King v Fairfax Media Publications Pty Ltd

Judgment - ex tempore 1HER HONOUR: These are proceedings for defamation arising out of the publication of a series of articles in the Australian Financial Review, the Sydney Morning Herald, the Age and the Canberra Times. 2The plaintiff in the action is Mr Wallace King, who is described in the articles as the former Chief Executive Officer of the "construction giant", Leighton Holdings. The articles reported allegations of bribery and corruption in Leighton's negotiation of overseas contracts with emphasis on the involvement of Mr King and the extent to which the reported conduct could be sheeted home to him. 3The defendant has taken a series of objections to the defamatory imputations pleaded by Mr King. Objections are taken both as to the form of some imputations and as to some capacity of the matters complained of to convey them. This judgment determines those objections. 4The parties agreed that the objections as to capacity should be dealt with as the determination of a separate question under r 28.2 of the Uniform Civil Procedure Rules 2005. 5The principles to be applied in the determination of such a question were not in dispute. Mr Leopold SC, who appears with Ms Barnett for the defendants, noted that the Court of Appeal has recently remarked on the distinction between the Court's task in determining a capacity objection as a separate question and on a strike out application under r 14.28 of the Uniform Civil Procedure Rules: see Younan v Nationwide News [2013] NSWCA 335. In that case Macfarlan JA, with whom the Chief Justice and the President agreed, said (at [20]): Unlike the summary disposal or strike out jurisdiction, where the question for the court is, in effect, whether the opponent's point is unarguably bad, determination of a point as a separate question simply requires its consideration as on a final hearing, that is, whether it has been established on the balance of probabilities. 6It follows that the question to be determined is whether I am satisfied on the balance of probabilities that each of the plaintiff's imputations objected to on that basis is reasonably capable of being conveyed to the ordinary reasonable reader. 7As to the objections on the basis of form, the requirement is that the imputation must specify the act or condition allegedly attributed to the plaintiff by the matter complained of with sufficient clarity to enable the defendants to know the case they have to meet. 8Mr Leopold's submissions set out the relevant principles in some detail. The position is now well-settled that the question which arises in determining an objection as to form is whether there is likely to be confusion, either at the pleading stage or at the trial: see Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 138E where Gleeson CJ approved the test stated by Hunt J in Whelan v John Fairfax & Sons Ltd (1988) 12 NSWLR 148 at 155F as follows: The issue which has to be decided in the particular case is whether there is likely to be confusion either at the pleading stage or at the trial in relation to the meaning for which the plaintiff contends. 9Priestley JA in Drummoyne at 155F reached the same conclusion, perhaps on a slightly different basis and at least without having to rely on the authorities cited by Hunt J in Whelan, reiterating the unexceptionable proposition that a requirement of sufficient clarity to enable a defendant to know the case he has to meet is a basic rule of pleading. As already noted, there was no controversy as to the content of any of those well-established principles. 10Before turning to the particular objections taken on behalf of the defendants, a number of broad observations may be made as to the matters complained of. I am at this point dealing with the first matter complained of, which is an article published in the Financial Review. The plaintiff sues on a combination of articles under different headings as a single matter complained of and no objection is taken to that course. 11The primary article appearing on the front page of the newspaper appeared under the heading "Wal King approved Iraqi bribe". The article features prominently a photograph of Mr King. A separate article also commencing on the first page appeared under the headline, "Ethical breach not so isolated." 12The parties agreed that my determination in respect of the imputations objected to could be made by reference to those matters complained of as a single publication and that those determinations would govern the other matters complained of by the plaintiff. 13There is also on the front page an insert under the heading "Uncovered" which sets out what is alleged to be a transcript of a handwritten memorandum by David Stewart, described in the article as Mr King's "short term successor." 14Further by way of general opening observation, the article focused on what was evidently described by Leighton as a self-reported "possible breach of its code of ethics." As foreshadowed by the headline to which I have already referred, the plain thrust of the article is that that single self-reported breach was not so isolated as was being suggested on behalf of Leighton. 