other editions of Canteen News, was sent by post in an envelope addressed to Canteen Managers of the school canteens to which Pinegate sold products. Copies of Canteen News were also placed on the counter at Pinegate's premises.

80 Whether the appellants authorised republication to other readers, and whether those other readers knew of extrinsic facts to identify Mr Essey, and whether republication was an issue on the pleadings was a matter of controversy between the parties.

81 Mr Essey was furious when he learned about the publication of the article in the September Canteen News. He referred the matter to All-Fect's solicitors. They wrote to the appellants asking for a retraction of the allegations. A retraction was not proffered. The appellants wrote back defending the publication on the basis that what was said in it was true.

82 As a result Mr Essey prepared and signed a letter as Managing Director of All-Fect which was sent out on 15 October 1997 to Canteen Managers in all schools in Western Australia and to 10 or 12 food distributors in Western Australia. This letter contained an answer to the allegations in the articles. The content of this letter was defamatory of the appellants and they counterclaimed for damages in relation to it.

83 The learned trial Judge found that the article in the September Canteen News was defamatory of both All-Fect and Mr Essey and awarded damages to each of them against both appellants.

84 His Honour also found that the respondents' letter was defamatory of the appellants but dismissed the counterclaim because he held that the letter was published on an occasion of qualified privilege.

85 The case was bedevilled by a failure on the part of both parties to adhere to the rules and established practice and procedure designed to identify issues to be decided in a case. As will become apparent, the respondents failed to plead material facts or to give particulars to identify the persons to whom the offending words were published. The appellants failed to apply to strike-out the statement of claim because of this deficiency. There was then a debate between the solicitors for the parties about whether the pleaded case permitted the respondents to claim damages for republication of the September Canteen News by persons to whom it had been published. This debate took place a year before the trial. The respondent's solicitors contended that republication was an issue even though it was not mentioned in the pleadings. The appellants claimed it was not an issue. The respondents failed to apply to amend the statement of claim or to raise the issue until a few days before the trial. The application was dismissed. The failures referred to, and the way the case was conducted, complicated the appeal.

86 The appellants submit that the respondents' evidence failed to prove that any of the readers of the offending article in the September Canteen News had identified All-Fect. Putting aside for the moment the evidence of a Mr Fraser, who did read the article in the Canteen News and did know that it was All-Fect who distributed JJ Noodles, the fact is that on page 3 of the September Canteen News All-Fect was identified as the person for whom the JJ Noodles were "packed", which meant, as Hasluck J held, that it was the "distributor" as par 5(d)(ii) of the statement of claim alleged.

87 The appellants submitted that what was on page 3 was irrelevant because the statement of claim, as it did, pleaded only that the words on pages 1 and 2 were defamatory. The words on those pages did not identify All-Fect. The way the case was conducted, however, meant that page 3 was not irrelevant.

88 The whole of the September Canteen News was tendered in evidence without objection. The appellants claim that the tendering of the whole of the newsletter (ie pages 1, 2 and 3) was merely for the purpose of proving the context in which the words complained of were published. In my view that was not the purpose at all. It was tendered because there was no issue before or during the trial that the relevant words and illustrations on pages 1, 2 and 3 were the materials complained of, despite the reference in the statement of claim to only the words on pages 1 and 2. The appellants in their defence in par 4.2.1 pleaded that Sch A to the statement of claim (which reproduced only the words on pages 1 and 2) did not accurately reflect the "related statements that appeared in Canteen News" and that the appellants would "refer to Canteen News at the trial for its full and correct terms". The whole copy of the September Canteen News was exhibited to an affidavit which had been sworn by Mrs Harding before trial, and which was tendered by the respondent during cross-examination of Mrs Harding. There was no objection to this being tendered. Further, all three pages were reproduced and included in the papers for the Judge. Page 3 appeared at page 15A of the papers for the Judge and the learned trial Judge asked about the "exact status" (AB 278) of page 3. The following interchange then took place (AB 278):

"HASLUCK J: Somehow I have been left with the impression, particularly as it has appeared at page 15A, immediately following on from the Canteen News, that in some way it formed part of the Canteen News newsletter or was attached to it or something of the kind, but is that an agreed fact or a fact to be proved or can someone tell me something more exact about that?

SCHOOMBEE, DR: No, your Honour. That's common cause. That's indeed common cause."

89 Furthermore the appellants' (defendants') outline of submissions for trial filed shortly before the trial began, referred to the whole of the September Canteen News and defined it as the "Publication" and stated that:

"The Publication did not name the plaintiffs, although a photocopy of the packaging for JJ Noodle Snacks identified, in small print the product as being 'packed for' the second plaintiff whose address was stated as being in New South Wales."

90 It is true that at the end of the trial, the appellants for the first time, in the appellants' (defendants') outline of submissions in closing, sought to distinguish between the article on pages 1 and 2 and the rest of the newsletter. In my opinion that was too late. The parties had conducted the trial on the basis that what appeared on pages 1, 2 and 3 were the materials complained of.

91 In any event this is a pleading point and even at this stage the appellants point could be overcome by allowing the respondents to amend to plead that the offending words were those appearing on pages 1, 2 and 3 of the September Canteen News.

92 The appellants also argued that there was no evidence that anyone read page 3 which referred to All-Fect. That argument cannot succeed because when a plaintiff is named in the words complained of it is not necessary that evidence be led that to whom the words were published knew the plaintiff before the plaintiff is defamed. Cross v Denley (1952) 52 SR (NSW) 112 at 116.

93 In my view, therefore, the appeal by the appellants against judgment in favour of All-Fect must be dismissed.

94 Mr Essey is not referred to in the article, but it was pleaded in the statement of claim that All-Fect marketed JJ Noodles, that Mr Essey was the Managing Director of All-Fect, and that these facts were known to readers of the September Canteen News. This is therefore a case of true innuendo, that is a case of a plaintiff relying on extrinsic facts known to the readers which allow them to identify the plaintiff. Where a claimant may only be identified as the result of extraneous facts not generally known, there will be no actionable publication unless it is proven by the claimant that the words were communicated to persons with such knowledge. Cross v Denley (op cit); Consolidated Trust Co Ltd v Browne (1948) 49 SR (NSW) 86. There may be cases where the facts are sufficiently notorious that the court may infer that some reader would have recognised the claimant even though such a person was not called as a witness. See Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30; Andrews v John Fairfax & Sons Ltd (1980) 2 NSWLR 225. In my view this is a case where the plaintiff had to prove that a person to whom the September Canteen News was published knew the extrinsic facts. All-Fect was a New South Wales company and the Managing Director was resident in New South Wales. In my opinion no inference could be drawn that persons to whom the September Canteen News was published would know of Mr Essey's existence and his connection with All-Fect. I note that his Honour referred to Mr Essey's business connections in Western Australia but those connections were not generally known to Canteen Managers.

