Mirror Newspapers Ltd v World Hosts Pty Ltd

A Point Piper restaurateur, George Pierce Countis, was declared bankrupt in Sydney yesterday.

Countis carries on business at the Caprice Restaurant, Rose Bay.

Mr. S. Fiszman of Bondi Junction, claimed in the Bankruptcy Court that Countis owed him $546 as the balance of a debt of $1046. Final judgment on this debt was received in the Sydney District Court on October 12, 1972.

Countis did not appear at the hearing but two intervening creditors - the Bank of NSW and the City Bank of California - were represented.

Mr. Justice Sweeney made a sequestration order against Countis' estate.

The plaintiff, who was at all material times the owner of, and conducted, the restaurant business known as Caprice Restaurant in Sunderland Avenue, Rose Bay, sued the defendant for damages for defamation. By its amended statement of claim the plaintiff asserted that the words " Caprice Owner " in the headline referred to it. No innuendo was pleaded. The principal defence pleaded by the defendant was that the publication was not defamatory of the plaintiff, indeed that it was incapable of bearing a meaning defamatory of the plaintiff.

At the trial, after the opening address by counsel for the plaintiff had concluded, and before any evidence was led, the trial judge heard argument on the question whether the report was capable of being defamatory of the plaintiff. Argument was presented on the assumption that the owner of the restaurant at all material times was, and was known by some persons to be, the plaintiff. The case for the plaintiff was put on the footing that there would be many readers who would read the headline only, wothout reading the body of the report, and that when the headline was so read it was capable of defaming the plaintiff. The trial judge ruled that the report should be read as a whole and that when it was so read by persons having knowledge that the plaintiff was the owner of the restaurant they would inevitably realize that the plaintiff was not the subject of the bankruptcy proceedings and that an error had obviously been made. His Honour directed a verdict for the defendant [1] .

The Court of Appeal held that the case should not have been summarily determined by the trial judge [2] . The Court was of the view that the plaintiff could not sue on the headline alone as any imputation must be found in the report as a whole. Further, the Court thought that the jury could not construe the report as meaning that the plaintiff was declared insolvent by order of the Bankruptcy Court or that it had been put into liquidation. But a majority of the Court (Moffitt P. and Hutley J.A.) held that, on the assumption that the plaintiff was the owner of the restaurant and that the report would be read by some person who was aware of this fact, it would be open to the jury to conclude that such a reader would reconcile the apparent inconsistency between the headline and the body of the report by understanding from them, taken together, that Countis, who was a bankrupt, was the owner of the plaintiff or that he owned the share capital of the plaintiff or some of it. Their Honours went on to hold that, on this understanding, it could be defamatory of the plaintiff to say that the man who owned and controlled it had been declared bankrupt, because a jury could reasonably conclude that readers looking at the realities of ownership and financial dependability, and beyond the legalities of corporate structures, would take the report to insinuate that the plaintiff itself was financially insecure.

At the second trial, before Taylor C.J. at C.L., there was no dispute that the plaintiff was the owner of, and that it conducted, the restaurant business, that Countis was employed by the plaintiff as the manager of that business and that the shareholders in the plaintiff were Mr. and Mrs. Jerry Lapin. The plaintiff's counsel opened the case to the jury on the footing that the publication defamed the plaintiff by suggesting to readers who knew that the plaintiff was the owner of the business that it was in financial difficulties because Countis, whom the readers would take to be the man responsible for World Hosts, was bankrupt. At the close of the opening address the defendant's counsel sought the discharge of the jury on the ground that the plaintiff's counsel had opened a case of true innuendo, no innuendo having been pleaded. The trial judge refused the application.

The plaintiff led evidence from witnesses who stated that they knew that the plaintiff was the owner of the restaurant and that they believed that Countis was a part-owner of the plaintiff. One witness expressed the belief that Countis was part of the plaintiff.

