Kelly v Fairfax Media Publications Pty Ltd

Pleading back the plaintiff's alternative imputations 7It is appropriate to begin by noting an important aspect of the plaintiff's cause of action in the present case. The proceedings are governed by the Defamation Act 2005, which replaced the Defamation Act 1974. 8Under the 1974 Act, there was a separate cause of action in respect of each defamatory imputation. Emphasis on the imputation as the cause of action was said by the former defamation list Judge, the Honourable Justice David Levine RFD, to have given rise to "excruciating and sterile technicalities" in interlocutory applications in the defamation list. Those remarks were quoted during the Second Reading Speech given by the Attorney General in relation to the 2005 Act (reproduced in Besser v Kermode [2011] NSWCA 174; reported as Fairfax Media Publications Pty Ltd v Kermode (2011) 81 NSWLR 157 at [37]). 9Under the 2005 Act, a person has a single cause of action in relation to the publication of defamatory matter even if more than one defamatory imputation is conveyed: see section 8 of the Act. The Attorney General stated, with a degree of optimism perhaps reserved for the legislative branch of government, that section 8 would "finally put an end to the needless complexity" described by Levine J. 10Although no longer the cause of action, the imputations complained of by plaintiffs remain the focus of many an excruciating argument in the defamation list. One of the reasons for the enduring importance of properly pleaded imputations is that they remain the focus of the defences of justification and contextual truth under the 2005 Act. 11The defence of contextual truth is contained in s 26 of the 2005 Act, as follows: It is a defence to the publication of defamatory matter if the defendant proves that: (a) the matter carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations ("contextual imputations") that are substantially true, and (b) the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations. 12The decision in Kermode cited above provides a comprehensive and helpful explanation of the legal and historical context in which that section was introduced. The main judgment was written by McColl JA (with whom Beazley and Giles JJA agreed at [1] and [2] respectively). In the context of a consideration of the proper construction of the section, her Honour recorded the remarks of the New South Wales Attorney General in the Second Reading Speech that the purpose of the defence was "basically to prevent plaintiffs from taking relatively minor imputations out of their context within a substantially true publication" (at [37]). 13The requirement that the contextual imputations relied upon by the defendant be "other imputations" conveyed "in addition to the defamatory imputations of which the plaintiff complains" is readily understood in that context. That requirement has, however, caused a degree of vexation. The parties suggested that the principles to be applied in determining whether a contextual imputation meets that requirement are "now fairly well settled", each citing (among other authorities) my decision in Tauaifaga v TCN Channel Nine Pty Ltd [2013] NSWSC 8. In that case, I adopted counsel's distillation of the principles stated by Nicholas J in Ange v Fairfax Media Publications [2011] NSWSC 204, as follows (at [7]): (a) a contextual imputation must differ in substance from the plaintiff's imputations (Ange at [25]); (b) the question is, would the ordinary reasonable reader or viewer have understood the matter complained of to convey at the same time both the plaintiff's imputations and the defendant's contextual imputation (Ange at [16]); (c) a contextual imputation will not be permitted if it is merely an alternative formulation to the plaintiff's imputation. The requirement that the imputations differ in substance is a necessary but not sufficient requirement - there must be a difference in kind (Ange at [19]); (d) if the defamatory sting of the contextual imputation is the same as the defamatory sting of the plaintiff's imputation, even if the contextual imputation is broader it will still be impermissible (Ange at [27]); (e) where there is more than one imputation relied upon by the plaintiff, it is necessary to consider all of the imputations separately and in combination to determine whether a contextual imputation is carried in addition to them (Ange at [28]). 14Any comfort derived from that apparently clear set of principles would be misplaced. Unfortunately, the defence under s 26 is emerging as one lending itself to boundless complexity. 