95 The respondents pleaded that readers "knew" Mr Essey was the Managing Director of All-Fect.

96 At trial, Mr Fraser was called by the respondents and he gave evidence that he did know about All-Fect; he did know that All-Fect marketed JJ Noodles; he did know that Mr Essey was a director of All-Fect. He read the article in the September Canteen News. He applied the knowledge he had about All-Fect and Mr Essey and he therefore knew the article referred to All-Fect and Mr Essey. The article therefore defamed Mr Essey.

97 That would have established Mr Essey's claim save for the fact that the appellants contend that there was no publication by the appellants of the words complained of to Mr Fraser. They submit the words were republished to him by a person to whom the September Canteen News was admittedly published by the appellants. The appellants submit that because of pre-trial rulings, republication to Mr Fraser could not be relied on to prove that Mr Essey had been defamed; and that without Mr Fraser's evidence, there was no evidence (as was the fact) that anyone to whom the words were published (rather than republished) did know about Mr Essey being associated with All-Fect. As a result they submitted that Mr Essey's claim should have been dismissed.

98 It was the respondent's submission that the words in the September Canteen News were published to Mr Fraser by the appellants, not republished by others and that his Honour's judgment in favour of Mr Essey was not in error.

99 To deal with this point I must again refer to the unsatisfactory nature of the statement of claim. The respondents in their statement of claim in par 4, did not plead to whom the Canteen News was published. Paragraph 4 merely pleaded that the September Canteen News was "published of and concerning" the respondents.

100 The person or persons to whom defamatory words are published should be identified in the statement of claim save in newspaper cases. Many cases suggest that particularisation is all that is necessary. See Lazarus v Deutsche Lufthansa AG (1985) 1 NSWLR 188 at 193.

101 In the cases of limited publication and to take the extreme example of a defamatory letter, the plaintiff would always be expected to plead, or give particulars of, the fact that the words were published of and concerning the plaintiff to the addressee, or in a case like the example given by Swinfed Eady LJ in Huth v Huth [1915] 3 KB 32 at 43, to plead that it was published to a person who opened the letter before the recipient received it in circumstances where that should have been expected.

102 This case involved publication to less than 200 people in Western Australia and Mr Essey had to prove that one or more of those people had knowledge of extrinsic facts to identify him as the person who caused All-Fect to cheat customers.

103 Although the respondents did not plead to whom the words were published, the appellants did so by pleading in par 2 of the defence that:

"... [Canteen News] is a monthly newsletter published in Western Australia by sending it by mail to a circle of readers consisting of persons or corporations that operate in or have an interest in the operation of school canteens in the State and are customers of the Second Defendant."

104 It would have been wise for the appellants to have asked for particulars of the generalised plea of publication in the statement of claim, but they did not do so. The failure of the respondents to plead or give particulars of the persons to whom the words were published, and to identify who had knowledge of the extrinsic facts, and the failure of the appellants to ask for particulars led to subsequent difficulties.

105 About a year before the trial the solicitors for the parties discussed the issues that were likely to arise and the question then arose about whether the respondents were relying on publication or republication. The solicitors for the respondents told the appellants that they did not intend to rely on republication authorised by the appellants to support a fresh cause of action. However, they said that the respondents claimed damages and that damages would include the damages caused by republication. The distinction is explained in State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd [2001] NSWCA 47; (2001) 51 NSWLR 399 at [105] and [106] per Giles JA. See also Sims v Wran (1984) 1 NSWLR 317.

106 This led the parties to apply for a pre-trial ruling 10 days before the trial commenced, about whether the respondents would be permitted to recover damages based on republication. Hasluck J ruled that no evidence of republication could be led unless notice of the respondent's intention to claim damages for republication was given in the statement of claim.

107 This prompted the respondents to make an application four days before trial, for leave to amend the statement of claim to claim damages for republication. This application was refused by Hasluck J because the amendments would cause the appellants prejudice. No application was made by the respondents for leave to appeal against that decision.

108 The trial then got underway and in the course of the evidence-in-chief of the first witness, Mr Essey, some evidence was led about a telephone call he received from a Mr Joyce concerning the September Canteen News. This was objected to by the appellants, not because it was hearsay, but because, according to the appellants, it was anticipated that Mr Joyce would give evidence that he had read the September Canteen News as a result of republication by a Canteen Manager.

109 The following interchange then took place (AB 155-156):

"HASLUCK J: I don't understand it to be being led as republication. I understand the evidence to be led simply to establish that at some stage the evidence came to the plaintiff's attention but, all right, let me find out from Mr Hassett.

HASSETT, MR: Yes, we have got to get to there and we have certainly got to establish that. I am conscious of what your Honour said about republication. We never suggested that Mr Joyce was a recipient of a republication. The question of publication - that's a matter for the trial. As your Honour said in Vitale, it's a matter for evidence. Who was this thing published to? At the moment I am just asking about his reaction but I am going to move to the next question which will be: did he have a copy, and I anticipate the answer being yes.

That is hearsay evidence as to the range of publication which I am entitled to lead on the basis of Hutley J's decision in Andrews at paragraph 18. At page 234 there:

It was further submitted though that this evidence was admissible to prove the range of publication which it was but not admissible on damages -

and his Honour found that this hearsay evidence was admissible on both counts - once in, all in, Walker v Walker - but was hearsay evidence admissible to prove the range of publication.

HASLUCK J: Yes. Let us be clear on this. I think it is recognised and conceded by counsel but as both counsel are aware, there have been directions prior to the trial in which a ruling has been made on the question of republication and I don't understand there to be any controversy about that. I think both counsel recognise that a ruling has been made on the pleadings as they stand that evidence of republication per se is not presently - is not at all an issue on the pleadings and I understand both parties recognise that ruling has been made. So I understand from what you say your evidence is not going to that. Dr Schoombee, is that the position?