At the conclusion of the evidence the defendant's counsel applied for a verdict by direction. The application was refused. The trial judge summed up to the jury on the footing that it was for them to decide whether the report defamed the plaintiff by suggesting to readers who had the special knowledge that the plaintiff was the owner of the business that it was owned or controlled by Countis who had been declared bankrupt, and that therefore the plaintiff was financially unsound. Alternatively, the judge instructed the jury to decide whether the report would be read by those having special knowledge as meaning that the plaintiff itself was bankrupt in the sense that it could not pay its debts, namely, that it was in a state of insolvency.

At the close of the summing up the defendant's counsel, at the invitation of the trial judge, submitted in writing a request for thirty-seven directions. Included in these directions was a request that his Honour should withdraw a direction that he had given to the jury about Cassidy v. Daily Mirror Newspapers Ltd. [3] and about special knowledge because the direction confused an issue of true innuendo with identification. His Honour declined to give this direction. The jury brought in a verdict for the plaintiff for $30,000.

An appeal by the defendant was dismissed by the Court of Appeal [3a] . The Court held that a jury could find that readers who believed that Countis was a shareholder or an owner of the plaintiff would understand the report to be asserting that the plaintiff was financially unsound because Countis had been declared bankrupt and thus it was defamatory of the plaintiff, even though readers of that class relied on their own beliefs, not on objectively established facts, in reaching that understanding. Although the statement of claim was held to be defective in that it failed to plead an innuendo to sustain the defamatory imputation found by the jury, the case had been conducted on a footing which disregarded that point. Accordingly, the Court of Appeal declined to set aside the verdict on this ground and gave the plaintiff leave to further amend the statement of claim so as to make clear the basis on which it obtained a verdict and judgment.

Before this Court, Mr. McHugh for the defendant submitted that the report was not capable of bearing a meaning defamatory of the plaintiff because (1) the report contained no imputation concerning the plaintiff within the meaning of s. 5 of the Defamation Act, 1958 N.S.W.; (2) the statement that Countis was declared bankrupt, made in the body of the report, showed that the headline was erroneous and that any reasonable person on reading the report as a whole could only so conclude; (3) any conclusion by a reader that the plaintiff was financially unsound or insolvent was necessarily based on the reader's incorrect belief, not contributed to by the defendant's report, that Countis was a shareholder or an owner of the plaintiff, and was not an objectively established fact; (4) the case found by the jury was never pleaded, there being no innuendo alleged in the statement of claim, and as the defendant had asked for a discharge of the jury, had subsequently requested a verdict, and had finally sought a direction on this ground, the verdict should now be set aside.

It goes without saying that it was for the plaintiff to establish an imputation concerning it within the meaning of s. 5 of the Defamation Act; it is not enough to prove a statement which injures the plaintiff (Sungravure Pty. Ltd. v. Middle East Airlines Airliban S.A.L. [4] ). Although the headline taken in isolation obviously contained an imputation concerning the plaintiff, a case based on the headline only was not presented by the plaintiff at the second trial, that case having been rejected by the Court of Appeal in the first appeal. What we now have to decide is whether the publication, read as a whole, is capable of sustaining the imputation concerning the plaintiff which was put to the jury at the second trial and accepted by them.

Before the Defamation Act, 1958 N.S.W. altered the law of defamation in that State the plaintiff had to prove at common law that the defendant published to a third party a statement about the plaintiff of a kind likely to lead the recipient as an ordinary person to think the less of him. The essence of the action in defamation was that the publication of defamatory matter operated as a disparagement of the plaintiff's reputation: see the comment of Dixon J. in Lee v. Wilson and Mackinnon [5] on the speeches in E. Hulton & Co. v. Jones [6] . Consequently, malicious statements which injured a man's business or his goods but did not disparage his reputation were not actionable in defamation though they were actionable as injurious falsehoods (South Hetton Coal Co. Ltd. v. North-Eastern News Association Ltd. [7] ; Drummond-Jackson v. British Medical Association [8] ). But a plaintiff whose reputation was disparaged by a defamatory statement could recover as damages any business loss sustained in consequence of the publication of the defamatory statement (Ratcliffe v. Evans [9] ; Calvet v. Tomkies [10] ).

