Kay & Anor v Chesser & Anor [1999] VSCA 83

12. The present dispute arises out of an action for defamation brought by the individual and corporate plaintiffs, the respondents to this appeal, against the defendants who bring this appeal. The action is founded on words uttered over radio station 3AW on 7 October 1997 in the course of an interview when it is alleged the firstnamed appellant made a number of defamatory comments about each of the respondents. Mr Chesser is a director and shareholder of the corporate plaintiff, Amex Panels, which carries on business as a motor repairer. The words used by the firstnamed appellant, for whom the secondnamed appellant AAMI are said also to be responsible, were a colourful, indeed vitriolic, description of the alleged incompetence of Mr Chesser and Amex Panels. After stating that AAMI had banned them from doing its work Mr Kay then asserted that they were in the "thirty worst repairers in Melbourne" and then, because of the interviewer's surprise and lest anybody should misunderstand him, he alleged that he was "dishonest, crook" but said that he was not assassinating his character because he did not believe that his character could be assassinated. Not surprisingly the action is hotly disputed although the broadcast is admitted and most of the imputations conceded as being open. There are also pleas that the words used were "true in substance and in fact" and there are further pleas of fair comment and qualified privilege. Particulars have been given which were elaborated in the course of interlocutory proceedings as to what are said to be shoddy workmanship, charging for new parts on repairs which were "then deliberately not supplied" and tampering so as to give the appearance that a defective repair was caused by another repairer.

15. Pursuant to the provisions of O.34A of the County Court Rules the proceeding has been subject to directions in the Defamation Division but, so far as I can gather, the matter has been treated as if it is a full-scale action without substantial limit on interlocutory orders, as if the matter were being heard in a court of plenary jurisdiction. Thus in April last year particulars were sought and were given in elaborate terms extending in the first place over some seventeen pages, including elaborate allegations of failures to supply new parts and labour for some eight motor vehicles.

18. At a directions hearing on 18 May 1998 it was ordered by the judge presiding at that time that the parties file and serve affidavits of documents by 15 June 1998, the order not being limited in any way, so that I would understand that it is conceded that the ordinary rules as to discovery contained in O.29 would apply. There followed two further sets of additional particulars of the amended defence extending over another eight pages and referring to a further group of defectively repaired motor cars. On 22 July 1998 the defendants were given leave to file and did file and serve interrogatories for the examination of the plaintiffs. These consisted of some 135 interrogatories extending over 52 pages. Notwithstanding the length of the first set of interrogatories leave was given to file and serve a further set of 24 interrogatories.

21. On 8 October 1998 the plaintiffs filed and served an affidavit of documents some thirteen pages in length. On 4 December, in accordance with the practice in the list, the defendant's solicitors informed the plaintiff's solicitors by letter that at the next directions hearing application would be made for orders pursuant to r.29.08 of the County Court Rules for further discovery of specified classes of documents, of which the two classes relevant to this appeal were described as follows:

"(a) The secondnamed plaintiff's tax returns for the years ending 30 June 1994, 1995, 1996, 1997 and 1998 together with documents (including any computer data) relating to trading, profit and loss, sales and balance sheets from 1st July to the present time. ... (d) Invoices, packing slips, statements, delivery dockets and other like documents relating to the following parts supplied to the plaintiff in respect of the repair of the vehicles as listed ...".

There followed a list of some seven named vehicles and parts said to have been charged but not supplied for their repair. This application was opposed and various affidavits were filed on each side.

26. On 18 January 1999 the matter came before the learned judge then in charge of the defamation division who dismissed the application for further discovery in relation to the classes of documents in paragraphs (a) and (d) referred to above. His Honour then settled reasons with counsel to which reference will be made below. In substance it was said that the provision of the corporate plaintiff's tax returns and financial statements "could not be determinative of what was an appropriate sum for damages" and, because the corporate plaintiff did not claim any "direct financial loss" by way of special damages, he held that it was inappropriate to order discovery of documents in class (a). As to class (b) his Honour said that there were large numbers, so it was alleged, of invoices, packing slips, dockets and the like which were not stored by reference to the vehicle but only by reference to the part supplier, so that, assuming relevant invoices etc. were located, they would not be proof whether or not the plaintiffs installed the alleged parts and so he refused to order a further discovery of that class for "lack of probative force".

