Liquor Marketing Group & Anor v Sadler

PARTIES : Ernie Begg (Second Appellant) v Gary Sadler (Respondent) JUDGMENT OF : Sheller JA at 1; Giles JA at 5; Davies AJA at 31

LOWER COURT JURISDICTION : District Court LOWER COURT 281/98 FILE NUMBER(S) : LOWER COURT Goldring DCJ JUDICIAL OFFICER :

COUNSEL : As: Mr T K Tobin QC, Mr M G Lynch R: Mr B R McClintock SC, Mr R C Titterton SOLICITORS : As: Freehill Hollingdale & Page R: Wall & Associates CATCHWORDS : Defamation - whether defamatory imputation could be drawn from publication - pleading of defamatory innuendo - qualified privilege under statute and common law - whether defendant afforded natural justice - whether proceedings should be remitted for rehearing on damages alone Defamation Act 1974, ss 9,22 Trade Practices Act 1974 (Cth), s 53 LEGISLATION CITED : Fair Trading Act 1987, s 44,45 Supreme Court Act 1970, s107 District Court Rules, Pt17r10 Morgan v John Fairfax & Sons Limited (No2) (1991) 23 NSWLR 374 Humphries v TWT Ltd (1993) 120 ALR 693 Lewis v Daily Telegraph Ltd [1964] AC 234 Dawson Bloodstock Agency Pty Ltd v Mirror Newspapers Ltd [1979] 1 NSWLR 16 Adam v Ward [1917] AC 309 Bellino v Australian Broadcasting Corporation (1996) 185 CLR 183 CASES CITED: Horrocks v Lowe [1975] AC 135 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 Uren v Australian Consolidated Press Ltd (1965) 66 SR(NSW) 271 Australian Consolidated Press Ltd v Uren (1966) 117 CLR 185 Monti-Haitsma Enterprises Pty Ltd v Lord (1988) Aust Torts Reps 80-200 Tolley v J.S. Fry & Sons Ltd [1931] AC 333 Pateman v Higgin (1957) 97 CLR 521 DECISION : Appeal allowed. See paragraph 76.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40795/98 DC 281/98 SHELLER JA GILES JA DAVIES AJA THURSDAY 6 JULY 2000 LIQUOR MARKETING GROUP LIMITED & ANOR v Gary SADLER JUDGMENT 1 SHELLER JA: I have had the benefit of reading in draft the judgments prepared by Giles JA and Davies AJA. I agree for the reasons Davies AJA has given that the imputation pleaded in paragraph 5(a) of the plaintiff's second amended statement of claim was not conveyed by the letter of 2 May 1995. 2 In my opinion the imputation as pleaded in paragraph 6(a) of the second amended statement of claim is capable of being defamatory as a true innuendo. The test is whether a reasonable person with the knowledge of the extrinsic fact, namely that the plaintiff was at the date of publication the general manager of "Pub Mart" which carried on business as a seller of wholesale liquor, would understand the imputation as tending to damage the plaintiff's reputation. The defamatory sting arises because the hypothetical audience is aware of the extrinsic fact. Logically the imputation should not have to incorporate the extrinsic fact as long as that extrinsic fact is particularised; see Pt 67 r 12(c) to which Giles JA has referred. Like Giles JA I think the pleading was appropriate. 3 The trial Judge noted that in the replies to interrogatories, the defendants said on oath that they did not believe either of the imputations found to have been conveyed were true. His Honour said:

"In view of the quoted passages from Morgan v John Fairfax & Sons Limited (No 2) (1991) 23 NSWLR 374 at 387-8, per Hunt AJA, that is sufficient to establish that the matter complained of does not fall within the scope of a publication on an occasion that attracts qualified privilege, either under the Defamation Act 1974 , s 22, or at common law."

In so saying the trial Judge failed to take account of paragraph (3) at page 387 in the judgment he cited. But as Giles JA points out, the trial Judge went on to reach conclusions on the assumption that his "interpretation of the law on this point" was wrong. Giles JA has analysed the trial Judge's reasons for judgment. I agree with that analysis and with his Honour's conclusion that the conduct of the defendants was not reasonable in respect of imputation 6(a) and that, accordingly, the defence of statutory qualified privilege fails. I am also of the opinion, despite the fact that the trial Judge seems to have stated the law on common law qualified privilege incorrectly, that, for the reasons given by Giles JA and Davies AJA, this defence also fails. 4 I agree with the orders proposed by Davies AJA. 5 GILES JA: I have had the benefit of reading the reasons of Davies AJA in draft. With some qualifications and additional remarks not affecting the result, I agree with them. 6 The first qualification concerns the pleading of imputation 6(a), which his Honour considers to have been incorrect as a matter of strict pleading. 7 The original pleading of the imputation, then as imputation (b), was simply, "Because of the Plaintiff's lack of experience in the sale of liquor to hotels in New South Wales he lacks the ability to make a true statement in relation to comparative pricing of wholesale liquor in New South Wales." Levine J considered that "in isolation and merely as a statement about someone" it was incapable of being defamatory but, referring to the fact that Mr Sadler was the general manager of Pubmart, said that he was persuaded that it was "capable of being rendered defamatory as a true innuendo". His Honour gave leave "to amend to plead imputation (b) as a true innuendo and provide proper particulars". 8 The result was para 6 as set out by Davies AJA, repeating the original imputation (b) but preceding it with invocation of particularised extrinsic facts and following it with particulars that Mr Sadler was the general manager of Pubmart which carried on business as a seller of wholesale liquor. 9 There is said to be a true innuendo when the defamatory meaning of a publication only arises because of facts, passing beyond general knowledge, known to the recipient of the publication. Reading imputation 6(a), that is, the words in subpara (a) of para 6, with the preceding words and the particularised facts, there could be no doubt that Mr Sadler was alleging that the letter had the defamatory meaning in the imputation because of the particularised facts, being facts known to hoteliers. 10 But the appellants submitted that, because s 9 of the Defamation Act 1974 tied the defamed person's cause of action to a defamatory imputation, regard could be had only to imputation 6(a) itself, in effect only to the original imputation (b), so that despite the re-pleading the imputation remained incapable of being defamatory. In their words, "the imputation itself must utter the sting of the libel and it doesn't do it here". 11 The submission was properly acknowledged as a technical point. I agree with Davies AJA that, for the reasons he gives, it should not bring success on appeal, and I add that the appellants' muted suggestion that the point had been taken at the trial was revealed, on examination of the transcript, to be unsound. But in my view the submission itself should not be accepted. 12 Section 9 of the Defamation Act provides so far as presently material -

"(1) Where a person publishes any report, article, letter, note, picture, oral utterance or other thing, by means of which or by means of any part of which, and its publication, the publisher makes an imputation defamatory of another person, whether by innuendo or otherwise, then for the purposes of this section: (a) that report, article, letter, note, picture, oral utterance or thing is a matter , and

(b) the imputation is made by means of the publication of that matter.