15The decision in Kermode established that, under the 2005 Act, it is not permissible for a defendant to "plead back" the plaintiff's imputations as contextual imputations (a course that was available under the 1974 Act). However, the decision left open the question whether, where a plaintiff pleads one imputation as an alternative to another, it may be permissible for a defendant to plead the alternative imputation as a contextual imputation. McColl JA said (at [90] to [91]): Mr McHugh raised a second pleading argument which was, in effect, a complaint about the manner in which the primary judge dealt with the respondent's "alternative imputations" (see [11] and [12] above). Her Honour (at [58]) held the respondent only complained of one imputation, even though he had pleaded an alternative in each case. Accordingly she concluded that it was not possible, for the purposes of the s 26 contextual truth defence, to set up the alternative imputations pleaded by the plaintiff against one another. Her Honour's reasoning, as I understand it, was that even though a plaintiff pleads alternative imputations, only one of which it will ultimately rely on if it persuades the jury it was conveyed, the other imputation remains a plaintiff's imputation and cannot, accordingly, be "in addition to" as s 26 requires. It may be that there is a flaw in her Honour's reasoning in this respect. If a jury finds that one imputation is conveyed, and as a result the plaintiff does not rely on an alternative imputation, it is arguable that the alternative imputation is no longer one "of which the plaintiff complains". If so, it is also arguable that it is open to the defendant to plead a s 26 defence in a manner which contingently "adopts" (and seeks to establish the substantial truth of) the alternative imputation which otherwise did not further come under the jury's consideration. While the practical utility of such a course for a s 26 defence, in circumstances where it might be thought the jury had found in the plaintiff's favour on a more serious imputation, might be debatable, it may be that s 26 permits such a course. However, her Honour did not express a concluded view, and nor do I. 16The defendants have adopted the course tentatively left open by those remarks and, accordingly, the issue now arises for my determination. 17Uninformed by authority, I would have held that an alternative or fallback imputation is one of "the defamatory imputations of which the plaintiff complains" within the meaning of s 26, or else is taken to be subsumed within the imputations of which the plaintiff complains. I apprehend that may have been the premise of the primary judge's ruling in Kermode referred to in the remarks of McColl JA set out above. 18However, although McColl JA's view to the contrary was expressed tentatively and was not part of the ratio in Kermode, it would be inappropriate for me as a puisne judge to proceed on an understanding of the statute different from that evidently approved unanimously in a decision of the Court of Appeal. Accordingly, I consider that I should determine this issue on the basis suggested by Ms Chrysanthou in reply, namely, by determining the question whether the particular alternative imputation relied upon by the plaintiff is capable of meeting the requirement of the section that it be an "other" imputation conveyed by the matter complained of "in addition to" the plaintiff's primary imputations. That course proceeds on the assumption (with which I do not agree but which I consider I am effectively bound to make) that the course adopted by the defendants is open as a matter of law. 19The issue arises only in respect of the first and fourth matters complained of. The plaintiff's pleading of alternative imputations in respect of each of those articles followed my rulings at [19] and [53] of my earlier judgment. 20As to the first matter complained of, the plaintiff relies upon the following imputations (paragraph 7 of the further amended statement of claim, first filed on 10 October 2012; an identical copy was accepted as filed on 19 October 2012): (a) Alternatively to imputation 7(b), the plaintiff accepted bribes while he was a senior State public servant. (b) The plaintiff is corrupt in that, while a senior public servant, he provided favourable treatment to the Kazal family, a powerful property family, in connection with the granting and administration of leases by the Sydney Harbour Foreshore Authority in exchange for secret benefits, including lavish holidays in Abu Dhabi. (d) The plaintiff, while the second most senior official of the Sydney Harbour Foreshore Authority, was secretly and simultaneously an employee of members of a powerful property family which leased properties from that Authority, which warranted a finding of corrupt conduct by the Independent Commission Against Corruption. 