Mahon v Mach 1 Financial Services Pty Ltd

Judgment 1HER HONOUR: These are proceedings for injurious falsehood arising out of the publication of a large number of emails concerning the plaintiff posted on two "wikifrauds" websites. The proceedings were commenced by summons seeking urgent interlocutory relief to restrain the publication of that material. The interlocutory application was heard by Garling J on 7 December 2011. His Honour granted the interlocutory relief sought, making orders restraining the defendants from maintaining the websites or publishing like material concerning the plaintiff; requiring them to do all things necessary to shut down the websites and requiring them to do all things necessary to cause the removal of the links from the websites from specific internet search engines. The injunctions were granted until further order. 2On 26 March 2012 the plaintiff filed his statement of claim. By notice of motion filed on 18 April 2012, the defendants sought an order striking out that pleading. On 15 June 2012, I determined that application: see Mahon v Mach 1 Financial Services Pty Ltd [2012] NSWSC 651. The principal basis for the application was the contention that the pleading did not plead any actual damage sustained by the plaintiff. I rejected that contention, holding that a claim in injurious falsehood may be maintained without proof of actual damage where (as here) an interlocutory injunction has been granted preventing the very damage which might otherwise have ensued: at [15] to [23]. 3Separately, the defendants complained that the statement of claim failed to articulate the facts, matters and circumstances relied upon to sustain the contention that actual damage would have been suffered but for the granting of the interlocutory injunction. I accepted those submissions, holding (at [26]) that the statement of claim was wholly inadequate for the purpose of putting the defendants on notice as to the case they had to meet on that question. However, since the defendants had not sought particulars on that issue before moving the court to have the pleading struck out, I declined to strike out the statement of claim at that stage, instead directing the plaintiff to provide proper particulars. 4The further particulars were provided by letter dated 18 July 2012. I then heard further argument as to whether, in the face of those particulars, the pleading disclosed any cause of action in injurious falsehood. I should note that, while the pleading also pleads a cause of action in defamation, that cause of action has been expressly abandoned. The only relief now sought by the plaintiff is a permanent injunction to restrain the alleged injurious falsehoods. 5In order to assess the adequacy of the particulars now provided, it is necessary to explain the way in which the claim is put in the existing pleading. Paragraph 1 of the pleading identifies the plaintiff as a property developer and a director or officer of "a number of companies, including but limited to the following companies incorporated in Fiji: (a)Denarau Investments Ltd (Investments); and (b)Denarau International Ltd (DIL)". 6The pleading asserts that Investments was the developer of the Denarau Resort on Denarau Island in Fiji and that it marketed and sold villas in the resort. Villas were sold pursuant to the terms of a written sale agreement which required purchasers to enter into a management agreement with DIL. 7Neither Investments nor DIL is a party to the proceedings. The only plaintiff is Mr Mahon. 8The elements of the cause of action for injurious falsehood have been stated in different terms (but perhaps without difference in substance) in different places. I am content to adopt those stated by Gummow J in Palmer-Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; 208 CLR 388 at [52] as follows: The elements of the action for injurious falsehood usually are expressed in terms which derive from Bowen LJ's judgment in Ratcliffe v Evans [1892] 2 QB 524 at 527-528, to which further reference will be made. Thus, generally, it is said that an action for injurious falsehood has four elements: (1) a false statement of or concerning the plaintiff's goods or business; (2) publication of that statement by the defendant to a third person; (3) malice on the part of the defendant; and (4) proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement. 9The alleged injurious falsehoods in the present case consist in statements to the effect that the plaintiff has diverted monies otherwise payable to villa owners; has bribed or corrupted police working in the Fijian court system; is a crook; has engaged in illegal activity; has engaged in underhanded business deals; has concealed illegal activity or underhanded business deals; has been a party to a conspiracy of concealment of illegal activity or underhanded business deals and many further like representations. 10Underlying the defendants' challenge to the pleading is the further contention that the claim is a defamation claim masked as a claim in injurious falsehood. I considered that contention in my earlier judgment at [30] to [39], concluding that, subject to the need for the plaintiff to articulate an arguable basis for establishing the element of "actual loss" (which, as I held, was capable of being satisfied by proving the probably loss that would have occurred had the injunction not been granted), the vice of bringing what is truly a claim in defamation under the guise of a different cause of action is relevant to the exercise of the discretionary power to grant injunctive relief but is not relevant to the issue raised by a strikeout application. 11The question that now arises for my determination is whether the plaintiff has articulated an arguable basis for establishing the element of "actual loss" (understood in the sense in which I have explained). Although I said in my earlier judgment that the claim's resemblance to a claim in defamation was not relevant to that issue, having now seen the particulars relied upon by the plaintiff to prove the element of actual loss and considered those particulars in the context of the case articulated in the pleading, I do not think that consideration can be ignored. 