(2) Where a person publishes any matter to any recipient and by means of that publication makes an imputation defamatory of another person, the person defamed has, in respect of that imputation, a cause of action against the publisher for the publication of that matter to that recipient … " 13 The practice of defamation litigation is bedevilled by technicalities, and I do not think the present technical point should be numbered amongst them. Consistently with s 9, an imputation may be framed which is defamatory by innuendo. There is nothing saying that the facts which make it defamatory must be incorporated within the imputation itself. Provided those facts are particularised, so that the defamatory meaning arises with knowledge of the facts, the imputation is defamatory and the pleading will be adequate. 14 This is reflected in the Rules concerning proceedings for defamation. By Pt 67 r 11 the statement of claim must specify each imputation on which the plaintiff relies and allege that the imputation was defamatory of the plaintiff, but it need not show how the matter complained of bore the sense of any imputation on which the plaintiff relies. By Pt 67 r 12 the particulars required in relation to the statement of claim shall include -

"(c) where the plaintiff alleges that the matter complained of had a defamatory meaning other than its ordinary meaning, particulars of the facts and matters on which he relies should establish that defamatory meaning". 15 Some further qualifications and additional remarks concern the statutory and common law defences of qualified privilege. 16 Davies AJA has noted that the trial judge was influenced by the fact that the appellants' answers to interrogatories included that they did not believe that imputation 6(a) was true; they said the same as to imputation 5(a). In the interrogatories the question and answer were in terms of subpara (a) of para 6, that is, without reference to the particularised facts, so the answer must be read accordingly, an answer as to a matter of fact innocuous in itself. 17 The trial judge said that in view of the passages from Morgan v John Fairfax & Sons Ltd (No 2) which he had set out, in effect the passage cited by Davies AJA, the answers to the interrogatories were "sufficient to establish that the matter complained of does not fall within the scope of a publication on an occasion that attracts qualified privilege, either under the Defamation Act 1974, s 22 or at common law". This was incorrect. But his Honour went on to reach conclusions on the assumption that his "interpretation of the law on this point" is wrong.

(a) Statutory qualified privilege 18 The trial judge found that the appellants did not intend to convey the imputations in fact conveyed, but that -

" … they cannot establish that they believed in the truth of the imputations which they did intend to convey and that, even if they did, their conduct was not reasonable, because the personal attack on Mr Sadler, and on his experience, and the general attack on the management of Pubmart was unnecessary to protect themselves against any criticism. Under the Commonwealth Trade Practices Act s 53 and the Fair Trading Act (NSW) s 45, it is a criminal offence, in certain circumstances, to make false and misleading statements about the price of goods or services. The first imputation that I found to have been conveyed accuses the whole of the management of Pubmart in general, and Mr Sadler in particular, he being a part of that management, of committing a criminal offence. To make such an accusation, in the course of responding to what was clearly a publication designed to attract commercial support, is, in my view, unreasonable" 19 If the conclusion be correct that, even if the appellants believed in the truth of the imputations they did intend to convey, their conduct was not reasonable, the defence of statutory qualified privilege will fail. In that event, it will not matter whether questions asking Mr Begg whether he believed statements in the letter were true were wrongly disallowed. 20 As Davies AJA demonstrates, in the result Mr Begg was able to and did explain what he meant by the letter and to support it: indeed, early in his reasons the trial judge said in terms that Mr Begg gave evidence that he believed that the content of his letter was true. There was much more than the one passage from Mr Begg's evidence which Davies AJA has set out. A reading of the transcript shows that the appellants were not precluded from putting forward anything they wished in support of the reasonableness of their conduct. It does not matter, because the complaint about rejection of the questions is of no consequence. 21 What were the grounds for the trial judge's conclusion? It must be remembered that the trial judge was addressing two imputations, imputation 5(a) concerning deliberately misleading statements and imputation 6(a) concerning Mr Sadler's experience and ability. When, as I agree is the case, imputation 5(a) was not to be found in the letter, it must be asked what effect that has on the conclusion. 22 Clearly enough one ground, seen in the passage from the trial judge's reasons set out above, was that it was unreasonable in the circumstances to accuse Pubmart management, and Mr Sadler in particular, of committing a criminal offence. This was no doubt connected with his Honour's finding in favour of imputation 5(a), and went to that imputation. I agree with Davies AJA that the accusation does not fairly arise from the letter. 23 Another possible ground, to be seen in the preceding paragraphs of the trial judge's reasons, was to the effect that Mr Begg could not reasonably have seen Pubmart's opinion as to the proper treatment of the 3 per cent finance and administration charge as misleading - he could reasonably only have recognised a genuine difference of opinion. His Honour's reasons as to this are, with respect, not well expressed, and the appellants subjected them to some criticism. The matter went more to reasonableness in relation to imputation 5(a) than to reasonableness in relation to imputation 6(a), and in any event in the passage which I shortly set out was effectively put aside in what I regard as the key ground for the conclusion as to unreasonable conduct (see "while Bottlemart and Mr Begg may have considered … "). 24 The trial judge said -

"Further, while Mr Begg may have thought Mr Sadler to have been wrong in his price comparison, he could not reasonably or honestly have believed that Mr Sadler lacked experience in any aspect of the wholesale marketing of liquor. He was aware that Mr Sadler had been working in the trade for many years at a responsible level. On several occasions in his evidence, Mr Begg spoke of his 'instructions' not to include the 3% charge in the wholesale price. This was vital if that device for avoiding sales tax and licence fees was to be maintained. Mr Begg knew this policy, and put it ahead of whatever his personal beliefs might have been. He maintained this view no matter what reason, or his own personal views might have entailed. I conclude that, while Bottlemart and Mr Begg may have considered that the comparison of wholesale prices made by Mr Sadler was wrong, and should be answered, when Mr Begg published the letter on 2 May 1995, this was an instrument of deliberate commercial strategy, motivated entirely be reasons of commercial gain. The strategy and primary intention of each of the defendants was not to compare prices, but to attack the credibility, veracity and competence of Mr Sadler, personally, as the officer of Pubmart most likely to have direct contact with hoteliers. As one witness put it, reporting a conversation with another hotelier, this was 'playing the man, not the ball'. What was published of Mr Sadler was designed as a personal attack to discredit him in the estimation of hoteliers and others in the liquor industry. I do not accept Mr Begg's assertion that this was not his intention. It is the only reasonable construction that can be placed on what was published. It therefore satisfies the tests for malice laid down by the Court of Appeal in McKenzie v Morgan Holdings Pty Ltd (1990) 20 NSWLR 42, 51-53; King and Mergen Holdings Pty Ltd v McKenzie (1991) 24 NSWLR 305, 316 and Hanrahan v Ainsworth (1990) 22 NSWLR 73. The defendants' publications were therefore not protected by the common law defence of qualified privilege." 25 The appellants rightly said that having a commercial strategy and an eye to commercial gain were not unreasonable, rather the reverse. But the point of this passage is the nature of the strategy. And, although it included attacking the credibility and veracity of Mr Sadler, recalling imputation 5(a), the strategy also included attacking his competence, and at its heart was that there was a personal attack on Mr Sadler. This, in his Honour's view, went beyond what was necessary to protect Bottlemart, and was unreasonable. 26 Notwithstanding some difficulties in the trial judge's reasons, and the need to separate out the effect of a finding (now to be reversed) in favour of imputation 5(a), in my view the rejection of the defence of statutory qualified privilege should be upheld. I can now take up the reasons of Davies AJA in this respect. Mr Begg did not attempt to justify what was said about Mr Sadler's lack of experience and inability to make a true statement in relation to comparative pricing of wholesale liquor in New South Wales. He did not believe in the truth of the imputation, in the sense of the matter of fact, found to have been conveyed. The trial judge found that he could not reasonably or honestly have believed that Mr Sadler lacked experience. The personal attack on Mr Sadler in this respect was not warranted, and the conduct of the appellants was not reasonable in respect of imputation 6(a).