21As to the fourth matter complained of, the plaintiff relies upon the following imputations (paragraph 16 of the further amended statement of claim): (a) Alternatively to imputation 16(c), the plaintiff accepted bribes while he was a senior State public servant. (b) The plaintiff, whilst a senior official for the Sydney Harbour Foreshore Authority, engaged in a conflict of interest by signing a lucrative lease agreement with the Kazals in 2007 on behalf of the Sydney Harbour Foreshore Authority whilst at the same time he was in a secret employment arrangement with the Kazals. (c) The plaintiff is corrupt in that, while a senior public servant, he provided favourable treatment to members of the Kazal family in connection with the granting of a lease by the Sydney Harbour Foreshore Authority in exchange for a promise of a lucrative position with one of that family's companies in Abu Dhabi. 22In each case, the defendants seek to rely upon the plaintiff's alternative imputation as a contextual imputation in the event that the primary imputation is found to have been conveyed. In respect of the first matter complained of, the defence is pleaded as follows (at paragraphs 4(b) and (c) of the proposed amended defence): (b) insofar as and to the extent that it may be found that the matter complained of in paragraph 6 of the FASOC was published of and concerning the plaintiff and was defamatory of him as bearing imputation 7(b), each of imputation 7(b) and (if it has been found to be conveyed) 7(c) as may not be found to be substantially true was published contextually to the First Contextual Imputations and also contextually to imputation 7(a); (c) in either case, whether by reason of the substantial truth of one or more of the First Contextual Imputations (in the event that imputation 7(b) is not found to arise) or by reason of the substantial truth of the First Contextual Imputations together with imputation 7(a) (in the event that imputation 7(b) is found to have been conveyed), publication of such of the imputations pleaded in paragraph 7 as may be found to arise and not to be substantially true did not further injure the plaintiff's reputation. 23The same approach is adopted in respect of the fourth matter complained of (at paragraphs 15(b) and (c) of the proposed amended defence). 24As already noted, the plaintiff's reliance upon the bribery imputation (imputations 7(a) and 16(a)) as an alternative, fallback to the corruption imputation (imputations 7(b) and 16(c)) follows from my earlier judgment where I said (at [19]): The plaintiff submitted that imputation 7(a) conveys a different concept from imputations 7(b) and 7(c) in that imputations 7(b) and 7(c) suggest that the plaintiff was in fact suborned, whereas imputation (a) merely refers to acceptance of a gratuity with no favour in return. In my view, viewing the imputations in the context of the matter complained of as a whole, the only difference is one of the degree of seriousness of the conduct in question, which is in substance the same conduct. A person is corrupted upon acceptance of a secret benefit. If he in fact provides favourable treatment in return, that is properly regarded as a feature of aggravation of the corruption, since the law pay regard to consequences. However, it is the corruption of integrity upon acceptance of the benefit which is the essence of the sting. On that basis, I rule that imputation 7(a) be allowed to stand on the pleading. However, that imputation should be regarded as a fallback. 25Imputations 16(a) and 16(c) were identical to imputations 7(a) and 7(b) in that pleading. Accordingly, my ruling as to those imputations was the same: see [53] of the earlier judgment. 26A fallback imputation of lesser seriousness is correctly regarded as differing in substance from the more serious imputation: Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 (at [75] per Hunt AJA, Santow and Basten JJA agreeing at [1] and [24] respectively). That was a relevant observation in Harvey because the claim was governed by the 1974 Act, under which the imputation was the cause of action. One effect of the 2005 Act may be a return to the previous position (as it was before the imputation became the cause of action) where the imputation was regarded as "the most injurious meaning which includes within it all the less injurious meanings which fall broadly within its terms": see Harvey at [75]. That may be an additional reason for rejecting the defendants' approach in the present case. 27In any event, what is clear beyond dispute (as noted in the above summary of the relevant principles) is that a difference in substance is a necessary but not sufficient attribute of an imputation sought to be relied upon as a contextual imputation. A contextual imputation must be different in kind. 28Whether or not it would necessarily always be the case for an alternative imputation, in the present case the ruling which resulted in the imputations being pleaded as alternatives determines that issue. I held that the only difference between imputations 7(a) and 7(b) was "one of the degree of seriousness of the conduct in question, which is in substance the same conduct". Accordingly, I do not think the plaintiff's alternative imputations are capable of meeting the requirements of a contextual imputation under s 26 of the Act.