1. (1934) 51 C.L.R. 276, at p. 290. 2. [1910] A.C. 20. 3. [1894] 1 Q.B. 133, at p. 139. 4. [1970] 1 W.L.R. 688, at p. 698; [1970] All E.R. 1094, at p. 1104. 5. [1892] 2 Q.B. 524, at p. 529. 6. [1963] 1 W.L.R. 1397; [1963] 3 All E.R. 610.

When the publication was ex facie defamatory and referred by name to the plaintiff it was necessary to prove only that it was published by the defendant, without proving that the persons to whom it was published had any knowledge of the plaintiff. The situation was held to be otherwise when the publication was not ex facie defamatory or did not refer by name to the plaintiff. Jordan C.J. in Consolidated Trust Co. Ltd. v. Browne [11] explained it in this way:

If, however, the matter complained of is not ex facie defamatory, or does not refer by name to the person alleged to be defamed, and the defamatory character which is attributed to the matter, or the identity of the person defamed, would be apparent only to persons who had knowledge of special circumstances, it is necessary, in order to prove publication, to prove that it was published to a person or persons who had knowledge of those circumstances. His Honour later said: This is not to say that the mere fact that the name is not mentioned makes it essential to call a witness to prove that he identified the complainant by the description. To take an example used in argument, in an action against a widely circulated newspaper for an alleged libel upon a plaintiff contained in an article which described him only as "the Prime Minister of Australia", it would be unnecessary to call a witness to prove that he had received the issue of the newspaper and knew who the Prime Minister was. In such a case the nature of the description would be such that special knowledge would be unnecessary to identify the person indicated: Jones v. E. Hulton & Co. [13] . But the less revealing the description the greater the danger of omitting proof of identification. It is hardly necessary to add that it would be, to say the least, imprudent for a plaintiff who expected to obtain substantial damages to abstain from proving the scope of the publication and its effect, in accordance with the usual practice in actions of defamation: cf. Sunkissed Bananas (Tweed) Ltd. v. Banana Growers' Federation Co-operative Ltd. [14] . It was decided in that case that the plaintiffs, who sued on a report defaming the owners of two buildings without naming them, failed because their identity was not a matter of general notoriety and they omitted to prove that the report was published to persons who would know who the owners were. Jordan C.J.'s statement of the law was followed and applied in Cross v. Denley [15] and more recently in Kruse v. Lindner [16] . 1. (1948) 49 S.R. (N.S.W.) 86, at p. 89. 2. [1909] 2 K.B. 444, at 454, 477. 3. (1935) 35 S.R. 526, at pp. 537-539. 4. (1952) 52 S.R. (N.S.W.) 112. 5. (1978) 19 A.L.R. 85.

But the decision of this Court in Sungravure Pty. Ltd. v. Middle East Airlines Airliban S.A.L. [17] shows that the Defamation Act, 1958 did not require that an imputation to be actionable should disparage the plaintiff's reputation. It was enough that there was an imputation concerning the plaintiff and that it was likely to injure his reputation, to injure him in his profession or trade, or that it was likely to cause others to shun or avoid or ridicule or despise him (s. 5). Consequently, when a report defamed the owner of a named business, without naming him, and the imputation was likely to injure that business, it was enough in our opinion for the plaintiff to prove that he was the owner of the business and that the defendant published the matter in question, without proving that persons who read the report knew that the plaintiff was the owner of the business. Whatever may be the true limits of the doctrine enunciated by Jordan C.J. in Consolidated Trust Co. Ltd. v. Browne [18] , it had no application to a plaintiff who sued under the Defamation Act, 1958 on a statement describing him as the owner of a named business without naming him. Not that this is a matter of importance on the issue of publication, because publication to persons who knew that the plaintiff was the owner of the Caprice Restaurant was proved.

1. (1978) 134 C.L.R. 1. 2. (1948) 49 S.R. (N.S.W.) 86.