(b) Common law qualified privilege 27 Although, as explained by Davies AJA, the trial judge did not state the law satisfactorily, he effectively came to the question of malice and concluded that the publication was actuated by malice in the sense used in this area of the law. The passage from the trial judge's reasons last set out expresses that conclusion. 28 What I have said in relation to statutory qualified privilege need not be repeated. Even taking imputation 5(a) out of the picture, the trial judge found, and was entitled to find, that Mr Begg could not reasonably or honestly have believed that Mr Sadler lacked experience, and the personal attack on Mr Sadler as to his experience and ability, not justified in the evidence of Mr Begg, of itself warranted the conclusion. In my view malice was established, and the common law defence fails. 29 The concluding additional remarks concern retrial. The appellants accepted that this Court could not reassess damages, if partial success on appeal left that to be done. Mr Sadler invited the Court to reassess damages in that event, and to relist the appeal for further submissions going to damages. In aggreeing with Davies AJA that a retrial is necessary, rather than assessment on appeal, I have not overlooked the invitation. A retrial as to damages is regrettable, but I do not see how, when imputation 5(a) must be taken out of the picture, this Court could reassess. The circumstances are quite different from those in Humphries v TWT Ltd (1993) 120 ALR 693, to which Mr Sadler drew our attention. The only satisfactory way is for the parties to relitigate damages on the basis of liability for imputation 6(a). 30 I agree with the orders proposed by Davies AJA. 31 DAVIES AJA: This is an appeal from the judgment in defamation proceedings of a Judge of the District Court of New South Wales, Goldring DCJ ("the trial Judge"), and from an interlocutory ruling of a Judge of the Supreme Court of New South Wales, Levine J, who held that the matter complained of was capable of carrying the imputations pleaded in paragraphs 5(a) and 6(a) of the Statement of Claim. After the ruling was given by Levine J, the case was transferred for trial to the District Court of New South Wales. It proceeded in that Court before a judge alone. 32 On the hearing of the appeal, Mr T K Tobin QC, with him Mr M Lynch of counsel, appeared for the appellants. Mr B R McClintock SC, with him Mr R C Titterton of counsel, appeared for the respondent. 33 The first appellant, Liquor Marketing Group Limited ("Bottle Mart"), and the second appellant, Mr Ernie Begg, the Manager of Bottle Mart, were the defendants below. They were ordered to pay damages of $80,000 arising out of a letter which Mr Begg had sent to hoteliers on 2 May 1995. The respondent, Mr Gary Sadler, who was the plaintiff below, was the General Manager of Pubmart, a division of Independent Liquor Group Co-operative Limited. Bottle Mart and Pubmart each carried on business in or in connection with the supply of liquor by wholesale to liquor outlets. Bottle Mart was associated in practice with Australian Liquor Marketers Pty Limited ("ALM"), a company which itself was associated with the Davids Holdings Limited group. Bottle Mart did not supply liquor to hotels, but acted as an intermediary between the hotels and the suppliers, including ALM. It published a catalogue every two months in which prices and other information concerning the lines available were set out. Pubmart held a licence to supply liquor by wholesale and it supplied liquor directly to retailers, who included both liquor stores and hotels. Pubmart, like Bottle Mart, published a bi-monthly catalogue. 34 Bottle Mart administered a scheme whereby a 3 per cent finance and administration charge was levied on the invoice price of all goods charged. The amount was invoiced separately and was not included in the catalogue price. It was charged on all purchases other than those made on the basis of cash within seven days of delivery. Evidence was given that, during the period April/May 1995, only about ten out of the three hundred hotels who were members of the Bottle Mart group paid on a cash basis. The effect of the arrangement was that the 3 per cent charge was not taken into account in assessing the cost of the liquor, thereby limiting the sales tax and licence fees payable. The view of Pubmart, and also the view of the Liquor Administration Board, as expressed in evidence at the trial, was that the 3 per cent was part of the cost of the goods and should be taken into account for the purpose of assessing liquor licence fees. Bottle Mart, however, acted upon advice given by Mr Anthony Whealy QC, that the 3 per cent charge was a finance and administration charge and was not part of the cost of the goods for the purpose of sales tax or liquor licence fees. 35 Pubmart took the view that Bottle Mart members were obtaining an unfair advantage by this arrangement. On 24 April 1995, Mr Sadler wrote the following letter which was sent to both Pubmart and Bottle Mart members:

"To the Hotelier, Over the past couple of months a number of incorrect claims in relation to Bottle Mart vs Pubmart pricing have been made. To report the facts accurately we have compiled a comparison report from Pubmart's March/April Catalogue compared to the Bottle Mart March/April catalogue. The products compared were from the Pubmart's top 100 selling lines for March including the 20Ltr. bulk Spirit range. In order to deliver the facts, that is to compare 'apples to apples' Pubmart's prices are reflected without a 3% Service Fee as is conveniently done by Bottle Mart. Out of the 100 products surveyed Pubmart were cheaper on 85 with Bottle Mart cheaper on 15. Some Examples .. Jim Beam Bourbon 20 Ltr. $24.92 per drum cheaper from P.mart Lindemans Casks 4 Ltr 70c. per unit " " " Stanley Casks 4 Ltr 25c. per unit " " " Berri Casks 5 Ltr 26c. per unit " " " Bacardi 20 Ltr $6.61 per drum " " " Bells Scotch Wsk. 20 Ltr $6.00 per drum " " " and the list goes on! If you would like to expand on the comparison even further and check Bottle Mart Specials prices as compared to Pubmart Specials prices for the same months (March/April) you will find that Pubmart beats Bottle Mart pricing hands down. The question is .. Do you want to continue to pay a lot more for your products?" 36 Mr Begg, as Manager of Bottle Mart, responded on 2 May 1995 with the subject letter to hoteliers:

"Reference is made to the contents of a recent letter dated 24th April last, whereby Pubmart are endeavouring to discredit the credibility of the Management of Bottle Mart regarding incorrect pricing claims in the March/April period. Firstly, to use a comparison report of Pubmart so called 100 top selling lines from 68 active Hotels, whereas our membership exceeds 460 Hotels illustrates the depth of Mr Sadler's experience. Remembering also their sales statistics information is drawn from their warehouse which supplies liquor stores rather than Hotels. To say of the 100 products (actually 94) surveyed Pubmart were cheaper by backing out a pricing factor again, proves his lack of comprehension in presenting the true picture and when comparing true catalogue comparisons, there are numerous inconsistencies. To present a true comparison, one needs to review pricing over a period of 5-6 months including promotional deals rather than a 2 month period. The real issue is that Pubmart members are defecting to Bottle Mart because of the service we offer to our members, credit terms, low cartage, credit card rebates, EFTPOS and many other service benefits and acceptable gross profit margins , keen price points with a product range that consumer measures in determining his needs, is the reason why their membership is declining. The management of Liquor Marketing Group has been servicing the hotel industry for the past 18 years and our Hotel membership exceeds 460 Hotels and is the largest Hotel Group in Australia. Our success is measured by having a strong management in the field and a Board of Directors who are Active and Successful Hoteliers . Should you wish to pursue Pubmart claims , we would be only too happy to call at a convenient time rather than you receive correspondence which is of a misleading nature. Bottle Mart growth in membership and turnover in the past 12 months is the 'Real Issue' and misleading information circulated by Pubmart Management is not in the best interest in the marketing of your Hotel particular in off premise sales. My recommendation is leave it to the experts who have a successful record of achievements in being the No.1 Hotel Group in Australia ." 37 Mr Sadler then instituted defamation proceedings. After amendment, the pleaded imputations read as follows:

"5. The matter complained of conveyed the following imputation which is defamatory of the Plaintiff: (a) The Plaintiff deliberately published misleading statements to hoteliers in the State of New South Wales to discredit the management of Bottle Mart. 6. The matter complained of in its natural and ordinary meaning together with the particularised extrinsic facts conveys the following imputation of the Plaintiff which is defamatory of him, namely: (a) Because of the Plaintiff's lack of experience in the sale of liquor to hotels in New South Wales he lacks the ability to make a true statement in relation to comparative pricing of wholesale liquor in New South Wales. PARTICULARS OF EXTRINSIC FACTS (a) The Plaintiff was at the date of publication the general manager of 'Pub Mart' which carried on business as seller of wholesale liquor." 38 The trial Judge found the imputations as pleaded to be defamatory and to have been in fact conveyed to the persons to whom they were published. The trial Judge rejected the defences of qualified privilege at common law and under s 22 of the Defamation Act, 1974. His Honour found that Bottle Mart and Mr Begg had admitted in their answers to interrogatories that they did not believe in the truth of the imputations as pleaded, that the statements made in the letter were excessive and went beyond what was necessary to respond to Mr Sadler's letter and, in the case of the common law privilege, that the privilege was defeated by actual malice. His Honour awarded aggravated compensatory damages and costs. At a subsequent hearing, the trial Judge added a sum for interest that he had previously overlooked, amended some words in his reasons for judgment which he considered not to have reflected his view, and ordered that there be costs on a solicitor and client basis after 16 July 1998, the date of a letter which his Honour considered to be a "Calderbank" letter.

Imputation 5(a) 39 It was submitted by Mr Tobin that the imputation that, "The Plaintiff deliberately published misleading statements to hoteliers in the State of New South Wales to discredit the management of Bottle Mart" was not, as a matter of law, to be drawn from and was not conveyed by the letter of 2 May. There was no evidence from hoteliers that they understood the letter in the sense alleged in the pleaded imputation. I agree with this submission. In my opinion, the letter cannot reasonably be read as conveying the message that Mr Sadler deliberately disseminated misleading information. As a whole, the letter attributed Mr Sadler's information to his lack of competence to deal with the subject matter of which he was writing. Paragraph 2 of the letter referred to "the depth of Mr Sadler's experience". Paragraph 3 referred to "his lack of comprehension" and the final paragraph recommended hoteliers to "leave it to the experts". The general tenor of the letter was inconsistent with the imputation pleaded. 40 The letter certainly conveyed an imputation of deliberate intent in the statement that "Pubmart are endeavouring to discredit the credibility of the Management of Bottle Mart" and the word "misleading" was used twice. Mr McClintock submitted that it was "the broad impression conveyed by the libel" - the words used by Lord Devlin in Lewis v Daily Telegraph Ltd [1964] AC 234 at 285 - that mattered rather than the precise meaning of particular words or sentences. Mr McClintock referred to the illustration given by Lord Devlin at 285 that, "loose talk about suspicion can very easily convey the impression that it is a suspicion that is well founded." In my opinion, however, the letter as a whole conveyed the impression that Mr Sadler's letter of 24 April was attributable to Mr Sadler's lack of understanding, not to a deliberate intent to mislead. 41 Mr McClintock submitted that Mr Begg's letter would be understood to be sarcastic, as intending to convey a deliberate intent to mislead on Mr Sadler's part, although it referred to his lack of comprehension and lack of experience. I do not consider that the letter is reasonably capable of being read in the way suggested or that it, in fact, conveyed the imputation. 42 Accordingly, this ground of defamation should have been rejected.