Specific objections to defendants' contextual imputations 29The contextual imputations relied upon by the defendants in respect of the first matter complained of are: 4(a)(A) the plaintiff, as the second most senior official of the Sydney Harbour Foreshore Authority, engaged in disgraceful misconduct by deliberately failing to disclose a possible conflict of interest and continuing to deal with matters affecting tenancies which the Kazal family held or sought with the Authority, whilst personally involved in secret business dealings with the Kazal family; 4(a)(B) the plaintiff dishonestly covered up the fact that while the second most senior official of the Sydney Harbour Foreshore Authority he was involved in secret business dealings with a powerful family, the Kazals, which leased and sought to lease properties from the Authority. 30The plaintiff submits that imputation 4(a)(A) is bad in form in that it is ambiguous, has more than one sting and is confusing. It was submitted that the imputation alleges a deliberate failure to disclose a possible conflict of interest and, separately, continuing to deal with matters affecting the Kazal tenancies whilst being personally involved in secret business dealings with the Kazal family. That is not the sense in which I would read that imputation. I would understand the sting of the imputation to be that the plaintiff engaged in disgraceful misconduct by deliberately failing to disclose a potential conflict of interest. The remaining words of the imputation explain or expand upon that allegation. I do not think the imputation is bad in form. 31Separately, it was submitted that neither contextual imputation is capable of being conveyed by the matter complained of. As to imputation 4(a)(A), Mr McClintock submitted that the article conveys an allegation of corrupt conduct, not an allegation of not disclosing the corrupt conduct. I think that is a false dichotomy. Perhaps seeking to put the same proposition in different terms, Mr McClintock submitted that, if the contextual imputations are capable of arising, they convey the same core sting as the corruption imputation relied upon by the plaintiff. 32I do not accept that submission. It may be accurate to say that corruption often entails deliberate concealment of the corrupt conduct but it does not follow that those two kinds of behaviour amount to the same thing. The active concealment of wrong-doing is often seen as a factor which aggravates its seriousness. I appreciate that secrecy is a common if not inherent aspect of corruption whereas that is not the case in respect of all forms of wrong-doing. Nonetheless, the deliberate failure to disclose the conflict of interest is, in my view, rightly regarded as a discrete form of misconduct. The plaintiff's submissions (particularly at paragraph 13 of the written outline) do not grapple with that distinction. 33As to imputation 4(a)(B), Mr McClintock submitted that the only notion of dishonesty alleged in the first matter complained of is that the arrangements were secret and that there is no discrete allegation of deliberately or dishonestly engaging in a cover-up. 34I do not accept that the two contextual imputations are incapable of arising. The whole tenor of the article is the secrecy in which the alleged conduct was undertaken by the plaintiff. As noted on behalf of the defendants, the article notes that ICAC had previously concluded that "corrupt conduct is not likely to have occurred...on the basis of the information before the commission" but goes on to assert that ICAC was not fully informed of the depth of the plaintiff's relationship with the Kazal family and had not considered certain emails. I accept, as submitted by Mr Gray on behalf of the defendants, that the inference would be open to the ordinary reasonable reader that the plaintiff dishonestly concealed the true position (being one that entailed a conflict of interest) from ICAC. 35The first two contextual imputations relied upon by the defendants in respect of the second matter complained of are the same as 4(a)(A) and 4(a)(B) above. There is a third, as follows: 8(a)(C) the plaintiff so conducted himself as to warrant the Government referring his conduct to the Independent Commission Against Corruption, and suspending him as a government consultant, because while the second most senior executive of the Sydney Harbour Foreshore Authority he accepted secret incentives from the Kazal family, with which he was involved in negotiations on behalf of the Authority, and he had also accepted appointment to a lucrative position with a Kazal related company in Abu Dhabi after he left the Authority. 