29. Leave to appeal was granted on 26 February this year by this Court and the grounds effectively challenge each of the reasons of the learned judge, in particular contending that his Honour misunderstood the nature of damages which could be awarded in favour of a corporate plaintiff in a libel action and that he had applied irrelevant and inappropriate tests to determine whether the other documents should be discovered. The argument on the hearing before us took a somewhat different turn, so that I shall refer to those arguments to the extent that it is necessary to resolve this appeal.

(a) Whether discovery should be given of documents relating to financial position of corporate plaintiff

33. Although the matter was said to be subject to the provisions of O.34A, both parties appeared to accept that the relevant test for an order for further discovery of this kind is that laid down by the provisions in the general rules and contained in O.29.08. That rule of course varies the former practice contained in the Judicature Rules which was so carefully spelled out in Mulley v. Manifold [1959] HCA 23; (1959) 103 C.L.R. 341 and there seemed no dispute that the Court had power to order further discovery of a class of documents, nor was there any dispute but that each of the classes of documents sought existed but have not been discovered.

36. The argument as to Amex Panels' financial documents raised, as it seems, a question of principle relating to the nature of the damages which a corporation can recover in defamation. The learned judge resolved the matter on the basis that Amex Panels had "expressly disavowed any claim for special damages", so that he thought the defendants were thereby seeking to demonstrate that that company had a low standing in the industry and was not pre-eminent. He referred to the judgments in the Federal Court in Australian Broadcasting Corporation v. Comalco Ltd. (1986) 12 F.C.R. 510 but concluded that provision of the taxation returns and financial statements could not be determinative of what was an appropriate sum by way of damages.

39. In argument the respondents took a different tack but again relying on the fact that the corporate plaintiff made no claim for special damages. Counsel did not assert that that prevented Amex Panels from recovering damages, only that its claim will be confined, as he conceded, to a sum sufficient to vindicate its reputation. For that purpose he contended that neither goodwill nor any other financial details were relevant, for the amount recoverable for damage to reputation was a matter at large: cf. Carson v. John Fairfax & Sons Ltd. (1992) 178 C.L.R. 40.

42. In my opinion the judge's reasons and the respondent's arguments misapprehend the nature of damages which a corporation may recover in defamation. Although it has sometimes been said that a corporation can only recover in respect of injuries measurable in money (cf. Australian Broadcasting Corporation v. Comalco at 586, 602); that does not mean that it can only succeed if it makes a claim for special damages, nor does it mean that damage to reputation can only be compensated if calculable in precise money terms. To the extent of agreeing with that later proposition, the respondents were correct but they overstated its significance. The consequence is that damage to the reputation of the corporation is not at large but can only be assessed having regard to financial and commercial considerations by which a corporation's reputation is ordinarily assessed.

45. The relevant principle is expressed in simple and compelling terms by Lord Reid in Lewis v. Daily Telegraph [1964] A.C. 234 at 262:

"A company cannot be injured in its feelings, it can only be injured in its pocket. Its reputation can be injured by libel but that injury must sound in money. The injury need not necessarily be confined to loss of income. Its goodwill may be injured."

With that speech Lord Jenkins concurred and there is nothing in the speeches of the other members of the House which would deny those statements of principle. Lord Reid's propositions of principle seem entirely consistent with observations made many years before in the High Court in Barnes & Co. Ltd. v. Sharpe [1910] HCA 26; (1910) 11 C.L.R. 462 at 473-474, 478-479 and 485. It is sufficient to refer to what Griffith, C.J. said in remarking that a particular point had not been pressed (at 474):

"It is, however, plain that a defamatory statement to the effect that a trading company carries on its business in a dishonest or criminal manner is likely to injure its reputation in the way of its business ...".

That consistency was remarked upon in a more recent case in the Federal Court, by Pincus, J. in Australian Broadcasting Corporation v. Comalco Ltd. (1986) 12 F.C.R. 510 at 600-601, with which, on this aspect of damages, Smithers, J. agreed, at 560.