Imputation 6(a) 43 The imputation that "Because of the Plaintiff's lack of experience in the sale of liquor to hotels in New South Wales he lacks the ability to make a true statement in relation to comparative pricing of wholesale liquor in New South Wales" was considered by Levine J to be anodyne in terms and to be capable of being defamatory only as a true innuendo. He gave leave to amend the original pleading. The amendment, which does not appear to have been referred back to his Honour, added the particular of extrinsic fact that, "The Plaintiff was at the date of publication the general manager of 'Pub Mart' which carried on business as seller of wholesale liquor". Mr Tobin submitted that the imputation as pleaded remained anodyne and that a statement that a person lacked experience and lacked ability to make a true statement in relation to comparative pricing of wholesale liquor was not in itself defamatory. Mr Tobin submitted that, in order to plead a defamatory innuendo, it is necessary to express a defamatory meaning arising out of the extrinsic fact that is pleaded. Mr Tobin submitted that a person is not disparaged by his or her lack of experience and that, as Begg J observed in Dawson Bloodstock Agency Pty Ltd v Mirror Newspapers Ltd [1979] 1 NSWLR 16 at 18:

"… it is now no longer actionable merely to publish an imputation of a person by which he 'is likely to be injured in his profession or trade'; … the common law notion of 'disparaging imputation' referred to by Mason J in the Sungravure case (1975) 134 CLR 1 at 24 is now the relevant law." 44 I agree with Mr Tobin that, as a matter of strict pleading, the imputation should have been rephrased so as to reflect upon Mr Sadler's competence in relation to his position as General Manager of Pubmart. Nevertheless, I consider that it is too late to raise what is in essence a pleading point. The imputation as pleaded, taking paragraph 6(a) of the Second Amended Statement of Claim as a whole, clearly enough communicated what was alleged. It would be wrong to allow an appeal on this point when the form of the pleading caused no significant embarrassment and the problem could have been resolved at the trial.

Qualified Privilege Under Section 22 of the Defamation Act 45 Section 22(1) of the Defamation Act provides:

Where, in respect of matter published to any person: (a) the recipient has an interest or apparent interest in having information on some subject,

(b) the matter is published to the recipient in the course of giving to him information on that subject, and

(c) the conduct of the publisher in publishing that matter is reasonable in the circumstances, there is a defence of qualified privilege for that publication. 46 It is not in dispute that the occasion for the letter of 2 May was one in which Bottle Mart and Mr Begg had a duty to respond to hoteliers with respect to the matters raised by Mr Sadler in his letter of 24 April. The matters raised by Mr Sadler called for an answer. They were matters in respect of which both Bottle Mart and hoteliers had an interest: see Adam v Ward [1917] AC 309. 47 However, the issue arises as to whether the conduct of the appellants in publishing the matter complained of was reasonable in the circumstances. On this issue, the trial Judge considered that the conduct of the appellants was not reasonable. His Honour relied, in particular, upon the following passage from the reasons of Hunt AJA in Morgan v John Fairfax & Sons Ltd (No. 2) (1991) 23 NSWLR 374 at 387-388:

"In my opinion, all of those cases support the following propositions in relation to the requirement of s 22(1)(c) that the conduct of the defendant in publishing the matter was reasonable in the circumstances: (1) The conduct must have been reasonable in the circumstances to publish each imputation found to have been in fact conveyed by the matter complained of. The more serious the imputation conveyed, the greater the obligation upon the defendant to ensure that his conduct in relation to it was reasonable. Of course, if any other defence (such as truth or comment) has already been established in relation to any particular imputation found to have been so conveyed, it is unnecessary to consider the reasonableness of the defendant's conduct in relation to the publication of that particular imputation. (2) If the defendant intended to convey any imputation in fact conveyed, he must (subject to the exceptional case discussed in Barbaro's case, and perhaps also that discussed in Collins v Ryan ) have believed in the truth of that imputation. (3) If the defendant did not intend to convey any particular imputation in fact conveyed, he must establish: (a) that (subject to the same exceptions) he believed in the truth of each imputation which he did intend to convey; and

(b) that his conduct was nevertheless reasonable in the circumstances in relation to each imputation which he did not intend to convey but which was in fact conveyed. If, for example, it were reasonably foreseeable that the matter complained of might convey the imputation which the jury finds was in fact conveyed, it will be relevant to the decision concerning s 22(1)(c) as to whether the defendant gave any consideration to the possibility that the matter complained of would be understood as conveying such an imputation, as will be his belief in the truth of that particular imputation and what steps he took to prevent the matter complained of being so understood: Evatt v John Fairfax & Sons Ltd at 13-14; Makim v John Fairfax & Sons Ltd (1990) 5 BR 196 at 209; see also Wright v Australian Broadcasting Commission at 712 (whether the defendant 'knew whether he was likely to convey a misleading impression'); Austin v Mirror Newspapers Ltd (at 362) (Privy Council). (4) The defendant must also establish: (a) that, before publishing the matter complained of, he exercised reasonable care to ensure that he got his conclusions right, (where appropriate) by making proper inquiries and checking on the accuracy of his sources;

(b) that his conclusions (whether statements of fact or expressions of opinion) followed logically, fairly and reasonably from the information which he had obtained;

(c) that the manner and extent of the publication did not exceed what was reasonably required in the circumstances; and

(d) that each imputation intended to be conveyed was relevant to the subject about which he is giving information to his readers. The extent to which the inquiries referred to in par (4)(a) should have been made will depend upon the circumstances of the case, in particular the nature and the source of the information which the defendant has obtained, and whether the position, standing, character and opportunities of knowledge of the informant (as perceived by the defendant himself) are such as to make his belief in the truth of that information a reasonable one: cf South Suburban Co-operative Society Ltd v Orum [1937] 2 KB 690 at 700-701; White & Co v Credit Reform Association & Credit Index Ltd [1905] 1 KB 653 at 658, 660; see, also, Hansen v Border Morning Mail Pty Ltd (1987) 9 NSWLR 44 at 55-56. It is necessary to keep in mind that each of the matters referred to in par (4) are relevant to the reasonableness of the defendant's conduct; they do not raise questions independently of that issue. This is important in relation to the functions of judge and jury. If, for example, there is a dispute as to whether the defendant made a particular inquiry, that dispute is to be decided by the jury. But if there is a dispute as to whether reasonable conduct in the circumstances required inquiries to be made or as to whether the inquiries in fact made were sufficient, those disputes are to be decided by the judge as part of the ultimate question as to whether the defendant's conduct was reasonable in the circumstances."

It is not in dispute that the trial Judge was correct to apply these observations of Hunt AJA. 48 In his judgment on this issue, the trial Judge was influenced by the fact that Bottle Mart, in an answer to interrogatories, conceded that it did not believe it to be true that "because of the Plaintiff's lack of experience in the sale of liquor to hotels in New South Wales he lacked the ability to make a true statement in relation to co-operative (sic) pricing of the wholesale liquor in New South Wales". Bottle Mart's answers to interrogatories were sworn by Mr Begg. 49 It thus became necessary for the defence to establish that Bottle Mart and Mr Begg did not intend to convey the imputation in fact conveyed and, in accordance with paragraph (3) of the passage from Hunt AJA's reasons, that they believed the truth of the imputations which were intended to be conveyed by the letter and that the conduct in writing the letter was reasonable in relation to each imputation which they did not intend to convey but which was in fact conveyed. The trial Judge found that the appellants did not intend to convey the imputation in fact conveyed, but that they had not established that they believed in the truth of the imputations which they did intend to convey - "and that, even if they did, their conduct was not reasonable, because the personal attack on Mr Sadler, and on his experience, and the general attack on the management of Pubmart was unnecessary to protect themselves against any criticism". 50 Mr Begg gave this evidence, inter alia:

"Q. Did you publish your letter, Exhibit A, with an attempt to injure Mr Sadler? A. No." "Q. What meaning did you intend to convey by the letter, which is Exhibit A, Mr Begg? A. The, what I endeavoured to put in place, in writing, was that I believed that the letter that was circulated in April, that it did, was misleading, in essence. Misleading to the extent that the pricing that's been discussed was wrong, incorrect. I think it was misleading, because the comparison didn't apply to all members of Bottle Mart. I think it was misleading in the fact that there are seven day terms to some of our members. It was misleading to say that it was their so called 100 top selling lines, which actually were the so called 100 top selling lines of their total business, being liquor stores and hotels, and therefore I felt it was somewhat misleading and it needed some correction and the only way I could indicate that was to, in broad terms, try to explain to the members, that there was a need for them to review, and if they wished to pursue the Pubmart claims, that we would be only too happy to take it up with them personally. There certainly was no malice involved, it was purely a letter in answer to a personalised letter sent to our members." 51 This answer, however, did not provide any explanation or justification for the comments which the letter of 2 May made about Mr Sadler. The trial Judge found that those comments about Mr Sadler, which Mr Begg made no attempt to justify and which he said in the answer to interrogatories he did not believe to be true, were excessive and were not reasonable. That conclusion was fairly open to his Honour. 52 Mr Tobin submitted that, in view of Mr Sadler's letter of 24 April, a robust reply on the part of Bottle Mart was called for. Mr Tobin relied on several passages in Mr Sadler's cross-examination including the following:

"Q. '-- show an artificially low LUC (landed unit cost) then later they charge a three per cent monthly service fee on all purchases made', now is it fair to say that you were asserting that Bottle Mart was deceiving its members by falsely pretending that the prices they would sell the products at were cheaper than in fact they really were? A. That is what we were trying to show yes. Q. It was a false pretence which you were alleging against Bottle Mart in this publication? A. Yes … Q. Did you intend to convey that message that I put to you previously, namely that Bottle Mart was intentionally deceiving its members as to the true prices their liquor was available? A. That's right." 53 One can readily concede that Mr Sadler's letter called for a strong response. The letter of 2 May was strong, as one would expect, but it was not strong on factual information. It referred to "a pricing factor" but did not expressly refer to the 3 per cent service fee or attempt to justify it. Much of the strength of the letter came from the attack upon Mr Sadler's experience and upon his ability to make a true comparison. As Mr Begg and Bottle Mart did not attempt to justify the truth of what was said about Mr Sadler, the trial Judge was entitled to find that the publication of the letter of 2 May was not reasonable. I cannot agree with Mr Tobin's submission that the letter of 2 May was "a temperate rebuttal of the 'Pubmart' assertions".

Qualified Privilege Under Common Law 54 The trial Judge summarised the common law defence as follows:

"To summarise the position at common law, as I see it, defamatory material is published on privileged occasion if it is made a. under circumstances where the person making the publication has a belief in the truth of what is published, and b. it is reasonable for him to make the publication either - i) to respond to some attack made upon him (the self defence publication), or

ii) to meet an argument or criticism when such matter is published under a duty or obligation, and those to whom it is published have a duty, interest or obligation to receive the publication." 55 This was not a correct exposition of the common law. The person making a defamatory publication does not have to establish, in the first instance, either that he believed in the truth of what was published or that it was reasonable for him to make the publication. The true position was stated by Lord Atkinson in Adam v Ward [1917] AC 309 at 334, where his Lordship said: "It was not disputed, in this case on either side, that a privileged occasion is, in reference to qualified privilege, an occasion where the person who makes a communication has an interest or a duty, legal, social, or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. This reciprocity is essential. Nor is it disputed that a privileged communication - a phrase often used loosely to describe a privileged occasion, and vice versa - is a communication made upon an occasion which rebuts the prima facie presumption of malice arising from a false and defamatory statement prejudicial to the character of the plaintiff, and puts the latter on proof that there was malice in fact: per Parke B, Wright v Woodgate 2 CM&R 573, 577. Nor that the question of whether the occasion is a privileged occasion or not is, if the facts be not in dispute, or if in dispute have been found by the jury, a question of law to be decided by the judge at the trial. Nor yet that a person making a communication on a privileged occasion has not, in the first instance and as a condition of immunity, to prove affirmatively that he honestly believed the statement made to be true, his bona fides being in such a case always presumed: Jenoure v Delmege [1891] AC 73, 79; Clark v Molynuex (1877) 3 QBD 237, 249." 56 The privilege may not attach, in a particular case, to defamatory statements that are not relevant to the occasion. In Bellino v Australian Broadcasting Corporation (1996) 185 CLR 183, Dawson, McHugh and Gummow JJ said at 228:

"It is true that, at common law, privilege only attaches to those defamatory imputations that are relevant to the privileged occasion. Where a potentially privileged communication consists partly of matters relevant to the privilege and partly of matters that are not relevant, qualified privilege only attaches to that part which is relevant to the occasion." 57 Once qualified privilege attaches, because the defamatory material was communicated on a privileged occasion, the defence will succeed unless it is established by the defamed person that the communication was actuated by malice, a concept which comprehends improper motive: see Horrocks v Lowe [1975] AC 135 at 149; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 572. 58 The concept of malice for the purposes of defamation law was fully considered in Horrocks v Lowe. Nothing would be achieved by setting out all the valuable comments made by their Lordships in that case. However, it is worth noting the following comments of Lord Diplock at 151:

"But where, as in the instant case, conduct extraneous to the privileged occasion itself is not relied on, and the only evidence of improper motive is the content of the defamatory matter itself or the steps taken by the defendant to verify its accuracy, there is only one exception to the rule that in order to succeed the plaintiff must show affirmatively that the defendant did not believe it to be true or was indifferent to its truth or falsity. Juries should be instructed and judges should remind themselves that this burden of affirmative proof is not one that is lightly satisfied. The exception is where what is published incorporates defamatory matter that is not really necessary to the fulfilment of the particular duty or the protection of the particular interest upon which the privilege is founded. … As regards irrelevant matter the test is not whether it is logically relevant but whether, in all the circumstances, it can be inferred that the defendant either did not believe it to be true or, though believing it to be true, realised that it had nothing to do with the particular duty or interest on which the privilege was based, but nevertheless seized the opportunity to drag in irrelevant defamatory matter to vent his personal spite, or for some other improper motive. Here, too, judges and juries should be slow to draw this inference." 59 The trial Judge cited this and other passages from Horrocks v Lowe. His Honour concluded from the terms of the letter of 2 May and from Mr Begg's evidence that the comments made in respect to Mr Sadler were irrelevant to the occasion and excessive and that they were actuated by actual malice or spite. There was adequate evidence to justify this finding and Mr Begg did not attempt to justify the statements he made about Mr Sadler. Mr Begg denied that he published his letter in an attempt to injure Mr Sadler or to damage the reputation of Pubmart in New South Wales and he denied that when he published his letter he was trying to discredit Mr Sadler in his capacity as General Manager of Pubmart. Yet the letter made hurtful comments about Mr Sadler, his experience and his abilities and the comments were made in the context that the hoteliers to whom the letter was written knew of Mr Sadler's position as General Manager of Pubmart, for it was his letter of 24 April to the hoteliers which had provoked the response of 2 May. The trial Judge considered that, being aware that Mr Sadler had been working in the trade for many years at a responsible level, Mr Begg could not reasonably or honestly have believed that Mr Sadler lacked experience in any aspect of the wholesale marketing of liquor. His findings included:

"The strategy and primary intention of each of the defendants was not to compare prices, but to attack the credibility, veracity and competence of Mr Sadler, personally, as the officer of Pubmart most likely to have direct contact with hoteliers. As one witness put it, reporting a conversation with another hotelier, this was 'playing the man, not the ball'. What was published of Mr Sadler was designed as a personal attack to discredit him in the estimation of hoteliers and others in the liquor industry. I do not accept Mr Begg's assertion that this was not his intention. It is the only reasonable construction that can be placed on what was published. It therefore satisfies the tests for malice laid down by the Court of Appeal … ."

It was open to the trial Judge to make a finding of malice. The appeal on this ground must fail. 60 In my opinion, his Honour approached the issues correctly, notwithstanding that his statement of the law was unsatisfactory in several respects.

Natural Justice 61 In examination in chief of Mr Begg, the following question was asked:

"Q. Can I take you to Exhibit A (the letter of 2 May), Mr Begg. In the first paragraph you say 'reference is made to the contents of a recent letter dated 24 April last, whereby Pubmart are endeavouring to discredit the credibility of the management of Bottle Mart regarding incorrect pricing claims in the March/April period', did you believe that the statement made in that paragraph was true?

This question was objected to by counsel for Mr Sadler. The objection was put on a number of grounds. It was said by counsel that it was not relevant whether Mr Begg believed that statement to be true, that it would not assist the case to go through each of the statements in the letter to ascertain if Mr Begg believed them to be true, that the question was misconceived for it was not directed to the imputations conveyed by the letter and, finally, that Mr Begg should not be allowed to give such evidence because Bottle Mart had refused to answer interrogatories which asked what imputation or imputations Bottle Mart intended to convey by the letter and whether Bottle Mart believed that imputation or imputations to be true. Counsel for Bottle Mart and Mr Begg sought to have the question allowed as relevant to the defence of common law qualified privilege. 62 The debate about the allowance of the question was a very confused one and I shall not attempt to summarise it. Ultimately, his Honour disallowed the question, although his Honour said that he would exercise his discretion against disallowing the question on the ground of prejudice. Counsel for Bottle Mart and Mr Begg stated that he would have sought to ask the same question about the truth of other particular matters in the letter but took it that the trial Judge was against the allowance of such questions. His Honour said that he was. 63 The trial Judge did, however, indicate that, in order to establish the defence of qualified privilege, the defendants were entitled to ask questions going to the issue of what was reasonable in the circumstances and that evidence as to what the defendants intended to convey in the material complained of was essential. His Honour indicated that he would allow a question to that effect when the Court resumed at 2.00pm. On the resumption of the hearing, the examination in chief commenced and one of the early questions put to Mr Begg was, "What meaning did you intend to convey by the letter, which is Exhibit A, Mr Begg?". I have already set out Mr Begg's response to that question. 64 Mr Tobin has submitted that, by the rejection of the question I have mentioned, the trial Judge prevented Mr Begg from giving relevant and vital evidence. However, in my view, that is not so. As the answers to the interrogatories had gone into evidence, as Bottle Mart and Mr Begg chose not to retract the answer that Bottle Mart did not believe in the truth of the two imputations which were pleaded and as the imputation pleaded in paragraph 6(a) arose from the terms of the letter, it was necessary for the defence of Bottle Mart and Mr Begg that Mr Begg should give evidence as to what were the imputations which he intended to convey and whether or not he believed in their truth. The relevant question on that issue was not put until after the trial Judge had ruled against the earlier question as to Mr Begg's belief in the truth of the statement that, "Pubmart are endeavouring to discredit the credibility of the Management of Bottle Mart". That question and the foreshadowed questions may have been strictly admissible but their disallowance did not disadvantage the defence in any significant way. 65 It does not seem to me that Mr Begg was shut out from giving useful relevant evidence. He was not precluded from answering any question as to what he intended to convey by the letter and whether or not he believed in the truth of what he intended to convey. Mr Begg was examined and cross-examined on the issues relating to comparative pricing, including the issue of the 3 per cent service fee. His view on all those matters became perfectly clear by the end of the evidence. 66 Mr Begg also gave this evidence:

"Q. Were there other meanings which you intended to convey, which you're able to now identify? By the letter, apart from the misleading character which you've already described? A. I think, fundamentally what I was endeavouring to do in paragraph 3 was that I don't believe there was a true indication of how the pricing was formulated and the application that was presented wasn't true and therefore that and many other numerous inconsistencies contained in the letter, made me feel that I'd need to go into this matter in more depth. … Q. Why did you write the letter which is Exhibit A? A. I felt there was a need to correct the misleading nature of the letter in that, in concise terms. The selection of the range I believe was too narrow. I believe the information was drawn from was too narrow. I believe the pricing application was incorrect. I believe the understanding of the pricing lacked the real true manner that the pricing was calculated. The numerous inconsistencies in the, in transposing the information from catalogue to catalogue, that is the pricing. The spelling, knowing that the actual 94 items listed weren't true, in precise terms, and I felt it was only right that I should at least draw the members attention to those aspects and in doing so, if they had any further claims in this aspect that we're only too happy to discuss with them." 67 In my opinion, Mr Begg was given an adequate opportunity to express his case. In these circumstances, I am satisfied that there was no breach of the rules of natural justice.