15It is in that context that there is undoubtedly substantial focus in the articles on Mr King as, adopting Mr McHugh's words, "the primary villain." Mr Leopold took issue with that characterisation of the portrayal of Mr King in the matters complained of, but it seems to me that it is well supported by their content. 16Mr Leopold further submitted by way of general observation that the articles are serious and not sensational. He submitted that the Court should approach the present issue on the basis that the ordinary reasonable reader would read the articles with care, not with any measure of loose thinking and that the articles do not invite any such thinking. Mr McHugh took issue with that characterisation of the articles and submitted that there were aspects of them which were sensational and invited loose thinking. The proper approach is of course to consider whether the articles are reasonably capable on balance of being read as conveying the meanings they are said to convey, rather than purporting to determine one way or the other whether they bear that characterisation on a final basis. 17The first objection relates to imputation 10(a) as follows: The Plaintiff committed criminal offences by approving the payment of multiple bribes to win contracts overseas. 18Mr Leopold premised his argument on the proposition that the word "approved" does not appear in the matters complained of. 19I should note that that objection was taken by reference to the third matter complained of, which is the electronic version of part only of the first matter complained of, namely, the part appearing under the heading "ethical breach not so isolated." It was clarified on behalf of the plaintiff during argument that, contrary to the appearance of the pleading, the plaintiff does rely on the additional words at the conclusion of that article which say "read next: Wal King approved Iraq bribe." 20With that additional information, Mr Leopold was left to an argument that the matter complained of was not capable of conveying the meaning that Mr King approved the payment of multiple bribes, notwithstanding the fact that the article expressly states in terms that he approved one particular bribe. With admirable ingenuity, Mr Leopold suggested that the explicit reference to one individual bribe would in fact conduce the ordinary reasonable reader to conclude that the article was expressly suggesting that there had been no involvement on Mr King's part in any other part of the misconduct reported in the matters complained of. He noted that the article describes Leighton Holdings as a "construction giant" and said the ordinary reasonable reader would not leap to the conclusion that where a particular bribe was stated to have been approved by Mr King, he had approved any other similar conduct. 21The submission appeared to echo the canon of construction captured in the Latin maxim expressio unius est exclusio alterius but, as properly acknowledged by Mr Leopold on behalf of the defendants, that is no aspect of the qualities the law attributes to the ordinary reasonable reader. 22The material relied upon by Mr McHugh included the caption to the photograph, which refers to Mr King's knowledge of, "the company's questionable method of winning contracts in countries rife with corruption"; the photograph itself; the heading, which conveys a degree of scepticism as to the company's apparent claim of a single possible breach and the emphasis throughout the article on the fact that Mr King was the head of the group for such a lengthy period. 23In my view the article is plainly reasonably capable of conveying the imputation. 24As a separate point, Mr Leopold submitted that there is some ambiguity in the meaning of the word "approving" in the imputation. He submitted that there was a question as to whether it meant a positive act of signing off on the conduct in question or some more passive conduct. Mr McHugh submitted that the word was clear and confirmed that it does connote some positive act of signing off on the relevant conduct. With that indication, which in my view was clear in any event, I am satisfied that the imputation is not embarrassing in form. 25The ruling in respect of that imputation is that it is reasonably capable of being conveyed by the matters complained of and will go to the jury. The application to have it struck out as being bad in form is rejected. 26The second objection is to imputations 6(a) and 6(d), as follows: 6(a) The plaintiff approved a bribe in Iraq. 6(d) The plaintiff committed a criminal offence under Australian law when he approved a $42 million kickback to a company in Monaco nominated by an Iraq official in return for Leighton International obtaining a $750 million oil pipeline contract. 