52. The respondents sought to resist the company's claim for discovery by saying that, having eschewed any claim for special damages, the corporate plaintiff could only seek damages generally to vindicate its reputation, so that damage to reputation being ordinarily at large, it was not appropriate that it should seek to do so by reference to financial considerations or by taking into account matters as precise as those which would appear in balance sheet entries, the annual reports or taxation returns. The contention was founded on what Mahoney, J.A. said in Andrews v. John Fairfax & Sons Ltd. [1980] 2 N.S.W.L.R. 225 at 256-261. His Honour there said that, aside from any claim for special damage, a corporation's claim for general damages ought not to extend to establishing the extent of damage to its goodwill and therefore should be included in a claim for special damages or not at all. But his Honour was there in a minority, dissenting from firmly expressed views to the contrary by Hutley and Glass, JJ.A. esp. at pp.235-237 and 251-252. Moreover, that dissenting view was expressly disapproved by the members of the Full Federal Court in Australian Broadcasting Corporation v. Comalco. For example, Neaves, J. with whose judgment on this aspect of the case Smithers, J. agreed, said (at 587):

"Insofar as the judgment of Mahoney, J.A. in Andrews v. John Fairfax & Sons Ltd. ... expresses the view that a trading corporation may recover damages in defamation for injury to what his Honour called its 'reputation as such', being a reputation other than what is encompassed by its reputation in the way of its trade or business, I am, with respect, unable to agree."

Pincus, J. likewise rejected Mahoney, J.A.'s views (at 599-600), holding that a corporation cannot recover damages for injury to its reputation other than in respect of injury to its business. The reasons for these conclusions are carefully explained in those two judgments and in the judgments of the majority in Andrews' Case, Hutley and Glass, JJ.A.

57. In an interesting judgment Hutley, J.A. examined the historical reason for allowing claims for damage to reputation reflected in harm to business reputation, citing (at 235) the judgment of the Court of Common Pleas in Ingram v. Lawson [1840] EngR 324; (1840) 6 Bing. (N.C.) 212; 133 E.R. 84, expressing the view (ibid) that it had "never been reflected upon" and that:

"It establishes that, even though only general damages are claimed, the plaintiff can give evidence of some particularity about the state and nature of his business, and changes which he alleges have been wrought in it by the defamation of which he complains, but only for the purpose of enabling the jury properly to evaluate the general damages which he has claimed."

61. I might add that this view generally of the authority relating to claims by corporations for damages for defamation other than for special damages was likewise reached by Batt, J.A., with whose judgment Brooking and Phillips, JJ.A. concurred, in a recent judgment of this Court not cited to us, namely Tsolakkis Nominees Pty. Ltd. v. National Australia Bank Ltd. (Court of Appeal, 4 June 1998, unreported) where his Honour concluded (at 17) that the damages to be awarded in such circumstances "are a recompense for harm measurable in money or proved financial loss". I do not think it necessary to rely independently upon that judgment, binding though it is upon us, because it was not referred to in argument, but it states principles which, upon the authorities, are and were so abundantly correct.

64. Only one apparent question of principle arises from the authorities and that, it may be seen, arises upon a misconception of another case relied upon by the respondents, the decision of the Court of Appeal in Calvet v. Tomkies [1963] 1 W.L.R. 1397, in which it was held that discovery ought not to be given in favour of the defendants for the accounts, income tax assessments and receipts of the plaintiff actress Corinne Calvet, who did not plead any special damage and so sought only damages at large for a defamatory article reflecting on her professional abilities. That decision led Hutley, J.A. in Andrews' Case to say (at 235) that a not dissimilar pleading by the appellant corporation in that latter case had the consequence that the defendants had not been entitled to discovery of its records. Indeed his Honour suggested (at 235-236) that, if documents were introduced into a case in order to show damage to business reputation, the case might, by reason of the rule in Calvet's Case, be adjourned or even stopped and a new trial ordered. I cannot accept that that is the correct interpretation of the latter case and, even if it were, it ought not to be followed now. To contemplate that a failure to provide proper discovery would lead to the halting of what are ordinarily long and complex defamation actions and possibly to the ordering of a retrial for want of discovery in the first place seems antithetical to the proper conduct of civil litigation in these days, so that it should not now be contemplated. In any event the statement arises, in my respectful opinion, out of a misapprehension of precisely what had been said in Calvet's Case. The problem there arose out of the requirements of s.3 of the Defamation Act 1952 as to pleading pecuniary damage and the plaintiff's election which was said to be consequential upon its introduction. As Lord Denning, M.R. said at 1400, the plaintiff had taken advantage of the Act in order to avoid pleading or proving special damage and so she was "saddled also with the consequences of it" and could not "introduce by side wind evidence of special damage without pleading it". Although Russell, L.J. agreed, he was more cautious and was "inclined to think" that, (at 1400) if actual loss of earnings or decline in business was to be put forward, "it should be pleaded with consequential discovery". In my opinion, that decision relating to the claim of an individual, in the circumstances described, ought not to restrict the powers of the courts in this State from granting discovery where appropriate.

