Liu v Fairfax Media Publications Pty Ltd

Judgment 1HER HONOUR: These are proceedings for defamation arising out of the publication of two articles in the Sydney Morning Herald on 21 October 2009. I previously ruled on the capacity of the matters complained of to convey the imputations pleaded by the plaintiff: see Liu v Fairfax Media Publications [2011] NSWSC 612. The defendant has since filed a further amended defence which includes a plea of contextual truth under s 26 of the Defamation Act 2005. This judgment determines the plaintiff's objections to that pleading.

Capacity argument - contextual imputations 12(a)(iv) and 13(a)(iii) 2The first objection to the defence raised by the plaintiff was that one of the contextual imputations relied upon by the defendant is not capable of being conveyed by either matter complained of. The imputation in question (pleaded at paragraph 12(a)(iv) as arising from the first matter complained of and at paragraph 13(a)(iii) as arising from the second matter complained of) is as follows: The plaintiff as manager of Astarra Managed Funds placed investors' funds at risk by investing those funds in investments of dubious integrity. 3The thrust of the plaintiff's argument was that, whatever else the article may say about him, it says nothing capable of sustaining the notion that he invested funds in "investments of dubious integrity". 4As outlined in my earlier judgment, the subject of the articles is the performance of a hedge fund referred to in the articles as the Astarra Strategic Fund. The fund is said in the articles to be managed by the plaintiff, Mr Eugene Liu, and his business associate, Mr Shawn Richard. The articles report that the fund performed unusually well during a period of time when many such funds did not, during the period of the global financial crisis. 5The first matter complained of was published under the headline "Grinning all the way to the bank - until watchdog started sniffing". The article reports that, at the height of the global financial crisis when "cashed up investors were reeling in a world of financial pain, the Astarra Strategic Fund somehow managed to buck the trend and keep clients' returns rolling in". 6After referring to the fact that the plaintiff and Mr Richard came through the downturn "unscathed" with $1 billion of funds under management, the article continues: But the dream run may be coming to an end. The corporate regulator has opened an investigation into several funds - including Astarra Strategic, one of the best performing hedge funds in the Australian market - following a clamp down on similar funds by US regulators in the wake of billion-dollar fund collapses and the $US 50 billion Ponzi scheme run by Bernie Madoff. 7As to the investment of funds under management by the plaintiff, the article states: The strategic fund's assets are held in a special purpose entity in the British Virgin Islands, and the investment manager has been allowed an exemption by the regulator Austrac from all sections of the Anti-Money Laundering and Counter Terrorism Financing Act. That means the fund does not need to verify the identity of its customers and to report transactions to the regulator. The fund was designed to invest in multiple hedge funds, based mostly in the US. 8The article includes a chart showing "the money trail" which illustrates the flow of Astarra Strategic Funds to the British Virgin Islands (illustrated with a photograph of a tropical scene with a swimming pool) and, from there, to "undisclosed US hedge funds". The chart appears over a photograph of each of the plaintiff and Mr Richard smiling, with the caption "winning smile", evoking the derisory sense of the headline "grinning all the way to the bank". 9Mr Richards, who appeared for the plaintiff, submitted that the article says nothing whatsoever as to the integrity of the "undisclosed US hedge funds" in which the Strategic Fund's assets were designed to be invested. Whilst it does not do so expressly, in my view the integrity of those funds is capable of being impugned by implication, taking the article as a whole. 10Mr Blackburn SC, who appeared for the defendant, reminded me of the well-known principles stated in Jones v Skelton [1963] 1 WLR 1362 at 1370 to 1371 per Lord Morris of Borth-Y-Gest (approved by the Court of Appeal in Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 at 165B per Hunt CJ at CL, Mason P and Handley JA agreeing at 161). Although the relevant passage is well known, it pays revisiting from time to time: It is well settled that the question whether words which are complained of are capable of conveying a defamatory meaning is a question of law and is therefore one calling for decision by the court. If the words are so capable then it is a question for the jury to decide whether the words do in fact convey a defamatory meaning. In deciding whether words are capable of conveying a defamatory meaning the court will reject those meanings which can only emerge as the product of some strained or forced or utterly unreasonable interpretation. In Capital and Counties Bank v George Henty & Sons, Lord Selborne LC said: The test, according to the authorities, is, whether under the circumstances in which the writing was published, reasonable men, to whom the publication was made, would be likely to understand it in a libellous sense. The ordinary and natural meaning of words may be either the literal meaning or it may be an implied or inferred or an indirect meaning: any meaning that does not require the support of extrinsic facts passing beyond general knowledge but is a meaning which is capable of being detected in the language used can be a part of the ordinary and natural meaning of words. 11As noted later in that passage, the test of reasonableness guides that determination. 12Although the article makes no explicit statement questioning the integrity of the undisclosed US hedge funds intended for the investment of the Strategic Fund's assets, the overall tenor of the article is to point a finger of suspicion at the two men managing the fund. The reference to ASIC's decision to investigate the funds in circumstances likened to US regulators' investigations of billion dollar fund collapses and Ponzi schemes may point rather to an implication that the so-called undisclosed US hedge funds did not exist at all, rather than to their being of dubious integrity. That is an argument that can be put to the jury. In my view, noting the compelling composition of the article and allowing for a measure of loose thinking in that context, it cannot be concluded that the imputation is incapable of being conveyed by the first matter complained of. 13The second article was published under the headline "ASIC silent on order against trio". The central focus of the article is the news that ASIC has not been able to make any public disclosure about its legal proceedings against the plaintiff and Mr Richard, having been directed by the judge hearing an application to make no public disclosure about the case. 14The article repeats the statement that the Astarra Strategic Fund operated under a structure that held its assets through an entity in the British Virgin Islands. Later in the article, it is stated: The strategic fund had never disclosed the names of any of the hedge funds in which it invested in its monthly updates to investors, instead focussing on vague aspects of its investment strategy. 15The article also records that the fund had not provided any update on its performance since the end of June whereas other funds on the Astarra website had done so. 16As with the first matter complained of, whilst it might be forcefully argued to the jury that the only implication is that the supposed target investment funds did not exist (rather than that they were of dubious integrity), the implication captured in the contextual imputation is in my view capable of being conveyed and must be left to the jury.