27Mr Leopold submitted that 6(a) is contained within 6(d) and should be put only as a fall back imputation, citing Kelly and Fairfax [2012] NSWSC 690 [14]-[19]. 28Mr McHugh accepted that would be so if it were accepted that, in the context of those two imputations, there is no difference in substance between the word "kickback" and the word "bribe". 29Mr Leopold in turn accepted that there is no difference in substance between those two terms in this context. The objection is resolved in that concession and Mr McHugh's indication that imputation 6(a) will be relied upon only as a fall back to imputation 6(d). 30The third objection is to imputation 6(e), as follows: The plaintiff, having approved the payment of $87 million in order to obtain a $700 million contract when at least half of that payment was a kickback, was the sort of man who, if later asked about the payment of the kickback, would deceitfully claim that he had not approved the payment or that he had "forgotten it". 31The complex language of the imputation is explained when regard is had to the terms of the matter complained of itself. The objection was that the imputation was bad in form in that it fails to distil a sufficiently precise defamatory act or condition. That the relevant principles require the plaintiff to do so is beyond dispute. 32Mr Leopold complained that the imputation does not allege that the plaintiff has in fact engaged in any disreputable act, only that he would. It was submitted that, to the extent that the imputation attempts to allege a defamatory meaning, it does not do so with the requisite precision. Mr Leopold submitted that the imputation appears to be hinting at dishonesty as the relevant act or condition but fails to say so with the requisite precision. 33The part of the matters complained of from which the imputation is said to arise is part of the transcript of the handwritten memorandum of Mr Stewart. The relevant extract describes Mr Stewart as being advised by another executive of an opportunity to negotiate an extension to a current contract in Iraq, stating that the extension would require a payment to a third nominated subcontractor in circumstances where the real value of the work to be performed by the subcontractor would be less than half the quantity of the payment. 34The memorandum continues (Mr Stewart being the author): I asked them how we won the current 700 contract and he says it was won by $87 million payment to a nominated subcontractor on the same terms. I asked did Wal K approve it and he said yes. I said I will talk to WMK and he said that WMK will now deny it and have forgotten it. 35As submitted by Mr McHugh on behalf of the plaintiff, it may be seen that the matter complained of itself attributes the likelihood of certain future conduct to the plaintiff. The hypothetical form of the imputation is explained in that context. 36Further, as submitted by Mr McHugh, rather than failing to distil the defamatory character allegedly attributed to the plaintiff with sufficient clarity, the imputation is in fact extremely precise, drawing in terms on the content of the matter complained of. I am not persuaded that the imputation is embarrassing in form when it is understood in the context of the material from which it is drawn. 37Mr Leopold sought to draw support for his objection to the imputation from the decision of Hunt J in Mayfield Smith v Mirror News Ltd [1982] 2 NSWLR 419. In that case an apprentice jockey was quoted in the matter complained of as having said that the plaintiff, described as a prominent trainer, had threatened him, "If you ever hit my horse over the head with a whip, I'll hit you over the head." The report appeared under the headline "Row over whip. Trainer - I'll punch you." 38Plainly an issue was whether the words attributed to the trainer in the headline ("I'll punch you") accurately captured the sense of what he had allegedly said by way of threat to the jockey in the words, "I will hit you over the head." 39The report reveals that, during argument, counsel for the plaintiff had conceded that there was no distinction or no more than a slight distinction between the two forms of threat attributed to the trainer, "I'll hit you over the head" and "I'll punch you". It was in the face of that concession that Hunt J held that the words "I'll punch you" were irrelevant detail which should be removed from the imputation that the plaintiff threatened the apprentice. The precise terms of the threat did not matter, in those specific circumstances. 40This is a very different case, in my view. It is not a case where the precise terms of the likely conduct attributed to Mr King are irrelevant. On the contrary, that is the essence of the act or condition attributed to Mr King by the handwritten note reproduced in the matter complained of. That is, the note purportedly records the author's prediction that, being aware of a corrupt payment, Mr King would deny it or state that he had "forgotten it". 