Liquor Marketing Group & Anor v Sadler

Liquor Marketing Group & Anor v Sadler - [2000] NSWCA 161 - NSWCA 2000 case summary — Zoe

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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 -

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" … 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 -

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"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).

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(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:

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"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:

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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.

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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:

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"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:

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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:

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