SCHOOMBEE, DR: That is indeed the case. That is why I, with respect, signalled the question because it seems to be the same ground - my learned friend is now saying it's not republication; it's original publication.

HASSETT, MR: I'm saying it's original publication, yes. I'm allowed to say that."

110 The pre-trial rulings, the re-statement of the position by the trial Judge, and the statements by both counsel make it clear, in my opinion, that it was accepted by all parties that the case was being fought on the basis that if Mr Essey was to succeed, he had to prove that the words were published to someone who knew the extrinsic facts which enabled them to identify Mr Essey as the subject of the defamatory words. The corollary is that Mr Essey accepted that if he could only prove his case by proving that a person who knew the extrinsic facts had read the words as a result of republication, then his case could not succeed. It is also became evident that Mr Essey planned to argue that persons who read the offending words after receiving the September Canteen News from, or as a result of, actions of a Canteen Manager, should be held to be persons to whom the words were published rather than persons to whom the words were republished, by a Canteen Manager.

111 I will now refer in more detail to the evidence which was led at trial in relation to what was undeniably publication, as opposed to republication. The evidence from answers to interrogatories sworn by Mrs Harding and tendered by the respondents, was that 180 copies of the September Canteen News were printed and that "178 copies of the September 1997 edition ... were distributed". They were "distributed" by post in an envelope addressed to the "Canteen Manager" at each of the schools. Also enclosed in the envelope and attached to the newsletter was an invoice. There was also evidence that the newsletter was made available at Pinegate's premises. A Mrs Faranda who was a school Canteen Manageress used to visit Pinegate's premises to pick up products and she would there see on the counter, next to the till, a copy of the newsletter. No-one tried to stop her from picking up the Canteen News. She said anyone visiting could see it. Mrs Faranda did not know Mr Essey and she had never heard of him and so she knew no extrinsic facts which led her to identify Mr Essey as a person defamed by the article. There was no evidence that anyone who knew extrinsic facts allowing them to identify Mr Essey read a copy of the September Canteen News at Pinegate's premises.

112 Now I refer to the controversial evidence; that is, the evidence which the appellants contend was evidence of republication, but which the respondents argue was evidence of publication. Mr Fraser was a sale representative, whose job it was to visit school canteens to sell his products. The appellants did not ever send Canteen News to Mr Fraser. The appellants did not therefore publish the words complained of in the September Canteen News to Mr Fraser. He called at a school canteen to which one of the publications had been sent and he saw a copy of the September Canteen News on a counter in the canteen. While he was waiting to see the Canteen Manager, he picked up and read the offending article. He read pages 1 and 2. He did not read on to page 3 but he knew of All-Fect, he knew Mr Essey, he knew that All-Fect distributed JJ Noodles and he therefore identified Mr Essey as a person associated with the company distributing JJ Noodles.

113 There was also the evidence from Mr Essey about his telephone conversation with Mr Joyce. After the ruling on the objection to this evidence which I have referred to earlier in these reasons, Mr Essey gave evidence that Mr Joyce told him that he (Mr Joyce) had a copy of the September Canteen News. How he had obtained the copy was not disclosed. There was no evidence which would allow it to be inferred that he obtained it from the appellants.

114 Mr Stace of Confectionary Distributors gave evidence that he knew of Mr Essey as a principal of All-Fect. He saw the September Canteen News. It was given to him by a sub-wholesaler.

115 A Mr Peter Verbunt knew of Mr Essey and his connection with All-Fect but there was no evidence that he had read the September Canteen News.

116 So, the position at the end of the case was that the only oral testimony that a reader of the words complained of knew extrinsic facts to identify Mr Essey, was that given by Mr Fraser and Mr Stace. Mr Stace's evidence can be disregarded because there was no evidence about how the sub-wholesaler obtained the copy of the September Canteen News to give to Mr Stace. As a result, it was the appellants' submission that Mr Essey had not proved that the September Canteen News had been published by them to any person who knew extrinsic facts that allowed them to identify Mr Essey.

The trial Judge's reasons on the publication/republication issue

117 The learned trial Judge concluded first at [86] of his reasons for decision that:

"... I consider that the readers of the article or the persons to whom the publication was made included those persons by whom the publication would ordinarily be read. Such readers include persons entering into school canteens ..."

"96 This brings me to an issue concerning republication that was raised by the defendants. I was urged to find that the readers of the defendants' newsletter should be characterised narrowly as those persons to whom the newsletter was sent with periodical accounts. The defendants did not authorise republication to third parties and should therefore not be held responsible for any such republication.

97 I am not prepared to make such a finding. In my view, the format of the newsletter made it inevitable that the document would be read by persons other than the direct recipient. The newsletter served a promotional purpose and was intended to be read generally by persons coming to school canteens or by those who came to the defendants' premises. I find that it was in fact read by persons other than those to whom the defendants' accounts were mailed.

98 Accordingly, I consider that the readership of the newsletter extends beyond those persons who received the newsletter with their accounts and included visitors to school canteens such as Mr Fraser and other sales representatives. To the extent that such a finding is necessary, I find that the defendants authorised republication to such persons."

119 The appellants submit that his Honour's finding in the last sentence of [98] was not open because his Honour had ruled that republication was not to be an issue in the case and that this was accepted by the respondents. They also submit that his Honour erred in reaching the conclusion that the September Canteen News was published by the appellants to "readers ... entering into school canteens ... such as Mr Fraser."

The distinction between publication and republication

120 There is a clear distinction between publication and republication. The distinction is important because every republication of a defamatory statement is a new defamation and if committed by different persons, each one is liable as if the defamatory statement had originated with him: Truth (NZ) Ltd v Holloway [1960] 1 WLR 997. The first publisher may in certain circumstances be liable for republication by the recipient, but even in those circumstances it is important to distinguish between publication and republication. To publish a defamatory statement is to communicate the defamatory words to a person other than the person defamed: State Bank v Currabubula (supra) [105]. To communicate means to give or impart to another.

121 Counsel for Mr Essey submits that the trial Judge was correct to conclude that there was publication by the appellants to Mr Fraser.

122 Although there was no evidence of exactly how a copy of the September Canteen News came to be on the canteen counter, it can be inferred, and in my view it is the only inference open, that the Canteen Manageress opened the envelope and then placed the Canteen News on the counter. As a result it could be read by anyone who came into the canteen and passed it by. The Canteen Manageress by this method published the words to Mr Fraser. In my view, therefore, Mr Fraser can only have read the words complained of as a result of what is called republication.

