Hill v Westfield & Anor

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

20565/02 Geoffrey Hill v Mark Westfield & Anor 20023/03

JUDGMENT 1 HER HONOUR: Two proceedings (numbered 20565 of 2002 and 20023 of 2003) are before the court. In each the plaintiff, Geoffrey Hill, claims damages against the defendants, Mark Westfield and Nationwide News Pty Ltd, alleging that he was defamed by them in an article in The Australian newspaper, of which the second defendant was the publisher and the first defendant a journalist employed by the second defendant, in issues published, respectively, on 3 December 2002 and 15 January 2003. Both articles concern a Royal Commission into the well publicised collapse of a major insurance company, HIH.

proceedings 20565 of 2002 2 In the earlier article a reference was made to a: "tidal wave of material coming out of the royal commission suggesting fraud and manipulation on a massive scale." 3 This was followed by severe criticism of various relevant regulatory authorities, which, in turn, was followed by: "Perhaps the clearest case for ASIC [the Australian Securities and Investments Commission] to come out of the HIH royal commission is the purchase by former FAI Insurances director and merchant banker Geoff Hill of 100,000 FAI shares the day after he and the other four non-executive directors of FAI, received a letter from [Mr Rodney] Adler saying he was sounding out various parties, which he named, seeking a capital injection for FAI or a full bid for the company. Hill has admitted to The Australian that he read the letter, and bought the shares, but vigorously denies that it was in any way related to the share purchase. Eight days after he took his stake, and nine days after he received the letter, HIH launched its $282 million cash and share bid, handing him a $29,700 profit."

It is unnecessary to reproduce the balance of the article. 4 The plaintiff pleads that this material, in its natural and ordinary meaning, conveyed the following imputations which defamed him: "(a) The Plaintiff had committed a breach of the criminal law so serious as to deserve to be gaoled for it;

(c ) the Plaintiff misused information provided to him by Rodney Adler in order to make a substantial profit by purchasing and selling FAI shares; (d) the Plaintiff committed the criminal offence of insider trading;

(e) the Plaintiff told a deliberate untruth to the Second Defendant;

(f) the Plaintiff had committed one of the clearest pieces of fraud and manipulation uncovered by the HIH Royal Commission;

(g) the Plaintiff participated in fraud and manipulation in relation to his purchase of FAI shares." 5 The defendants challenge certain of these imputations. They advance three challenges. They argue that certain of the imputations (imputations (c), (d), (f), and (g)) do not differ in substance as required by Part 67 Rule 11(3) of the Supreme Court Rules. They also argue that the matter complained of is not capable of conveying imputations (d), (e) and (g). Finally, they argue that imputation (f) is bad in form, as attributing no precise act or condition to the plaintiff.

difference in substance 6 I have concluded that there is substance in the argument that imputations (c) and (d) do not differ in substance. 7 The true (legal) characterisation of the misuse of information to realise a substantial profit by the purchase and sale of shares is insider trading; the essence of insider trading is the misuse of (price sensitive) information in order to make a profit by the purchase and sale of shares. The two imputations are mirror images of one another. However, having regard to the view to which I have come in relation to other complaints about imputation (d), it is unnecessary to make any orders in consequence of that conclusion. I am satisfied that imputations (c) and (d) do not differ in substance. 8 On behalf of the defendants it was also argued that those imputations do not differ in substance from imputations (f) and (g). There is, I am satisfied, no difference in substance between imputations (f) and (g). The next question is whether those imputations differ in substance from imputations (c) and (d). If the imputations were to be stood side by side in the absence of the context from which they are drawn I would have been inclined to reject that submission. But they are not to be read on that basis. In Greek Herald Pty Ltd v Nikolopolous [2002] NSWCA 41; 54 NSWLR 165, Mason P, with whom Wood CJ at CL agreed, held that the task of construction of the words complained of must be undertaken in the context of the publication of which complaint is made. It is plain that the President was, in that passage, referring also to the construction of the imputations pleaded by a plaintiff. 9 When imputations (f) and (g) are read in that context it becomes apparent that the "fraud and manipulation" mentioned earlier in the article is the same wrongdoing as the asserted misuse of information and insider trading referred to later in the article. In the context of the article there is no difference in substance between these imputations.