41I reject Mr Leopold's submission that, in that context, the imputation includes more than the sting and fails to distil only the sting relied upon. The application to have that imputation struck out is rejected. 42The fourth objection is to imputation 6(f), as follows. The plaintiff while CEO of Leighton received a portion of Mr Sri Kumar's 10% kickbacks for deals in Iraq, India and Tanzania. 43It was submitted that the imputation is not reasonably capable of being conveyed by the matters complained of. 44Paragraph 31 of the matters complained of states, "Mr Sri Kumar has worked with Leighton in Iraq, India and Tanzania" and that a whistle blower said that he had heard the businessman received "a 10% kickback" on certain projects, "some of which is passed to Leighton executives". 45Mr Leopold submitted that, since that paragraph refers only to "Leighton executives" and not specifically to Mr King, it is not reasonably capable of conveying the meaning that Mr King was one of those who received the kickbacks referred to. He again noted the reference in the matters complained of to the size of Leighton as an organisation and submitted that the ordinary reasonable reader would be aware that it would have many executives. 46Mr Leopold relied on the decision of Hunt J in McCormick and John Fairfax and Sons Ltd [1989] 16 NSWLR 485 at 491, where his Honour said: As the matter complained of in the present action cannot, by its express wording, be interpreted as asserting that each member of the class was guilty of this particular conduct, and as there is nothing in the matter which points to the plaintiff as the one who was alleged to have been guilty of that conduct, it is incapable of conveying the imputation that it was the plaintiff who was guilty of that conduct. It follows that imputations (d) and (f) cannot go to the jury. 47Mr McHugh accepted that the meaning is not conveyed on the basis that the article suggests that each member of the class, that is, each Leighton executive, received part of the kickback referred to. He relied on the second limb of the principles stated by Hunt J and submitted that, in the present matter, there is something which points to the plaintiff as the one, or one of those, who was alleged to have been guilty of the conduct in question. 48It was in that context that Mr McHugh made the submission that Mr King is the primary villain portrayed in the matter complained of. He noted the headline, the photograph of Mr King and the fact that the article attributes him with having received information from the whistle blower together with references to an attempt to cover those issues up. Those passages appear at paragraphs 27 to 29 of the matters complained of. 49In addition, reference may be had to the content of paragraphs 60 to 68 of the matters complained of, which evidently returns to the issue of the same whistle blower. As I would read those passages, they report (in the context of Leighton's claim to have self-reported a single possible ethical breach) the fact that the Herald had conducted an investigation raising critical questions in relation to Leighton's directors and senior executives. The article continues, "It now appears Wal King who ran Leighton as Chief Executive for 23 years and his senior colleagues knew about the company's questionable methods of winning contracts rife with corruption." There is then a reference to the fact that Mr King was warned by a whistle blower in 2009 that a pay-off had been made, and it is stated, "a subsequent investigation under King's watch went nowhere." 50The next paragraph asserts that, had the company looked a little harder, very serious allegations would have been uncovered. It concludes with the following statement: Instead this all remained hidden and King left Leighton in 2011 with a severance package that approached $30M. 51Whilst there are certainly forceful arguments that could be put to a jury in respect of imputation 6(f), the combination of that material has persuaded me that it would be wrong to conclude that the matters complained of are not reasonably capable of pointing to Mr King as one of those Leighton executives who received a portion of Mr Kumar's 10% kickbacks. Imputation 6(f) will go to the jury. 52The next objection relates to imputation 6(h), as follows. The plaintiff in his role as CEO of Leighton regularly covered up multiple instances of bribery and corruption of foreign officials by company executives and employees. 53The objection to that imputation is one of capacity. The difficulty is said to be with the word, "regularly." Mr Leopold submitted that the respective matters complained of are not capable of being read to suggest more than at most a single and specific act of cover-up. Mr McHugh noted that there are several references in the matters complained of to conduct beyond the single specific cover-up referred to. He noted the opening paragraph of the matter complained of which states: Bribery, corruption and cover-ups in Leighton Holdings International empire were rife and known to the company executives and directors according to internal company files. Those in the know included the construction giant's chief executive at the time, Wal King and his short-term successor, David Stewart. 