123 The word "republication" is used in circumstances where a defendant publishes to A and A then publishes (republishes) to B. It is true that there are circumstances where words intended to be published to one person are in fact published to some other person, exposing the defendant to liability. In Gatley (supra) at 6.9 the author says:

"As a general rule, when a letter is addressed to a particular person, the writer is not responsible except for a publication to that person. However if in the circumstances of the case the writer knows that the letter will be opened and read by some person other than the person to whom he addresses it, he will be liable for the publication to that person."

124 Cases referred to in that paragraph however, are examples of the material complained of reaching some person before the intended recipient receives it. In that case there is publication to the first person.

125 Swinfen Eady LJ in Huth v Huth (supra) at 43 gave the example of a person sending a letter to a merchant knowing that the merchant had a staff clerk who in the ordinary course of business opened letters sent to the merchant's office. His Lordship said that would clearly be a publication if the letter were opened and perused by the clerk in that way 'even though that letter were most carefully sealed'. The author submits that the true rule is that the defendant will be liable if he has a reason to know that the letter may be opened in the ordinary course of business by someone other than the addressee and suggests that probably in modern business conditions such knowledge will generally be imputed to him unless the letter carries some clear indication to show that this should not take place." Theaker v Richardson [1962] 1 WLR 151 is another example. In that case the defendant put a letter intended for the plaintiff into an envelope similar to one which contained an election address and delivered it by hand. The plaintiff's husband picked it up and opened it and there was then said to be evidence on which the jury could find as they did, that the defendant anticipated that someone other than the plaintiff might open and read the letter and that it was a natural and probable consequence of the defendant's act that the plaintiff's husband would open and read it. There was accordingly held to have been publication to the husband.

126 In my view however, once the defamatory material has reached the recipient (not acting as agent for the original publisher) anyone else who reads the material thereafter by reason of an act of the recipient does so as a result of the act of republication by the recipient.

127 Thus, the Canteen News was sent to the Canteen Manager at each school. The evidence was that some Canteen Managers placed on noticeboards or left them around for others to read. These are all acts of republication by the Canteen Manageress not acts of publication by the appellants. The appellants submit that the pre-trial rulings, the re-statement by the trial Judge early in the trial that republication was not an issue in this case, and the acceptance of this by counsel for Mr Essey, meant that the respondents could not advance any claim based on republication. If that is so, what then of his Honour's finding that "the newsletter ... was intended to be read generally by persons coming to school canteens" and that "readership ... extends beyond those persons who received the newsletter with their accounts and included visitors to school canteens such as Mr Fraser ...". This was in effect a finding that the appellants published the September Canteen News to Mr Fraser. His Honour said so unambiguously at [86] where he said:

"... I consider that ... the persons to whom the publication was made included those persons by whom the publication would ordinarily be read. Such readers include persons entering into school canteens ...".

128 In my opinion the learned trial Judge erred in holding that there was publication by the appellants to Mr Fraser. In my opinion the defamatory words were republished by the Canteen Manager to Mr Fraser, not published to Mr Fraser by the appellants.

129 However, his Honour went on to find that the defendants authorised republication to Mr Fraser. The question is whether it was open to his Honour to make such finding. I consider that issue a little further on in these reasons.

130 There is no doubt that a person who authorises republication may be held liable for damages. So for example a person who submits material to the editor of a newspaper or who makes a statement to a reporter at a press conference will be held liable for republication in the newspaper. See Cock v Hughes [2001] WASC 24; Slipper v British Broadcasting Corporation [1991] 1 QB 283. It is not necessary that there be express authority to republish. The court may infer such authority from the circumstances.

131 In this case the September Canteen News was not a document likely to be regarded as confidential by recipients or to be treated as such. The appellants must be taken to have known of this. The "get-up" of the newsletter was according to Mrs Harding "modelled ... on the standard print used in newspapers" (AB 396). It had the words on it "Statewide edition" (AB 397) "it look[ed] like a newspaper" (AB 397), it was made "parodying a newspaper" (AB 397), it was a "newsletter" (AB 397). Mrs Harding knew it might be pinned on a noticeboard at a canteen (AB 402), knew that "reps do call in" to canteens (AB 402). The evidence of witnesses called by the appellants, a Mrs Terenciuk and a Ms Bowler, confirmed that the Canteen News was pinned up on a noticeboard (AB 460).

132 All of this was evidence which, in my opinion, might have justified his Honour concluding, as he did, that republication by Canteen Managers was authorised by the appellants. But the question is whether such a finding was open in view of the way the case was conducted.

133 In my view the finding was not open. Mr Essey conducted the case by accepting that republication was not an issue. He was bound by this decision. See Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1. His Honour's two pre-trial rulings and his statement early in the trial that republication was not an issue, and the acceptance by counsel for the respondents that republication was not an issue, means that his Honour should not have made any finding about republication. That his Honour did so may be partly the fault of counsel for the appellants who failed to continue to object to evidence which seemed to go only to the issue of republication. For example, the appellant should have objected to the evidence of Mr Fraser which went to the issue of republication. What seems to have happened is that counsel for the respondents made it clear, after the objection in relation to the Joyce evidence, that he wished to lead the evidence and to later argue that it was proof of publication, but which the appellants wished to argue was republication. It appears that once this issue was debated and identified early in the trial, objections on the same point were not made again. The matter was left for debate as a matter of law. That seems to be why Mr Fraser's evidence was allowed in without any objection being made by the appellants. The respondents reserved the right to argue that Mr Joyce (and by extension, Mr Fraser) read the words as a result of publication to them by the appellants. I note from the written outline of submissions filed by the respondents and from oral submissions, the respondents do not seek to uphold the learned trial Judge's finding that there was republication authorised by the appellants (except if they succeed on their notice of contention which I refer to below).

134 In my opinion the appeal against his Honour's judgment awarding damages to Mr Essey should succeed.

135 That leaves only the respondents' notice of contention which seeks to argue that his Honour erred in his ruling that evidence of republication was not admissible because there was no plea of republication in the statement of claim.