imputation (d) 10 The next submission made in relation to this imputation is that it is incapable of being conveyed by the matter complained of in its natural and ordinary meaning. It was recognised that, with the aid of appropriately pleaded extrinsic facts, the imputation may be conveyed, but this is of no present materiality. 11 The substance of the argument was that the concept of the criminal offence of insider trading is not one sufficiently familiar to the ordinary reasonable reader to enable that reader to derive the imputation from the matter complained of. There is no reference in the article to insider trading, although, to those in the know, it is clear that such an imputation may be conveyed. 12 In written submissions presented on behalf of the plaintiff, and in response to the defendants' submissions, it was asserted that the matter complained of appeared in the financial pages of the newspaper. Whether or not that is so I do not know; there is no evidence and no pleading to that effect. For the purposes of the argument I am prepared to assume that it is the case. But it advances the plaintiff's case not at all. The capacity of a publication to convey imputations in its natural and ordinary meaning does not depend upon the identity of recipients, or a specific class of recipient, but is to be determined by the application of an objective test: see Reader's Digest Services Pty Ltd v Lamb (1982) 150 CLR 500 at 505-506. 13 It may well be the case that many members of the public are aware, in some sense at least, of the concept of insider trading, and even that it constitutes a criminal offence. However, I am not satisfied that the level of public understanding of the concept is such as to warrant the conclusion that, from the factual matters asserted in the article, the ordinary reasonable reader would draw the conclusion that the assertions amounted to an accusation of insider trading. 14 I am satisfied that this imputation is not capable of being conveyed by the matter complained of. It will be struck out.

imputation (e) 15 On behalf of the defendant it was submitted that the imputation is a strained or forced meaning and that the matter complained of cannot reasonably be construed as asserting that the plaintiff told a deliberate untruth. 16 It was stated in the article that the plaintiff purchased 100,000 FAI shares the day after he had received a letter from Mr Adler indicating his intention of seeking a capital injection for FAI or a full bid for the company. That was followed by the report that the plaintiff had admitted reading the letter, and buying the shares, but vigorously denied any relationship between the two. The first defendant then noted that eight days later HIH had launched a cash and share bid from which the plaintiff had derived a substantial profit. 17 Although I was at first attracted to the argument put on behalf of the defendant, I have concluded that, on a reading of the whole passage, a reader could conclude that an assertion of deliberate untruthfulness was being made. Certainly, the last of the sentences extracted above can be read as inviting scepticism about the plaintiff's admissions of reading the letter and buying the shares but denying a relationship between the two. The paragraph follows the reference to "fraud and manipulation" of which the plaintiff's transaction is said to be "[p]erhaps the clearest case". If the plaintiff's denials of a relationship between his receipt of the information and his share purchase were accepted as truthful, there would be no cause to characterise the transaction as "fraud and manipulation". 18 I have concluded that this imputation is capable of being conveyed.

imputation (f) 19 This imputation is framed in language drawn directly from the matter complained of. The objection taken to this imputation was as to form, it being asserted that the imputation attributes no precise act or condition to the plaintiff, and that the meaning of the words "one of the clearest" is not discernible from the way in which the imputation is framed. The familiar submission was put that, notwithstanding the words used by a defendant in publishing the matter complained of, the plaintiff is obliged to specify what he/she/it asserts was conveyed by the defendant. As I have observed on other occasions, a defendant who publishes material alleged to be defamatory must live by the words he/she/it chooses. If the publisher of allegedly defamatory material chooses to use words that are imprecise and which fail to specify which of a number of available meanings is intended, then the publisher must live with that choice. It is not for a plaintiff to refine the meaning conveyed by the publisher. 20 In this case the imputation is drawn directly from the matter complained of. The defendant cannot complain that the plaintiff has not further refined their assertion. I reject the challenge as to the form of this imputation.

imputation (g) 21 A submission that the matter complained of was not capable of conveying this imputation was not pressed. I have already held that it does not differ in substance from imputations (c), (d) and (f). 22 The plaintiff will have leave to file an amended statement of claim in accordance with these conclusions. He will be entitled to elect upon which of those imputations I have held not to be different in substance he wishes to proceed.

(ii) proceedings 20023 of 2003 23 The article upon which the plaintiff bases these proceedings may best be described as predominantly a musing on the part of the first defendant about the consequences which would follow from the delivery of the report of the Royal Commission. The particular subject matter of this speculation was the extent to which individuals who had been adversely named by the Royal Commission or the lawyers assisting it would be prosecuted, and what would be said or done about any who were not the subject of criminal prosecution. The tenor of the article is to suggest that some wrongdoers will escape prosecution while others will be unfairly punished because of the inability of the legal system to cope with the dimensions of the wrongdoing exposed, and because of selectivity on the part of those involved in the decision-making. Towards the end of the article, having referred to the insurance company FAI, the first defendant wrote: "Its chief executive [Mr Rodney] Adler has been named adversely for having knowledge of a reinsurance contract used to turn a $55 million loss into an $8.6 million profit in 1998. His knowledge came from an email sent by FAI executive Niran Peiris giving details of the particular contract, written by a big US insurer. The same email was given to FAI's audit committee chaired by former director Geoff Hill. Both Adler and Peiris have been adversely named. Hill had the same information, yet he isn't mentioned."