Damages 68 It was submitted by counsel for the appellants that the award of $80,000 was excessive and, furthermore, in the circumstances of this case, an award of aggravated damages was not justified. Having regard to the finding that the imputation claimed in paragraph 5(a) of the Second Amended Statement of Claim did not arise from the subject communication and was not in fact communicated, it is obvious that the matter of damages will have to go back for a retrial. Section 107 of the Supreme Court Act, 1970 limits the power of the Court to make a reassessment. In the present case, this Court has not seen Mr Sadler and is not in a position to assess the impact of the defamatory material on him or to assess the damages which he has suffered. 69 A number of minor matters were mentioned by Mr Tobin which do not, in my opinion, detract from the substantial findings made by the trial Judge but would be relevant on an assessment of damages:

(a) In the course of his reasons on the issue of qualified privilege, the trial Judge found that, in Mr Begg's letter of 2 May, "the first imputation that I found to have been conveyed" , that is, imputation 5(a), accused the whole of the management of Pubmart in general, and Mr Sadler in particular, of committing a criminal offence, namely, making false and misleading statements about the price of goods or services in breach of s 53 of the Trade Practices Act, 1974 (Cth) and s 44 of the Fair Trading Act, 1987 (NSW). His Honour said that "to make such an accusation, in the course of responding to what was clearly a publication designed to attract commercial support, is, in my view, unreasonable" . This finding raises an imputation which was not pleaded and which, in my opinion, does not fairly arise from the letter of 2 May.

(b) In the course of his reasons, under the heading of "Damages" , the trial Judge said:

"The damage to his reputation caused by the matter complained of, in my view, would significantly impair his ability to find other employment in the hotel industry. It might also impair the chances he had for promotion in his particular position. The law of defamation does not compensate for injury to reputation, but it does compensate for economic loss , such as loss of potential earning capacity, and it is this capacity which I find has been damaged by the publication complained of in this case. That is a factor in assessing damages which is in addition to the damage that the victim of defamation suffers: see Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225 per Mahoney JA at 255." (emphasis added)

However, no claim for future economic loss of the diminution of earning capacity had been pleaded or particularised, nor was evidence of it given. What was relied upon was damage to Mr Sadler's reputation.

After the trial, there was an application to amend the judgment under the slip-rule, in Pt 17 r 10.1 of the District Court Rules . One of the matters sought to be varied was the passage which I have emphasised above. The trial Judge considered the passage set out in his reasons did not reflect his intention. He ruled that the reasons should be amended to substitute the following words:

"The law of defamation compensates for injury to reputation rather than for economic loss as such."

Unfortunately, the substituted words do not fit well with the remainder of the passage.

I should add on this aspect that I think the slip-rule refers to a judgment or order or certificate and not to the reasons for judgment. I would accept, nevertheless, that in appropriate circumstances, it may be open to a judge to amend his reasons for judgment if it is ascertained after judgment that they did not reflect the judge's intention. In the present case, however, the substituted words are obviously not satisfactory.

(c) Mr Tobin criticised the following findings of the trial Judge:

"… Mr Begg did not honestly believe that what Pubmart published as the prices of goods offered for sale was wrong".

"He [Mr Begg] may, and possibly did, disagree with the view of Pubmart and Mr Sadler that the 3% finance and administration charge should be included in the wholesale price, but … it could not reasonably have been said to be misleading …". "… when Mr Begg published the letter on 2 May 1995, this was an instrument of deliberate commercial strategy, motivated entirely by reasons of commercial gain". "… the opinion given by Mr Whealy QC … [was] erroneous".

I need not discuss each of these particular findings. There will be a rehearing on the issue of damages. I merely say that I doubt, on the evidence, that I would have drawn the above unqualified, adverse inferences which the trial Judge appears to have done.

Settlement Offer On Costs 70 The trial Judge awarded costs on a solicitor and client basis after being informed of a Calderbank offer on behalf of Mr Sadler to accept the sum of $75,000, costs and a written apology. There has been debate as to whether it was proper for his Honour to apply the provisions of Pt 39A r 25 to the informal offer that was made, particularly, as it included the requirement that an apology be given. 71 It is unnecessary for the Court to deal with this issue at this stage as the appropriate order is that the judgment be set aside and the matter be remitted.

Retrial 72 It is inevitable that there must be a retrial at least on the question of damages. The issue as to whether the retrial should be restricted to damages is a difficult one. In Uren v Australian Consolidated Press Ltd (1965) 66 SR(NSW) 271, Herron CJ and Wallace J, Walsh J dissenting, held that there should be a new trial limited to damages. At 304, Walsh J referred to a number of cases in which the issue had been discussed and in which the courts had thought it appropriate or inappropriate to order a general new trial. The judgment of the majority was reversed in Australian Consolidated Press Ltd v Uren (1966) 117 CLR 185. The High Court of Australia, agreeing with Walsh J, held that there should be a new trial on all counts. At 215, Windeyer J said:

"A new trial of a libel action limited to damages can seldom be satisfactory, especially in a case where malice is alleged." 73 Subsequently, in Monti-Haitsma Enterprises Pty Limited v Lord (1988) Aust Torts Reports ¶80-200, it was also held that the matter should be remitted for trial on all counts. At 67,979, McHugh JA said: "The verdict for $112,000, therefore, cannot stand. It must be set aside. Since the issues of liability, malice and damages are intertwined, the normal order would be a general new trial of the action in respect of the publication to Mr Cronin: Uren v Australian Consolidated Press Ltd (1965) 66 SR 271 at pp 304-305; approved Australian Consolidated Press Ltd v Uren (1966) 117 CLR 185 at pp 193-194, 201; Cohen v Mirror Newspapers Ltd (1971) 1 NSWLR 623 at p 627; Pateman v Higgin (1957) 97 CLR 521 at pp 527-528. I think that such an order should be made in this case." 74 However, the Court has a discretion and in an appropriate case the retrial will be limited to the question of damages: see Tolley v J.S. Fry & Sons Ltd [1931] AC 333; Pateman v Higgin (1957) 97 CLR 521. In the latter case, at 529, Kitto J said:

"The question whether a new trial should be limited to damages must always be, in the end, a question whether the appeal court is satisfied that notwithstanding what has happened about damages the verdict on liability should be accepted as a due determination of that issue." 75 In the present case, the need for the reassessment of damages is brought about, at least primarily, by the finding that the imputation pleaded in paragraph 5(a) of the Second Amended Statement of Claim was not established. In my opinion, notwithstanding the point raised by Mr Tobin which I have discussed above, I think that there is no reason to doubt the finding of liability in respect of the imputation pleaded in paragraph 6(a) of the Second Amended Statement of Claim. It seems to me that that finding was well based. Accordingly, the retrial should be limited to damages.

Orders 76 I would allow the appeal. I would set aside the ruling that the letter of 2 May 1995 was capable of carrying the imputation pleaded in paragraph 5(a) of the Statement of Claim: and I would substitute therefore a ruling that the letter was incapable of doing so. I would set aside the orders of the trial Judge. The matter should be remitted to the District Court of New South Wales for rehearing on the issue of damages resulting from the publication of the imputation pleaded in paragraph 6(a) of the Second Amended Statement of Claim. Costs should be reserved. The submissions of counsel for the appellants should be received within ten days and those of the respondent within seven days thereafter. **********

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