136 In my opinion the notice of contention must be dismissed. If the respondents wished to challenge the two pre-trial rulings, it would have been necessary to seek leave to appeal against those decisions. No such application was made to this Court. The rulings must stand. The notice of contention must therefore be dismissed.

137 In the case of Mr Essey, there is a second reason why the notice of contention cannot succeed. If he wished to claim that republication only went to increase the claim for damages, then it would first be necessary to establish that there was a cause of action based on publication of the defamatory material to someone who knew the extrinsic facts which identified him, and then to seek to enhance or increase the claim for damages by proving that there was also republication authorised by the appellants. It is clear however, that Mr Essey failed to make out his case that the September Canteen News was published to any person who knew the extrinsic facts which identified Mr Essey. None of the Canteen Managers were shown to have been aware of Mr Essey's existence and there was no proof that any person who read a copy of the September Canteen News at Pinegate's premises (if any) knew the extrinsic facts. Thus, Mr Essey's claim failed and therefore there were no damages to be enhanced or increased by evidence about republication to Mr Fraser.

138 The appellants also appeal against the dismissal of the counterclaim. This was a claim for damages based upon the respondents' letter replying to the article in the September Canteen News.

139 The appellants contend that the publication of the respondents' letter materially exceeded the bounds of any qualified privilege because it was not published to substantially the same audience which had received the September Canteen News.

140 The publication had been sent to only 183 schools and that in response the respondents' letter was sent to:

(a) Canteen Supervisors in all schools in Western Australia. There were about 1,000 schools in Western Australia;

141 A defamatory publication made in reply to an attack where the purpose of the publication is to vindicate the character or acts of the publisher is privileged: Heytesbury Holdings Pty Ltd v City of Subiaco (1998) 19 WAR 440 at 460. Reciprocity of duty and interest must exist before the defence of qualified privilege will succeed. The response must be a relevant response to the attack and if the reply is relevant and appropriate then the publisher is entitled to a considerable degree of latitude: Heytesbury at 461.

142 If the exigency of the situation requires wide publication and the reply is published to persons who in fact had no interest in reading the reply, then privilege will not necessarily be lost: see Gatley (supra) [14.75]. In the "Second Restatement of the Law of Torts" 2d, Vol 3 [604] it is said:

"Often the only practicable means of communicating defamatory matter involves a probability or even a certainty that it will reach many persons whose knowledge of it is of no value in accomplishing the purpose for which the privilege is given. In this case, the publication is not excessive or an abuse of privilege, if the importance of the interest involved, the gravity of the harm threatened to it and the inconvenience of any other means of communication make the publication reasonable."

143 In this case the respondents' solicitors wrote to Mrs Harding on 3 October 1997 threatening defamation proceedings because of the article in the September Canteen News, asking for certain information and asking if Mrs Harding was prepared to publish a retraction. Mrs Harding responded with a letter dated 7 October 1997 which was correctly characterised by Hasluck J as being "uncooperative and defiant". Mrs Harding said in her letter that "Truth is my defence". She ignored the request that a retraction be published. As a result on 15 October 1997 the respondents then published the letter the subject of the counterclaim.

144 All-Fect did not then know precisely to whom the September Canteen News was published but it did know that it was published to Canteen Managers and that wholesalers and buyers of products for canteens knew about it. Mr Essey knew that the September Canteen News article had reached distributors or buyers because this is how he first heard about the article being published. The title and get up of the September Canteen News indicated that it was intended for canteen staff generally. Furthermore, it is clear that Mrs Harding marketed Pinegate's services to school Canteen Managers beyond those who received the Canteen News. It is also the case that the Canteen News was available at the counter at Pinegate's premises.

145 All-Fect therefore knew that the September Canteen News was likely to have been read by many persons associated with school canteens. The defamatory material was very damaging and it had to be answered very quickly. As a result All-Fect addressed the letter to Canteen Managers/buyers.

146 In my opinion, All-Fect's response was reasonable. It was a letter directed to Canteen Managers/buyers and sent to Canteen Managers in all schools in Western Australia and to 10 or 12 wholesalers who Mr Essey reasonably believed had seen the article in the September Canteen News. The exigency of the circumstances required All-Fect to make a decision based on limited information about the persons to whom the letter should be sent. All-Fect acted reasonably in asking for a retraction. The response was defiant and uncooperative. It may be inferred from this response that the appellants would not have handed over their mailing list. In my view that was enough to discharge the evidential burden on All-Fect to show that it acted reasonably. Mrs Harding gave evidence and did not say that she would have handed over the list if she had been asked. All-Fect could see from the September "Canteen News" that it was a "Statewide Edition". In the circumstances, it was reasonable for All-Fect to write to Canteen Managers at all schools. The fact it may have reached persons who had not been sent the September Canteen News does not, in the circumstances, destroy the privilege.

147 The appellants also allege that the trial Judge erred and applied the subjective test to the determination of the issue as to whether the response was proportionate. The appellants pointed to his Honour's statement that reads:

"[Mr Essey's evidence] as a whole suggests he tried to make his response proportionate to the problem he sought to cure."

148 The appellants seized upon his Honour's use of the words "he tried". In my opinion this does not mean that his Honour applied a wrong test. It is true that it is for the court to determine objectively whether the response is proportionate or not but that decision is made by reference to the evidence. What the respondents tried to do is relevant to that assessment.

149 In any event, as one reads on, his Honour does conclude himself that privilege attached and there is no suggestion that he reached that conclusion entirely by reference to what the respondents "tried" to do.

150 Finally, it is necessary to consider whether Mr Essey is protected by the defence of qualified privilege in circumstances where he was not defamed in the September Canteen News. In my opinion, if A acting as a representative of B who has a legitimate interest in making the communication, makes it on B's behalf to C, who has a legitimate interest in receiving it, then the communication will be privileged: Baker v Carrick [1894] 1 QB 838; Smith v Streatfeild [1913] 3 KB 764; London Association For Protection of Trade v Greenlands Ltd [1916] 2 AC 15 at 32, 42 and 43. Thus a solicitor who makes a defamatory statement in the course of acting for a client, will be protected by the client's privilege: Watts v Times Newspapers Ltd [1997] QB 650 and Baker v Carrick (supra).

151 The result is that even though Mr Essey was not defamed in the September Canteen News, he signed the letter in his capacity as Managing Director and representative of All-Fect. All-Fect could only act via a human agent and Mr Essey as Managing Director was an appropriate agent.