12It is appropriate to set out the further particulars provided by the plaintiff in full: Australia 1 The plaintiff is the owner of two parcels of land at Scotts Head, NSW (Lot 9 and Lot 10 in Deposited Plan 1033603, Scotts Head, Nambucca) through the vehicle of Longview Coastal Holdings Pty Limited (Longview). The plaintiff is the sole director, and company secretary of Longview. Longview's ultimate holding company is Hilltop Trust Limited, a company registered in New Zealand, which is the corporate trustee of a discretionary trust established for the plaintiff and his family members. In the late 1990's the plaintiff purchased a block of coastal land at Scotts Head, NSW comprising approximately 1,000 hectares. The land was acquired by Scotts Head Lifestyle Homes (Pty) Limited (SHLH). The plaintiff was a director along with his brother. All the shares were held by a corporate trustee under a discretionary trust for the plaintiff and his family members. South Canterbury Finance Limited, a New Zealand finance company, was the financier of this project. The plaintiff, through the vehicle of SHLH carried out a large number of subdivisions and section sales over the years as well as securing a number of development approvals for the balance of the unsold land. All of these dealings were undertaken in the name of SHLH. In late 2008 the shares of SHLH were sold less two parcels of land which the plaintiff continues to own through Longview Coastal Holdings Pty Limited (Longview). The plaintiff is the beneficial owner of Longview through the trust structure outlined above again subject to a mortgage to South Canterbury Finance Limited. The loan fell due for repayment in early 2011. The plaintiff has endeavoured to negotiate agreements with Stephen McElroy of Coffs Harbour, NSW to refinance and settle the loan with South Canterbury Finance Limited (now in receivership). These negotiations were undertaken by the plaintiff in the period October 2011 through to December 2011. The plaintiff will, at trial, prove that this party withdrew from the negotiation due to the material disclosed on the website and did not wish to re-engage. In particular, Stephen McElroy is a substantial property owner in the area, knows and understands the property well, but due to the controversial nature of the material on the website does not now want to be involved. 2 Further, at the time of the publication of the Websites, the plaintiff was in contractual dealings with BOS International (Australia) Limited (ACN 066601250) (BOSI), an unlisted Australian Public Company BOSI was the owner, at all relevant times, of the senior security interests in the first securities charges over the assets and undertaking of Denarau Investments Limited (Investments) of Fiji, which company is the owner of the Fiji Beach Resort & Spa, managed by Hilton at Denarau Island, Fiji (Hotel). FIJI 3. The plaintiff is a director of and the owner of 40% of the shares in Investments and Denarau International Limited (DIL) which manages the Hotel, both companies being registered in Fiji. Both of these shareholdings are held by Fiji Hotel Investments Limited, a Cayman Island company owned and controlled by a trustee for the plaintiff and his family members. The plaintiff repeats and relies on the matters pleaded in the Statement of Claim concerning Investments and DIL, including but not limited to, paragraphs 1, 7, 8 and 9. New Zealand 4. At the time of the publication of the Websites by the defendants, that is in or about October 2011, Lausanne Project Management Limited (LPM) was the plaintiffs principal operating company undertaking the management and administration of all projects in New Zealand, Fiji and Australia. LPM carries out projects for the plaintiff's group of companies as well as for third party clients. All of the shares of LPM are owned by Montreux Trust Limited, which is the corporate trustee of the Montreux Trust, the beneficiaries of which are the plaintiff and his family members. The plaintiff is the sole director of both LPM and Montreux Trust Limited. 13As already noted, the alleged injurious falsehoods concern the Hilton Denarau Resort in Fiji. That is the only property or business identified in the statement of claim having any connection with the plaintiff. 14To the extent that the particulars deal with the Fiji business (in paragraph 3), they reveal no direct commercial interest held by the plaintiff. Although the first sentence of paragraph 3 asserts that the plaintiff is "the owner of 40% of the shares" in the two companies identified in the statement of claim, that assertion is qualified in the second sentence by the acknowledgment that the shareholdings are in fact neither owned nor controlled by him. 15The particulars as to the alleged proprietary and commercial interests in Australia and New Zealand are even more remote. Leaving aside further matters established by evidence adduced at the hearing, to the detail of which I need not descend, the particulars as to Australia reveal no connection whatsoever between the alleged injurious falsehoods and any probability of damage to the plaintiff. The particulars allege that the plaintiff is the owner of two parcels of land but that allegation is qualified by the curious statement that the land is owned "through the vehicle of Longview Coastal Holdings Pty Ltd". The plaintiff is not alleged to be a shareholder in that company but rather the beneficiary of a discretionary trust controlled by its ultimate holding company. 16The defendants sought further particulars of those particulars but received an unedifying response. A number of pertinent enquiries were met with the contention that, since my earlier judgment accepted that proof of actual damage was not required (in the particular circumstances explained above), it was "therefore unnecessary to identify how the proprietary or commercial interest of the plaintiff may have been injured" and that "to be put to that burden would require the plaintiff to speculate as to harm he might have suffered". That response misconceives the tenor of my earlier judgment, especially at [26]. 17The particulars as to New Zealand are too Delphic for my understanding and do not, in my view, meet the requirement of putting the defendants on notice as to any reasonable probably of actual damage flowing to any commercial or proprietary interest of the plaintiff required to be forfended by the continuation of the injunction granted by Garling J. 18A close consideration of the particulars and the evidence adduced by the defendants at the last hearing has persuaded me that the plaintiff's claim is a transparent device to obtain a permanent injunction in what is, in substance if not in form, an action to vindicate the plaintiff's personal reputation with no anchor in any tangible proprietary or commercial interest of his. 19In Palmer-Bruyn Gummow J observed that the rationale for the principle that the inhibition upon the use of the injunction to restrain further publication of defamatory material does not apply to injurious falsehood is said to be that injurious falsehood protects proprietary and commercial rather than personal interests: at [58]. I am not persuaded that the present action is brought to protect any tangible proprietary or commercial interest of the plaintiff. He would not have obtained injunctive relief had the claim been brought in defamation: see generally the discussion in my earlier judgment at [30] to [37]. 20For the reasons there considered, and in light of the particulars that have since been provided, I am persuaded that the statement of claim discloses no reasonable cause of action and is liable to be struck out. It probably follows that the injunction granted by Garling J should be dissolved and that the proceedings should be dismissed, but I should hear the plaintiff further before making those orders. At the request of the parties at the last hearing, I will also hear the parties as to costs. 21Order: (1)That the statement of claim be struck out.