36To the extent that the objections to imputations 8(a)(A) and 8(a)(B) mirror the form objections to 4(a)(A) and 4(a)(B), they are governed by my findings above. 37There is an additional form objection taken only in respect of imputations 8(a)(A) and 8(a)(B) (and, curiously, not in respect of imputations 4(a)(A) and 4(a)(B)), which is that the two contextual imputations do not differ in substance. In his written submissions, the plaintiff said at paragraph 30: "there is no difference between deliberately failing to disclose a conflict of interest and dishonestly covering up the secret business dealing (which is the conflict of interest)". However, in his oral submissions, Mr McClintock argued (at T13) that the article conveyed "an allegation of a deliberate cover-up, which is what we've pleaded, and we get the limp-wristed 'failure to disclose' as put back against us". Mr McClintock submitted that a failure to disclose and a deliberate cover-up are "quite different". I can only assume that the contention in the written submissions (as to there being no difference in substance between the two contextual imputations) was abandoned by senior counsel. 38The plaintiff further submits that imputation 8(a)(A) is incapable of arising from the second matter complained of. It was submitted that the only deliberate act of dishonesty alleged in the article is that the plaintiff went to some lengths to hide his trip to Abu Dhabi, an allegation dealt with by the plaintiff's imputation 10(b) (I think the author of the submissions must have intended there to refer to imputation 10(c)). 39I do not accept that the second matter complained of is not capable of conveying deliberate failure to disclose a broader scope of conduct. The article concludes with the assertion that confidential emails obtained by the Herald show that the plaintiff planned the second trip to Abu Dhabi to coincide with his normal annual leave, adding "They [the emails] also show Mr Kelly went to some lengths to hide his arrangements with the Kazals from his state government employer". 40Understood in the context of the article as a whole, I think that passage is capable of being understood to refer to a deliberate failure to disclose the "Rocks property deals" referred to in the headline to the article, rather than just the trip to Abu Dhabi. 41The plaintiff submitted that the second part of the imputation (continuing to deal with the Kazal tenancies) does not arise at all. However, since the article refers to the Kazal family as "a prominent tenant of the authority", and having regard to the tenor and content of the article as a whole, I think it would be open to the ordinary reasonable reader to infer that the article was alleging the plaintiff had ongoing dealings with the Kazals in their capacity as tenants of the properties. 42Separately, it was submitted that imputation 8(a)(A) does not arise in addition to the plaintiff's imputation 10(a) (see paragraph 29 of the written outline - the reference should be to imputation 10(b), which is the plaintiff's corruption imputation). For the reasons already given, I think the imputations of deliberate failure to disclose and dishonest cover-up are different in kind from that imputation. The distinction is between the initial misconduct and the cover-up. 43A similar submission was put in respect of imputation 8(a)(B), which it was said does not does not arise in addition to the plaintiff's imputations 10(a) and 10(b) (see paragraph 31 of the written outline - it was presumably intended to refer to imputations 10(b) and 10(c)). I do not accept that submission. The contextual imputation alleges a cover-up of a significantly different and more serious kind. 44Imputation 8(a)(C) is objected to on the basis that it is ambiguous in that it has multiple stings. Mr Gray resisted that contention. He submitted that the imputation picks up two things carefully avoided by the plaintiff in his imputations, namely, that his conduct was such as to warrant both referral to ICAC and suspension from his consultancy. 45The difficulty is that the conduct identified in the imputation as warranting the referral and the suspension adds nothing to the plaintiff's imputations. I am not persuaded that the characterisation of that conduct as warranting the consequences identified amounts to any separate sting or act or condition beyond those captured in the plaintiff's imputations. As submitted by Mr McClintock, the ultimate sting of the contextual imputation is the plaintiff's conduct in accepting secret incentives. 