McMahon v John Fairfax Publications Pty Limited
[2012] NSWSC 218
At a glance
Source factsCourt
Supreme Court of NSW
Decision date
2012-03-12
Before
McCallum J
Source
Original judgment source is linked above.
Judgment (8 paragraphs)
Judgment 1These are proceedings for defamation and injurious falsehood arising out of the publication of two articles in the Australian Financial Review . The proceedings are presently being tried before me with a jury. 2There has been a large amount of legal argument during the course of the trial. For that reason, I have generally taken the approach of reserving my reasons for evidentiary and other rulings so as not to stretch the jury's patience. My reasons for some rulings are published in McMahon v John Fairfax Publications Pty Limited (No 3) [2012] NSWSC 196 and McMahon v John Fairfax Publications Pty Limited (No 4) [2012] NSWSC 216. These are my reasons for the remaining rulings except in respect of the defences to be left to the jury, which will be published in a separate judgment.
The lease 3On the seventh day of the hearing I rejected the defendants' tender of a lease and a draft licence agreement relating to the premises the subject of the lease (at T574). 4The lease was relied upon in support of the truth defence in three respects. First, it was relied upon to prove the truth of imputation (c) alleged to arise from the second article. That imputation was later ruled incapable of arising (at T1343) and accordingly there is no need give reasons for excluding the lease in support of that part of the truth defence. 5Secondly, the lease was relied upon in support of imputation (e) alleged to arise from the second article, which is: that the plaintiff had conducted his firm's affairs dishonourably and so as to permit it to avoid payment of debts which it owed. 6The defendants allege (and it is not disputed) that from 1 July 2007, the structure of the legal practice conducted by Mr McMahon changed. Up to the end of June 2007, Mr McMahon had been in practice as the sole partner of the firm known as McMahon's National Lawyers. With effect from 1 July 2007, he established a limited partnership. The only general partner of the limited partnership was a company of which Mr McMahon was the sole director and shareholder. 7In support of the truth defence in response to imputation (e), the defendants sought to rely on the contention that the limited partnership occupied the same premises as had been occupied by the sole partnership and that Mr McMahon did not notify the lessor of the change. 8Mr Dawson submitted that the alleged failure to notify the lessor of the change of structure was relevant to imputation (e) because, if the lessor had known of the change, it would have required proper security and proper arrangements to be put in place for payment of rent by the limited partnership. Mr Dawson noted that the partnership appeared to have assumed rent as a liability in its accounts whilst not having in fact paid any. In the circumstance where Mr McMahon had transferred the goodwill of the sole partnership to the limited partnership (giving away his income earning function), he could not himself meet the obligation and ultimately the lessor was left out of pocket when the limited partnership collapsed. 9The premise of those submissions was that Mr McMahon was under an obligation to inform the landlord of the change of structure of the firm. The lease identified the lessee as "Bryan Francis McMahon t/as McMahons National Lawyers". Clause 8 of the lease prohibited Mr McMahon from assigning, transferring, mortgaging, charging or otherwise dealing with his interest in the premises or from demising, subletting, parting with possession of or granting any licence affecting the premises. 10Mr McMahon denied that there had been any such dealing with his interest in the premises. He said that, when the structure of the legal practice changed, he continued to occupy the premises but allowed the limited partnership to occupy the premises with him. 11I did not think the evidence established that there had been any dealing with Mr McMahon's interest in the premises of the kind referred to in clause 8, with the possible exception of the grant of a licence. In any event, I was not satisfied that the failure to notify the lessor of the change of structure of the legal practice was capable of proving that the way in which Mr McMahon had conducted his firm's affairs was calculated to permit it to avoid payment of debts which it owed. Regardless of the fact that a liability for rent was recorded in the accounts of the limited partnership, it did not in fact at any point owe any debt to the lessor. The lessee under the lease was Mr McMahon. He was throughout the term of the lease personally liable for any debt owed in accordance with the lease. Accordingly, I concluded that the lease was not relevant to any issue raised by the truth defence in so far as it was concerned with imputation (e). 12Finally, the lease was relied upon in support of one of the contextual imputations relied upon by the defendants: That the plaintiff so conducted himself as a solicitor as to warrant the Legal Services Commissioner of New South Wales, Steve Mark, to investigate whether to prosecute the plaintiff. 13The particulars relied upon by the defendants to prove the truth of that imputation included the following: (iii) In mid to late June 2007, the plaintiff knew that he should advise the lessor of the change in occupying identity because the change in entity in the lessee meant that there was a deemed assignment of the plaintiff's obligations under the lease and therefore a breach of the lease. Notwithstanding that knowledge, the plaintiff did not notify the lessor of the change. (iv) The plaintiff's failure to notify the lessor was dishonest as the lessor was entitled to know the identity of the lessee. (v) The plaintiff's conduct in (iii) above was capable of amounting to professional misconduct which warrants investigation by the OLSC as to whether to initiate punitive or disciplinary action against the plaintiff ... because it was conduct of an Australian legal practitioner occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice. 14I concluded that those contentions could not be substantiated. In the first instance, the defendants' case was specifically predicated on the contention that there was a deemed assignment of the lease. However, the clause of the lease addressing that issue applied only if the tenant was a company. As already noted, the lessee under the lease in question was Mr McMahon. 15In support of the contention that the failure to notify the lessor was dishonest, Mr Dawson relied on a separate document which was a draft licence agreement between Mr McMahon and the limited partnership in respect of the premises. It was submitted that the existence of that draft agreement (noting that it was never executed) revealed a conscious failure to tell the lessor "what was really happening as to occupation of its premises". 16In my view, it is doubtful whether that conduct warranted investigation by the Office of the Legal Services Commissioner. In any event, I was satisfied that the contentions could not be maintained having regard to the apparent incorrectness of the premise that there was a deemed assignment of the lease. For those reasons, I rejected the tender of both the lease and the draft licence agreement.