152 I would therefore dismiss the appeal concerning the counterclaim.

153 In my opinion the appeal against the judgment in favour of All-Fect should be dismissed. The appeal against the judgment in favour of Mr Essey should be allowed. The appeal against the dismissal of the counterclaim should be dismissed. The respondents' notice of contention should also be dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HARDING & ANOR -v- ESSEY & ANOR [2005] WASCA 30 (S)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : ESSEY & ANOR -v- HARDING & ANOR [2002] WASC 209

Practice and procedure - Costs - One plaintiff succeeds entirely at trial and on appeal - One plaintiff fails entirely - The defendants succeed entirely on the counterclaim on appeal - No new point of principle

Rules of the Supreme Court 1971 (WA), O 24A, O 66 r 2(b), (c)

Supreme Court Act 1935 (WA), s 32

First Appellant (First Defendant) : Dr J T Schoombee

Second Appellant (Second Defendant) : Dr J T Schoombee

First Respondent (First Plaintiff) : Mr K L Christensen

Second Respondent (Second Plaintiff) : Mr K L Christensen

First Respondent (First Plaintiff) : Christensen Vaughan

Second Respondent (Second Plaintiff) : Christensen Vaughan

Ellingsen v Det Skandinaviske Compani [1919] 2 KB 567

Godden v Alford [1960] WAR 235

Harding & Anor v Essey & Anor [2005] WASCA 30

Hendrie v Rusli [2000] WASCA 420

Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

Re Elgindata Ltd (No 2) [1993] 1 All ER 232

Sloane v McDonald & Sutherland, unreported; FCt SCt of WA; Library No 980012; 22 January 1998

Ottway v Jones [1955] 2 All ER 585

1 STEYTLER J: I have had the advantage of reading the judgments of McLure and Pullin JJA. I agree with McLure JA on each of the issues falling to be determined and with the orders proposed by her.

2 As to the question of interest, I agree with McLure JA, for the reasons she has given, that the delay in prosecuting the appeal is not such as to justify refusing to award interest from the date the cause of action arose, being 16 October 1997.

3 So far as the issue of costs is concerned, like McLure JA, it seems to me that the appellants were substantially successful in the appeal, having successfully challenged the orders made in the first respondent's favour, having successfully appealed against the dismissal of the counterclaims brought by each of them, having their submissions as regards the dismissal of the respondents' notice of contention accepted and having been unsuccessful only in their appeal against the judgment in favour of the second respondent. In those circumstances, like McLure JA, it seems to me that an appropriate exercise of discretion would be one in which the respondents are ordered to pay the appellants 80 per cent of the costs of the appeal and of the notice of contention to be taxed.

4 As to the costs of the trial and of the interrogatories, I agree with the orders proposed by McLure JA, for the reasons given by her.

5 MCLURE J: These reasons concern issues of prejudgment interest and costs arising from the reasons and orders made in Harding & Anor v Essey & Anor [2005] WASCA 30. On 4 March 2005 the Court ordered that:

(1) The appeal against the judgment in favour of the first respondent (first plaintiff) be allowed.

(2) The appeal against the judgment in favour of the second respondent (second plaintiff) be dismissed.

(3) The appeal against the dismissal of the counterclaim by the first appellant (first plaintiff by counterclaim) be allowed.

(4) The appeal against the dismissal of the counterclaim by the second appellant (second plaintiff by counterclaim) be allowed.

(5) The respondents' notice of contention be dismissed.

(6) In lieu of the orders made at trial, it is adjudged that:

(a) the claim by the first respondent (first plaintiff) be dismissed;

(b) there be judgment for the second respondent (second plaintiff) against the appellants (defendants);

(c) the first and second appellants (first and second defendants) pay the second respondent (second plaintiff) the sum of $20,000 and interest thereon at 6 per cent per year from 1 October 1997 to the date of these orders;

(d) there be judgment for each of the first and second appellants (first and second plaintiffs by counterclaim) on the counterclaim against the first and second respondents (first and second defendants by counterclaim);

(e) there be a certificate for the costs of the first and second appellants' (first and second plaintiffs by counterclaim) interrogatories.

6 The Court did not, on 4 March 2005, make orders for payment of the judgment sums of $30,000 and $15,000 on the counterclaim because of competing submissions as to the date from which interest should run. I deal with that question first.

7 The appellants sought interest at the rate of 6 per cent per annum from 16 October 1997, being the date of publication of the defamatory letter the subject of the counterclaim. The respondents contended that interest should not commence to run until March 2004 because of the appellants' delay in prosecuting the appeal.

8 The Court has a discretion under s 32 of the Supreme Court Act 1935 (WA) to award interest for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect. The awarding of interest is consistent with the principle of compensating an injured party for the damage suffered as a result of a defendant's wrongful conduct. Accepting that the appellants delayed in the prosecution of the appeal, the end result is the respondents have had the use of the judgment sum in the same period. I am not persuaded the delay is such as to justify refusing to award interest from the date the cause of action arose, being 16 October 1997.

9 As to the costs of the appeal, the appellants seek an order that the respondents pay 80 per cent of the appellants' costs of the appeal, including the notice of contention, to be taxed. The respondents contend the appropriate order is that the parties each bear their own costs of the appeal.

10 The appellants were successful in their challenge to the orders made at trial in Mr Essey's favour, in their opposition to the respondents' notice of contention and in reversing the result on their counterclaims. The appellants only failure related to the challenge to the judgment in favour of All-Fect. In financial terms, the appellants went from judgment for a total sum of $60,000 in favour of the respondents to a net gain in their favour of $25,000. The appellants were, on any view, substantially successful in the appeal. I would in the exercise of my discretion order that the respondents pay to the appellants 80 per cent of the costs of the appeal and the notice of contention to be taxed.

11 As to the costs of the trial, the prima facie position under O 66 r 2 of the Supreme Court Rules is that the appellants pay the costs of All-Fect's successful claim, Mr Essey pay the costs of his unsuccessful claim and All-Fect and Mr Essey pay to the appellants the costs of the counterclaim. I agree with Anderson J in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 at 574 that a Court will not make an order under O 66 r 2 as of course but, rather, will look to the realities of the case and attempt to do substantial justice. However, I do not have sufficient information and understanding of the course of the trial to ensure that, however rough and ready it may be, substantial justice is done. The matter is further complicated by the fact that the appellants made an O 24A offer on the counterclaim for less than the amount awarded, which offer was not accepted. Accordingly, the prima facie position under O 66 r 2 should apply.