The meaning which the plaintiff sought to ascribe to the report was not the natural and ordinary meaning which the words would bear, strictly interpreted. The expression in the headline and in the body of the report is "declared bankrupt". The report makes it clear that it relates to proceedings in the Bankruptcy Court in which a sequestration order was made against Countis. To say that the report means that the plaintiff is "in financial difficulties" or "insolvent" because Countis is an owner or shareholder of the plaintiff and he has been declared bankrupt is to put a different and, in one sense, a secondary, meaning on the words used. But in the law of defamation the expression "natural and ordinary meaning" has a special and somewhat larger content than it has in the sphere of legal interpretation. It includes inferences and conclusions which the ordinary man draws from the words used; it includes what was described by Lord Reid in Morgan v. Odhams Press Ltd. [19] as "a certain amount of loose thinking" for, as his Lordship then said: "The ordinary reader does not formulate reasons in his own mind: he gets a general impression and one can expect him to look again before coming to a conclusion and acting on it. But formulated reasons are very often an afterthought." See also Rubber Improvement Ltd. v. Daily Telegraph Ltd. (on appeal from Lewis v. Daily Telegraph Ltd.) [20] .

1. [1971] 1 W.L.R. 1239, at p. 1245; [1971] 2 All E.R. 1156, at p. 1163. 2. [1964] A.C. 234.

When read in conjunction with extrinsic facts, words may, in the law of defamation, have some special or secondary meaning additional to, or different from, their natural and ordinary meaning. This special or secondary meaning is not one which the words, viewed in isolation, are capable of sustaining. It is one which a reader acquainted with the extrinsic facts will ascribe to the matter complained of by reason of his knowledge of those facts because he will understand the words in the light of those facts. So, as Lord Devlin said in Lewis v. Daily Telegraph Ltd. [21] , "to say of a man that he was seen to enter a named house would contain a derogatory implication for anyone who knew that the house was a brothel but not for anyone who did not".

If the meaning which the plaintiff sought to ascribe to the report was a natural and ordinary meaning, then the plaintiff had no need to plead an innuendo or to plead and prove extrinsic facts. If, however, the meaning was a special and secondary meaning, the statement of claim should have pleaded the innuendo and the extrinsic facts upon which it depended, it being conceded that at the trial all necessary facts were established by admission or proof.

With respect to the members of the Court of Appeal, who all thought otherwise, we do not think the plaintiff's case as presented was one of innuendo arising from extrinsic facts. We exclude the fact that the plaintiff was the owner of the restaurant for reasons which we have already given. Once that is excluded there are no extrinsic facts on which the plaintiff relies to support the imputations. The plaintiff did establish that the report was read by persons who erroneously believed that Countis was an owner of, or shareholder in, the plaintiff. However, the erroneous belief of a reader as to the existence of a fact cannot found an innuendo, for an innuendo must be based on an existing fact: Grubb v. Bristol United Press Ltd. [22] . A defendant is not liable for an imputation which is not the product of the words complained of read in the light of existing facts known to the reader, but which is merely the product of those words understood in the light of the reader's erroneous belief: see Livingstone-Thomas v. Associated Newspapers Ltd. [23] .

1. [1963] 1 Q.B. 309, at pp. 328-329, 334-335, 338-339. 2. (1969) 90 W.N. (Pt 1) (N.S.W.) 223, at p. 235.

It is of course different if the reader's belief arises from, or is the product of, the matter complained of. Then the case falls to be determined, as here, by reference to the inherent capacity of the words to bear the imputation put forward, that is, by reference to the natural and ordinary meaning of the words. That, in the ultimate, is the issue for decision here.

To the mind of the reader who knew that the plaintiff was the owner of the restaurant two possibilities would present themselves on a reading of the report - (1) Is the reference to "owner" in the headline shown to be a mistake because it is belied by the statements made in the body of the report? or (2) Is the apparent inconsistency between the headline and the body of the report to be reconciled by reading the words in the manner proposed by the plaintiff?