67. In my opinion the learned judge in this case misunderstood the authorities, or so it may appear, to the extent of concluding that the provision of the financial documents sought "could not be determinative of what was an appropriate sum of damages". It may be, in the broadest sense, correct to say that it was not "determinative" but in my opinion it was highly relevant, having regard to the limited matters which could be established by the plaintiff corporation in its claim for damage to reputation and the defendants ought to have access to those materials in order properly to prepare their case to meet that claim. The matter being decided on what I conceive to be an error of principle, I do not consider that questions of discretion were otherwise correctly brought to bear on the issue, although there is undoubtedly a discretion, to be exercised in accordance with the tenets of justice, to be applied in all applications for discovery. However, in the present case such materials should have been made the subject of an order for discovery, particularly having regard to the complexity of the case and the largely unlimited manner in which discovery generally had been treated by the parties in the preparation of this case for trial. There was some discussion of limiting the order so as possibly to exclude the taxation returns, but upon further consideration I would not limit the order. This being a matter to be dealt with by way of directions and, in order to allow the judge in charge of the Defamation Division to control the interlocutory processes as much as is practicable, I would merely set aside the relevant paragraph of the order insofar as it related to para.(a) of the letter seeking further discovery and remit it to the judge to make orders consonant with the reasons expressed by this Court.

(b) Whether discovery should be given of invoices and packing slips

71. As to this claim, although the learned judge may not have expressed himself with clarity, I am of opinion that he was entitled, in the exercise of the discretion which he had, to limit the discovery by not requiring production of these invoices and packing slips. In my opinion the provision of the documents, having regard to their nature and the manner in which they have been apparently kept, could well have been thought not likely to provide sufficiently relevant information to justify the expense of making discovery in relation to them. Of course, those difficulties appear only in an affidavit sworn on behalf of the plaintiffs, but the assertions seem inherently likely and the value to be gained from seeing documents which will only support the plaintiffs' rebuttal of the allegations contained in the defendants' plea of justification would seem to be sufficiently limited that this discovery was a matter which a judge could fairly exercise his discretion to refuse. Doubtless, if they exist, they would have been produced already or, if subsequently found, will be readily produced by way of an affidavit of further discovery, that being a necessary consequence of the original order for general discovery. Otherwise an order would simply result in a bland affidavit stating that there are no such documents or, more likely, that the plaintiffs have been unable to identify any documents which relate particular invoices and packing slips to the relevant repair jobs in issue. Such an affidavit would be of marginal use, in my opinion, and even if the deponent were to swear otherwise at the trial, the significance of the affidavit would be limited.

74. I did not understand the learned judge, when referring to the "probative purpose" of the document to be denying that otherwise they would be relevant in the conventional sense. Rather he was referring to the practical purpose to be served in making the order sought.

77. In my opinion the learned judge was well within his discretion in refusing to make such an order in respect of the documents referred to in para.(d) of the letter of 4 December 1998. I would not uphold the grounds of appeal relating to that refusal and consequently I would not set aside that part of the learned judge's order which refused further discovery of the documents so described.

80. I consider that the appeal should be allowed and that paragraph 9 of the learned judge's order of 18 January 1999 be set aside and in lieu thereof there be ordered: that the secondnamed plaintiff (Amex Panels) be ordered to give further discovery on affidavit in respect to the documents described in paragraph (a) of its solicitor's letter dated 4 December 1998, in the manner and at a time to be determined by the judge in charge of the Defamation Division of the Damages List of the County Court, but in terms conformable with the reasons of this Court, but that the application for further discovery of the documents referred to in paragraph (d) of the said letter be refused.