46Separately, it may be noted that there is a measure of tension between the defendants present position (that the imputation adds something to the plaintiff's existing imputations) and the position previously taken by the defendant (which I accepted at [43] of the earlier judgment) that the plaintiff's own general "accepted secret incentives" imputation was comprehended within the more specific imputation 10(b). 47I do not think imputation 8(a)(C) is capable of rising "in addition to" the imputations complained of by the plaintiff. The defendants should not have leave to include a contextual imputation in those terms. 48The contextual imputations relied upon by the defendants in respect of the fourth matter complained of are: 15(a)(A) the plaintiff so conducted himself as to warrant the suspicion that while a senior public servant he was prepared to provide favourable treatment to the Kazal family, a powerful family which leased and sought to lease properties from the Sydney Harbour Foreshore Authority, from whom he had accepted secret incentives and with whom he was involved on negotiations on the Authority's behalf in connection with the lease of a multi-million dollar taxpayer-owned property in The Rocks. 15(a)(B) the plaintiff so conducted himself as to warrant his suspension as a government consultant, in that while still a senior executive with the Sydney Harbour Foreshore Authority, he had accepted secret benefits from the Kazal family, with which he was involved in negotiations on behalf of the Authority, and he had taken up a lucrative position with a Kazal related company in Abu Dhabi, after leaving the Authority's employ. 49As developed in oral submissions, the plaintiff's objection to those imputations was that they are incapable of arising "in addition to" the plaintiff's imputations. Mr McClintock submitted that an allegation of suspicion cannot arise "in addition to" an imputation of actual guilt of the same conduct. In my view, there is force in that submission. 50Mr Gray submitted that the additional sting not captured by the combination of the plaintiff's imputations was that the plaintiff had been suspended from his position as a government consultant and that he had already accepted secret incentives, as opposed to the mere promise of a position (paragraph 32 of the written outline). As with the argument considered above, the second point takes a position inconsistent with that put and accepted in my earlier judgment at [43]). 51Upon analysis, I do not think those contextual imputations identify a defamatory sting of a different kind in addition to those captured in the plaintiff's imputations. The defendants should not have to include imputations 15(a)(A) and 15(a)(B). 52The contextual imputations relied upon by the defendants in respect of the fifth matter complained of are: 19(a)(A) the plaintiff dishonestly covered up the fact that while the second most senior official of the Sydney Harbour Foreshore Authority, he was involved in secret business dealings with a powerful family, the Kazals, which leased and sought to lease properties from the Authority on whose behalf he was negotiating with that family; 19(a)(B) whilst a senior official of the Sydney Harbour Foreshore Authority, the plaintiff knowingly engaged in a conflict of interest by signing a lucrative lease to the Kazals on behalf of the Authority, whilst at the same time he was accepting secret financial benefits from them. 53The plaintiff's objection to imputation 19(a)(A) raises substantially the same issues as are considered above in respect of the second matter complained of. In my view, contextual imputation 19(a)(A) captures a different sting which can be said to arise "in addition to" the plaintiff's imputations. As submitted by Mr Gray, the allegation of a dishonest cover-up is considerably more serious and more pungent than the plaintff's imputation of taking "some steps to conceal". 54As to imputation 19(a)(B), the plaintiff submitted that the only conflict of interest described in the matter complained of is dealt with by the plaintiff's imputations. However, as submitted by Mr Gray, the plaintiff's imputations do not address the specific allegation of conflict of interest in the signing of the lease, which features prominently in the article. The defendants should have leave to include imputations 19(a)(A) and 19(a)(B). 55The defendants have leave to file an amended defence in accordance with these reasons. 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. Decision last updated: 05 March 2014