54Mr McHugh further noted the reference in paragraph 7 to revelations of that kind in a series of countries which are named - Iraq, Indonesia, Malaysia and elsewhere. He submitted that the overall tenor of the article was that bribes were everywhere and cover-ups were everywhere. 55As with the previous imputation, I consider that there are submissions which may be put with some force to a jury as to the extent to which responsibility for the breadth of the conduct reported in the article is sheeted home to Mr King but in my view, considering the content of the article as a whole, it would be reasonably open to the jury to hold that the imputation conveyed the meaning of broader conduct beyond the single cover-up specifically evidently attributed to Mr King. Imputation 6(h) will go to the jury. 56In the face of that ruling, the further submission put was that imputation (i) is clearly an alternative or fall-back to imputation (h). Imputation (i) is as follows: 6(i) The plaintiff in his role as CEO of Leighton, after being notified in 2009 by a whistle blower of criminal conduct, including a systemic fraud, covered it up. 57Mr McHugh submitted that there are some differences between the two imputations, characterising imputation (h) as the general versus the particular of imputation (i). 58I do not accept that submission. In my view, reading the imputations together fairly and in the context of the matters complained of, one is attributing the plaintiff with having engaged in the same conduct on many occasions where the other is attributing him with having engaged in substantially the same conduct on one single occasion. 59The particular or specific imputation should, in my view, be able to be relied upon only as a fall-back to what Mr McHugh described as the general. 60The next objection is to imputation 6(l), as follows: The plaintiff during his tenure as CEO of Leighton encouraged a culture of rewarding corruption and incompetence and abysmal corporate governance. 61The imputation was objected to both as to capacity and form. It is appropriate to deal with the form objection first. 62Mr Leopold submitted that the imputation is bad in form because it is unclear what defamatory act is attributed to the plaintiff by the word "encouraged." He submitted that the imputation is capable of meaning that Mr King actually did something positive to provide encouragement or, alternatively, that it may convey something less in the form of tacit encouragement or merely condoning the relevant conduct. 63Mr McHugh responded by saying that the word was intended to mean, and clearly does mean, positive encouragement on the part of Mr King. That indication disposes of the form objection but also informs the objection as to capacity. 64Mr Leopold submitted that there is nothing in the matters complained of to suggest that Mr King committed any positive act to encourage the culture of rewarding corruption and incompetence. He described the plaintiff's argument to sustain the imputation as a "hall of mirrors". Mr Leopold noted that the article makes reference to one Leighton manager, who allegedly stole $500,000 worth of steel from the company to build a barge, having been given a bonus rather than being sacked, and having indeed been thanked for his work by a Leighton executive. In that part of the matter complained of it is clear that the Leighton executive referred to is not Mr King. The executive is named. Mr Leopold submitted that, in the context that the rewards referred to are attributed to persons other than Mr King, there is simply no hint in the articles of any positive act by Mr King encouraging the kind of corporate culture referred to. 65It may be accepted that there is no reference in the matter complained of to any specific act of encouragement directly attributed to Mr King. The notion of encouragement is one which is not always susceptible of precise identification in terms of any particular act. Whilst the analogy is not perfect (analogies rarely are), it may be observed that the law relating to the commission of a criminal offence on the basis of a joint criminal enterprise holds that a person can be attributed with the act of another on the strength of an agreement to commit an offence and participation in the execution of the agreement by doing no more than standing by ready to assist if required whilst the criminal act is committed by another party to the agreement. I am not suggesting that is the basis on which this issue is to be resolved but only that it illustrates the need for a more subtle analysis of what may amount to encouragement in any particular context. 