We do not think that a reader of the class under consideration would necessarily reject the second interpretation in favour of the first. Certainly the only statement made about the owner is that contained in the headline and there the expression is "declared bankrupt". But the reader would not necessarily accept the hypothesis that the reference to the owner was an error and might consider that the expression "declared bankrupt" in reality meant in financial difficulties or was insolvent. Consequently, although we agree with the Court of Appeal in thinking that the report was capable of bearing the defamatory meaning put to the jury, we do so on the footing that it is not a special or secondary meaning depending on extrinsic facts, but is one which is capable of arising on the natural and ordinary meaning of the words used.

In conclusion we may say that had we been of the opinion that the imputations found by the jury depended on the pleading of an innuendo we would not have held that failure to plead the innuendo and the relevant extrinsic facts disentitled the plaintiff to a verdict. We say this because in our view the defendant's counsel did not clearly take the point when he sought a verdict by direction and later when he sought the thirty-seven directions at the conclusion of the summing up. The fifth direction sought was in these terms: "Withdraw the direction about Corrigan's case [this being a reference to Cassidy v. Daily Mirror Newspapers Ltd [24] ] and special knowledge because the direction confused an issue of true innuendo with identification." We do not understand this direction to assert that the plaintiff's case was defective for failure to plead an innuendo and extrinsic facts.

The material facts on which this appeal depends and the course of the proceedings in the New South Wales courts, are set out in the judgment of Mason and Jacobs JJ. and I do not repeat them here.

The starting point for examination of this case is the fact that the Defamation Act 1958 N.S.W. effected some fundamental changes in the law of New South Wales as appears from the decision of this Court in Sungravure Pty. Ltd. v. Middle East Airlines Airliban S.A.L. [25] ("the Middle East Airlines Case "). At common law the essence of defamation was the publication of a statement containing imputations which reflected adversely on the plaintiff's reputation or character either personally or in his trade, profession or business. This was customarily expressed in the well-known phrase that the statement must be such as to be calculated to expose him to "hatred, ridicule or contempt" or to cause him to be shunned or avoided.

If the plaintiff was not directly named in the publication it was necessary to prove publication to some person who, by reason of "special facts" knew that the plaintiff answered the description used in the words published. In this context the word "imputation" in relation to particular characteristics or conduct had a derogatory significance and indeed the primary meaning of the word "imputation" was a charge of some crime, fault or failing, or some accusation.

All this, however, is somewhat changed by the Defamation Act 1958 N.S.W. which so far as material copied the provisions of The Defamation Law of Queensland 1889 which were later transplanted into the Queensland Criminal Code 1899. The relevant sections of the New South Wales Act are ss. 5, 9 and 10 which are as follows:

5. Any imputation concerning any person, or any member of his family, whether living or dead, by which the reputation of that person is likely to be injured, or by which he is likely to be injured in his profession or trade, or by which other persons are likely to be induced to shun or avoid or ridicule or despise him, is called defamatory, and the matter of the imputation is called defamatory matter.

The imputation may be expressed either directly or by insinuation or irony.

9. It is unlawful to publish defamatory matter unless the publication is protected, or justified, or excused by law.

10. The unlawful publication of defamatory matter is an actionable wrong.

In Hall-Gibbs Mercantile Agency Ltd. v. Dun [26] Griffith C.J., speaking of the identical provisions in the Queensland Criminal Code said that "imputation" did not necessarily mean anything disparaging and meant simply a statement or attribution of an act or condition.

The decision in the Middle East Airlines Case [27] applied this reasoning to the New South Wales Act. It shows that to be defamatory a statement must be about the plaintiff, though it need not necessarily be a disparaging statement affecting his personal or business reputation. It must, however, be more than a statement which merely injures the plaintiff. At common law the position had been that statements which injured a man's business, but did not reflect on his reputation might in appropriate cases be actionable as "injurious falsehood", but were not defamatory.

Under the Defamation Act 1958 what had previously been the common law torts "defamation" and "injurious falsehood" were subsumed under a single statement in s. 5 which is set out above.

It appears to me to follow from those cases that it is sufficient in New South Wales for a plaintiff to prove that he was the owner of a business and that the defendant published statements which were likely to injure that business. On that view of such a case there seems to be no place for innuendo nor need for proof of publication to persons who were aware of the identity of the owner, for his reputation is not at stake.