12 There is added complexity in relation to the costs of the claims because the plaintiffs were represented by the same solicitors and counsel. Where a plaintiff is unsuccessful against one of two defendants who have the same solicitor, the unsuccessful defendant can only be compelled to pay the costs which exclusively relate to him or her, and half the costs of the proceedings taken jointly for both defendants: Ellingsen v Det Skandinaviske Compani [1919] 2 KB 567 at 570. That principle applies by analogy to the present circumstances as follows: Mr Essey should pay to the appellants the costs that exclusively relate to his claim and half the costs of the claims proceedings taken jointly for both plaintiffs; the appellants should pay to All-Fect the costs that exclusively relate to its claim and half the costs of the claims proceedings taken jointly for both plaintiffs.

13 The orders made by the Court on 4 March 2005 have the effect of setting aside the order made by the trial Judge in relation to the respondents' interrogatories. All-Fect should have its costs of the interrogatories on the same basis as its other costs.

(a) Mr Essey do pay to the appellants the costs that exclusively relate to his claim and half the costs of the claims proceedings taken jointly for both plaintiffs to be taxed;

(b) The appellants do pay to All-Fect the costs, including for interrogatories, that exclusively relate to its claim and half the costs of the claims proceedings taken jointly for both plaintiffs to be taxed;

(c) All-Fect and Mr Essey do pay to the appellants the costs of the counterclaim on a party-party basis to 6 October 2001 and thereafter on an indemnity basis to be taxed;

(d) The respondents do pay to the appellants 80 per cent of the costs of the appeal and of the respondents' notice of contention to be taxed.

(1) The first and second respondents do pay the first appellant the sum of $30,000 and interest thereon at 6 per cent per annum from 16 October 1997 to the date of these orders;

(2) The first and second respondents do pay the second appellant the sum of $15,000 and interest thereon at 6 per cent per annum from 16 October 1997 to the date of these orders.

16 PULLIN J: Reasons for decision and judgment were given in this matter on 4 March 2005. The parties could not agree in relation to costs and written submissions have been filed on the subject.

17 Following the trial before Hasluck J, judgment was given for the plaintiffs, Mr Essey and All-Fect, in the aggregate sum of $60,000. His Honour dismissed the counterclaim by Mrs Harding and Pinegate, but provisionally assessed damages at $45,000.

18 As a result of the appeal, All-Fect recovers $20,000 and Mrs Harding and Pinegate recover an aggregate award of $45,000. When the costs scales contained an ad valorem element, this had an effect on costs recovered. Now the costs scales contain no ad valorem component and so the difference in awards will have no prima facie effect on the calculation of costs. The time involved in conducting the litigation is the foundation for the costs award.

19 The outcome following the trial and the appeal is that All-Fect succeeded on its claim for defamation and was awarded damages at the trial. The appeal against that judgment by Mrs Harding and Pinegate failed. If costs follow the event then All-Fect would be entitled to its costs of the claim and the costs of the appeal.

20 Mrs Harding and Pinegate, however, succeeded on appeal in establishing that they should have won their counterclaim at trial. If costs follow the event they would be entitled to their costs of the counterclaim, and to the costs of the appeal which was necessary to establish their entitlement.

21 Finally, Mrs Harding and Pinegate also succeeded on the appeal in establishing that the award in favour of Mr Essey was in error. If costs follow the event then Mrs Harding and Pinegate would be entitled to their costs of defending that claim at trial and their costs of the appeal against Mr Essey.

22 The fact is, however, that the proceedings were conducted as one trial and one appeal. The question then arises as to the proper disposition in relation to costs.

23 Mrs Harding and Pinegate submit that they should have 70 per cent of their costs of the action and the counterclaim and 80 per cent of the costs of the appeal.

24 Mr Essey and All-Fect submit that costs should follow the event and that the appropriate orders would be:

(a) Mr Essey should pay Mrs Harding and Pinegate the costs of the action insofar as they arise from Mr Essey's claim;

(b) that Mrs Harding and Pinegate should pay All-Fect the costs of the actions; and

(c) Mr Essey and All-Fect should pay Mrs Harding and Pinegate their costs of the counterclaim.

(d) Each party should pay their own costs of the appeal

25 It has now been disclosed that Mrs Harding and Pinegate served an O 24A offer on their opponents on 5 October 2001. It contained an offer to compromise the counterclaim if Mr Essey and All-Fect paid $5000 to Mrs Harding and Pinegate. The offer was not accepted. I will consider the effect that the offer should have in relation to costs after considering what orders would have been appropriate had no offer been made.

26 Mrs Harding and Pinegate argue that there will be a difficulty involved in apportioning the costs of the trial and the appeal in relation to the two claims and the two counterclaims and suggest the orders they propose are preferable. They rely on what was said by Anderson J in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, particularly at 574 and 579. In that case, the plaintiff sued on three causes of action against five defendants. It succeeded in part only against the first, second and fourth defendants and failed against the third and fifth defendants. The plaintiff sought costs against the unsuccessful defendants. The question then arose as to whether the first, second and fourth defendants should have costs of the issues on which they succeeded. Anderson J referred to O 66 r 2(a) of the Rules of the Supreme Court 1971 (WA) which deals with circumstances where a statement of claim contains more than one cause of action and the plaintiff succeeds on some and the defendant succeeds on others. His Honour then decided to make a costs order in favour of the plaintiff but to allow only a proportion of the total costs. In my opinion, the Permanent Building Society case provides no guidance in the present circumstances. That case and O 66 r 2(a) deal with the situation where there is one plaintiff (or one group of plaintiffs) and one defendant (or one group of defendants), where there are separate causes of action and the plaintiff succeeds on some of them and loses on others. The situation in this case is that some parties on both sides have wholly succeeded and one party on one side has wholly failed.

27 Mr Essey and All-Fect in submitting that costs should follow the event in relation to each claim, rely on Re Elgindata Ltd (No 2) [1993] 1 All ER 232 at 237 and Godden v Alford [1960] WAR 235 at 236 - 237. Hale J in Godden v Alford said at 236 - 237:

"Where the claim and the counter-claim raise essentially different issues and where, for instance, the plaintiff succeeds on the claim and the defendant on the counter-claim, there should be separate judgments on claim and counter-claim with the plaintiff having the costs of the claim and the defendant having the costs of the counter-claim: see for instance Chell Engineering Ltd v Unit Tool & Engineering Co Ltd [1950] 1 All ER 378".