66Whilst I accept that the matter complained of does not directly attribute any positive act to Mr King, for the reasons I have already indicated, I think the articles plainly place him squarely in the firing line for criticism as being a person charged with responsibility for much of the conduct described in the article. I have already recited the matters which contribute to that impression. I do not think it is a question of the articles simply saying responsibility rests with him because he is the man at the top. Rather the articles in my view are reasonably capable of giving rise to the inference that the person at the top in this instance must have been responsible for encouraging the corporate culture described. I think it would be wrong to withdraw that imputation from the jury. It is in my view plainly a matter reasonably capable of arising and one which the jury should determine. Imputation 6(l) will go to the jury. 67The next objection is to imputations 8(a) and 8(d), which Mr Leopold submits do not differ in substance. Imputations 8(a) and 8(d) are: 8(a) The plaintiff approved a bribe in Iraq. 8(d) The plaintiff approved a $42 million kick back to a company in Monaco nominated by Iraqi officials in return for Leighton International obtaining a $750 million oil pipeline contract. 68In my view there is force in Mr Leopold's objection. As submitted by him, each imputation captures the sting that the plaintiff approved a bribe. One includes further detail; one does not. But ultimately I do not think there is any difference in substance between the two imputations. The plaintiff should be directed to elect between those two. 69The next objection is of the same kind. It relates to imputations 8(c) and 8(g), as follows: 8(c) The plaintiff approved the payment of multiple bribes. 8(g) The plaintiff in his role as Chief Executive Officer of Leighton approved plans for the company to pay multimillion dollar kick backs in Iraq, Indonesia, Malaysia and elsewhere. 70Mr McHugh submitted that there is an important difference between the two imputations in that one refers to the approval of an actual payment whereas the other refers to the approval of plans to pay. Viewed in the context of the content of the matters complained of I think that is a distinction without a difference. It is plain that the first imputation is referring to the approval of a proposal to pay a bribe and it is, in context, substantially the same thing as approving a plan to pay. I do not think the imputations differ in substance. The plaintiff should be directed to elect between them. 71The next objection is to imputation 8(f). The parties agreed that my determination of the objection to imputation 6(f) above would govern that imputation. 72The final objection is to imputations 6(b) and 6(m), which are: 6(b) The plaintiff as Chief Executive Officer of Leighton knew bribery, corruption and cover ups were rife in the company's international empire. 6(m) The plaintiff's performance as Chief Executive Officer of Leighton was so grossly incompetent that he failed to prevent Leighton executives and employees from engaging in widespread bribery, corruption and cover ups. 73The objection initially taken was that those two imputations do not differ in substance. During the course of argument Mr Leopold further submitted that there is an issue as to whether imputation (m) is bad in form for want of specifying the plaintiff's degree of knowledge of the conduct he is attributed with failing to prevent. 74Imputation 6(b) in its present formulation says no more than something about what the plaintiff knew. Mr McHugh indicated during argument that it was, as he saw it, implicit in the imputation that, with that knowledge, the plaintiff failed to prevent the conduct referred to, but I do not think that is sufficiently clear in the present formulation of the imputation. In the face of my indication to that effect, Mr McHugh indicated that he would seek to reformulate that imputation. Leave should be granted for that purpose. 75With that indication it remains to consider whether imputation 6(m) as presently formulated can stand. Mr McHugh explained that the sting intended to be captured by the imputation was one of incompetence as opposed to dishonesty, which is what is sought to be captured in 6(b). He submitted that the degree of knowledge of the plaintiff is not required to be articulated with specificity in the imputation since that is intended to be comprehended within the duty of the plaintiff. The imputation is intended to capture the proposition that it was the plaintiff's duty to know of and prevent conduct of the kind attributed to Leighton executives. With that understanding I would accept that the imputation has sufficient clarity to put the defendants on notice of the case they have to meet. It remains to see whether the reformulated imputation 6 (b) will generate any further objection but I am satisfied that imputation 6 (m) is sufficiently clear and is not liable to be struck out as being bad in form. The objection to that imputation is rejected. 76I direct the parties to bring in short minutes of order reflecting these reasons.