The last two paragraphs of the article read: "O'Bryan [one of the counsel assisting the Royal Commission] went into lurid detail on every share trade of Adler's, even suggesting he was inside trading because he was in possession of sensitive information. Hill bought 100,000 FAI shares eight days before the HIH takeover and made $30,000 profit when accepting the bid, yet O'Bryan refused to even mention it." 24 The plaintiff claims that three imputations defamatory of him were conveyed by this article in its natural and ordinary meaning. They are framed as follows: "(a) The Plaintiff knowingly permitted the accounts of FAI to be falsified so that a $55 million loss was turned into an $8.6 million profit by use of a reinsurance arrangement referred to in an email given to the FAI audit committee by Niran Peiris;

(b) the Plaintiff as chairman of FAI's audit committee knowingly condoned a fraudulent transaction by use of a reinsurance arrangement referred to in an email given to the FAI audit committee by Niran Peiris to create a false profit of $8.6 million when in truth the Company had lost $55 million in 1998;

(c) the Plaintiff committed the criminal offence of insider trading using information contained in an email given to the FAI audit committee by Niran Peiris to buy FAI shares."

imputation (a) 25 The principal complaint made in respect of this imputation is that it is incapable of being conveyed by the matter complained of. The only possible source of the imputation in the matter complained of is the passage which refers to the adverse naming of Mr Adler: "for having knowledge of a reinsurance contract used to turn a $55 million loss into an $8.6 million profit in 1998"

and asserts that the plaintiff had received the same information. 26 There is nothing in that passage that states explicitly that the accounts of FAI were falsified. There is nothing in the passage that states explicitly that what was in reality a $55 million loss was given the appearance of an $8.6 million profit. That, however, is what the plaintiff contends is conveyed by the passages to which I have referred. The only material that could sustain that contention is the introductory part of the passage in which it is stated that Mr Adler had been named adversely for having knowledge of a reinsurance contract which had the effect of converting a large loss into a substantial profit. In the ordinary course of events one would not expect a person to be named adversely for having knowledge of that kind. Just why such knowledge should give rise to adverse comment is not explained in the article. There is a clear suggestion that, as Mr Adler was adversely named for having that information, the plaintiff deserved also to be adversely named, but this does not elucidate the reasons that the circumstances warranted adverse naming. Falsification of accounts is not the only, or even the obvious, possibility. For example, a reader might well think that what was being imputed was misuse of funds. There are, no doubt, other possibilities. 27 I have concluded that the defendant's challenge to this imputation is made good. By no amount of stretching the language used could a reader take the words, in their natural and ordinary meaning, to mean that the accounts had been falsified to present the misleading appearance of a profit. The imputation will be struck out. 28 A secondary criticism made of the imputation was that it does not differ in substance from imputation (b). I think there is substance also in this complaint but, having regard to the view to which I have come on the capacity argument, it is unnecessary finally to determine it.

imputation (b) 29 For the same reasons that imputation (a) is incapable of being conveyed, neither is imputation (b). The article is simply not sufficiently specific to convey an imputation of a fraudulent transaction or to convey an imputation that the profit shown was false. It will be struck out.

imputation (c) 30 There was, in this article, an explicit reference to insider trading, but in the context of an account of submissions made by counsel assisting the Royal Commission in relation to share transactions by Mr Adler. That was immediately followed by the assertion that the plaintiff had purchased 200,000 FAI shares eight days before that company was taken over by HIH as a consequence of which he made a profit of $30,000. The reference to insider trading does not extend to identifying that as a criminal offence, nor to explaining the concept. To the initiated, the two paragraphs, juxtaposed as they are, may well give rise to an inference that the plaintiff was guilty of insider trading. However, for reasons I have given in relation to the first matter complained of, I do not think that this concept is sufficiently widely known in the public arena, and I do not think the ordinary reasonable reader is aware that insider trading is a criminal offence. The fact that the notion of insider trading is mentioned in this article gives some comfort to the plaintiff, but it is not sufficient to enable the imputation as pleaded to be conveyed. Accordingly, imputation (c) will be struck out. 31 The orders I make are:

(i) proceedings 20565 of 2002: (a) imputation (d) is struck out; (b) the plaintiff is to elect as to which of imputations (c), (f) and (g) he wishes to pursue; (c) the plaintiff is granted leave to file an amended statement of claim.

(ii) proceedings 20023 of 2003: (a) imputations (a), (b) and (c) are struck out. (b) the plaintiff is granted leave to file an amended statement of claim. **********

Last Modified: 06/24/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.