"It is, however, to be noted that in that case, at p 383, Denning, LJ, said that it is desirable that a judge should consider whether a special order should be made as to costs because the issues are often very much interlocked and the usual order as indicated above does not always give a just result ...".

29 His Honour then gave examples of cases where a special order would be required. He referred, for example, to the circumstances where a claim advanced by one party is not much in issue and the real contest is about whether the counterclaim should succeed. He also referred to circumstances where the contest arises out of the one transaction so that the counterclaim is in its nature a defence to the claim. His Honour indicated that in those types of cases, if on balance the defendant recovers against the plaintiff, the defendant should have the costs of the claim on the basis of the amount claimed and costs on the counterclaim on the basis of the amount actually recovered by him. His Honour ended the review of the cases by stressing that the court must always look at the particular facts of the case and not to feel bound by any rule as to what it must do merely because the case happens to fall into one or other of the categories that he mentioned by way of example. His Honour then concluded at 237:

"The guiding principle, and in fact the only rule which can justly be called a principle, is that the court should carefully examine the realities of the case in hand, and should so frame its order that justice shall, so far as costs are concerned, be as nearly as possible done between the parties."

30 Elgindata's case (supra) says nothing different. Nourse LJ referred to the uncontroversial fact that costs are in the discretion of the court and that costs usually follow the event.

31 I refer to O 66 r 2(b) below. Order 66 r 2(b) reads:

...

(b) where there is judgment for one party on the claim with costs and judgment for the other party on the counterclaim with costs, the costs shall be assessed as if each party had succeeded in an independent action and charges which cover without discrimination, work referable to the claim and work referable to the counterclaim, shall be divided between the claim and the counterclaim in the proportion in which the work covered by such charge is properly attributable to the claim and to the counterclaim".

32 In relation to the All-Fect v Harding-Pinegate litigation, All-Fect succeeded on the claim and Mrs Harding and Pinegate succeeded on the counterclaim. If there is no special order and the usual orders were made (awarding All-Fect costs of the trial on the claim and awarding Mrs Harding and Pinegate costs of the trial on the counterclaim), then O 66 r 2(b) would apply to work out what would happen on taxation of costs in relation to the trial.

33 There is no doubt that if usual costs orders are made in favour of each successful party, there will be substantial disputation about what work was referable to the claim, and what work was referable to the counterclaim on both the trial and the appeal. These parties appear to be bitter enemies as a result of the litigation and it takes little imagination to see that a large sum of money may be spent on legal fees on both sides in argument about what work was referable to what part of which claim. The parties may not understand the complexities of the issues and the lawyers will in the main be left to drive the dispute. In my opinion, it is in the interests of justice to make an order which will reduce, as much as possible, the prospect of further legal expenditure.

34 That being so, and because of the success of some of the opposing parties and the complication of a party (Mr Essey) who wholly failed, I consider that (putting aside the effect of the O 24A offer) this is a case where a special order should be made. However, I do not consider that the order should provide for a percentage apportionment of costs as Mrs Harding and Pinegate suggest. It is not possible for the Full Court to make an assessment of the costs incurred by reference to submissions about the time involved in conducting the litigation.

35 If the only parties had been All-Fect, Mrs Harding and Pinegate and there had been no O 24A offer, then in my opinion the appropriate special order would have been that each party pay its and her own costs. That would have required an assumption that the costs of All-Fect and the costs of Mrs Harding and Pinegate were equal. It is an assumption I would have been prepared to make. A full taxation of costs on both sides to show whether or not this assumption was correct would be unnecessarily expensive and not in the interests of the parties. However, an order that each party pay its and her own costs would not take account of the fact that Mr Essey's claim has been dismissed on appeal and that his involvement has doubtless increased costs to some degree.

36 The solution would have been to ensure that costs of the trial and the appeal incurred by Mrs Harding and Pinegate and referrable to Mr Essey's claim should be paid by Mr Essey.

37 I would have made the following orders had it not been for the O 24A offer:

1. All-Fect, Mrs Harding and Pinegate each pay its and her own costs of the trial and the appeal.

2. Mr Essey do pay to Mrs Harding and Pinegate any costs incurred by Mrs Harding and Pinegate which are referrable to Mr Essey's claim, Mr Essey's defence of the counterclaim, and Mr Essey's participation in the appeal such costs to be taxed if not agreed.

38 Those orders would not however take account of the O 24A offer. After that offer was made, All-Fect and Mr Essey were at risk of an adverse costs order if they did not settle the counterclaim or if judgment on the counterclaim was for more than $5000. The offer was not accepted and after the appeal judgment on the counterclaim exceeded $5000 and so Mrs Harding and Pinegate are entitled to indemnity costs after the date of the offer (but only in relation to the trial. See Sloane v McDonald & Sutherland, unreported; FCt SCt of WA; Library No 980012; 22 January 1998; Hendrie v Rusli [2000] WASCA 420).

39 In my view the objective should still be to reduce the possibility of further unnecessary and expensive disputation, but to take account of the O 24A offer. I would therefore make the following orders:

1. Mr Essey should pay Mrs Harding and Pinegate the costs of defending the action attributable to the claim by Mr Essey;

2. Mrs Harding and Pinegate should pay All-Fect the costs of the action attributable to the claim by All-Fect;

3. All-Fect and Mr Essey should pay the costs of Mrs Harding and Pinegate in relation to the trial of the counterclaim on a party/party basis up until 6 October 2001 and after that date on an indemnity basis;

4. Each party should pay its and her own costs of the appeal.

40 I agree with Steytler and McLure JJ concerning the subject of interest and All-Fect's interrogatories therefore orders should be made as proposed by McLure J on those subjects.

• Identification
• Identification of All-Fect
• Identification of Mr Essey - The Extent of the Publication
• Counterclaim
• Conclusion
• Facts
• The identification of All-Fect
• Identification of Mr Essey
• The trial Judge's reasons on the publication/republication issue
• The distinction between publication and republication
• Respondents' notice of contention
• Counterclaim
• Conclusion