The plaintiff proved that it was the owner of the Caprice Restaurant and that it conducted the business of the restaurant. It also proved that its business had been damaged by the publication. Publication in the newspaper having been proved the plaintiff had at that point completed the process of proving all the ingredients required by s. 5 of the Defamation Act.

The fact that the headline referred only to the owner of the Caprice Restaurant and that the text of the publication referred to one Countis, described as a "restaurateur" of the plaintiff's address, having been declared bankrupt by the Court, would not affect the plaintiff's entitlement to succeed. The fact that the publication involved a mistake as to the name of the owner of the restaurant would not make the publication any less injurious to the plaintiff's business. The addition of an erroneous name, which the ordinary reader would, without special information, assume to be the owner of the restaurant referred to in the headline and located at the address given does not seem to me to detract from what would otherwise be the defamatory statement.

In a case of injurious falsehood in the common law sense knowledge by the reader of the identity of the owner of the goods or the business does not appear to be material, and certainly there seems to be no case which decides that it is. The Defamation Act 1958 does not expressly address itself to this question.

If the matter is looked at as being defamatory in the sense of adversely affecting the reputation of the owner of the Caprice Restaurant, then it would be necessary for the plaintiff to prove that publication to persons who knew that it was the owner of the Caprice Restaurant. Such proof was given, but it was aruged for the defendant that this was a case of true innuendo, which had not been pleaded as such and accordingly the plaintiff must fail.

The position at common law was that, if the plaintiff was not named in the publication, it must be proved that the allegedly defamatory matter was published to persons who knew the special facts which revealed the identity of the person referred to. So also if the published statement was not on its face defamatory it was necessary to show publication to persons who knew the special facts that made it defamatory.

The defendant's argument was that this case fell within that doctrine and must fail because innuendo was not pleaded. The Court of Appeal took the view that there was a case of true innuendo and it should have been pleaded, but said that it was not fatal to the plaintiff because the defendant had not taken the point at the hearing when a direction to the jury was sought that it must find for the defendant, nor was the point taken as of one of no less than thirty-seven requests for redirection made at the conclusion of the trial judge's summing up to the jury.

On the view I take of the matter it is not necessary for me to deal with that aspect, but if it were necessary I would take the same view as that expressed by Mason and Jacobs JJ.

It is clear that in determining whether the statement published was capable of being defamatory it is necessary to consider not merely the headline, conspicuous though it was, but the publication as a whole, and for the jury to be directed that in considering the question whether the statement bore a defamatory meaning they should consider the statement as a whole. The emphasis supplied by the publisher is, however, not to be ignored. In this case the publication complained of was in one column occupying about 140 millimetres of which the "headline" occupied about 50 millimetres.

To say that consideration must be given to the statement as a whole does not mean that either the court or the jury must give equal significance to each part of the publication. Nor is it to be supposed that the average member of the public, who is the assumed reader, will be fimiliar with the topic of insolvency and the difference between bankruptcy and winding up.

The body of the report, however, does make express reference to Countis having been made bankrupt by the Court. The ordinary reader, who knew that the plaintiff was the owner of the Caprice Restaurant, might perhaps conclude that the difference between the headline and the text demonstrated such a conflict that it was impossible to tell what the whole conveyed, but it is equally, perhaps more, likely, that he might conclude that the second part was incomplete in that it did not expressly explain the connexion between Countis and the Caprice Restaurant and the reference to its owner being bankrupt. A reader who knew that the plaintiff was the owner, but did not know who the shareholders were, might well take the reference to Countis as being to a person who was the owner of the shares or who had some share in the ownership in the popular sense. In my opinion such a meaning is capable of being defamatory.

In one sense it may be that this is not the "natural and ordinary meaning" of the words used when it is known to the reader that the owner is a company. It does not, however, involve more than the ordinary degree of "loose thinking" such as Lord Reid contemplated in Morgan v. Odhams Press Ltd. [28] for such a reader to attribute that meaning to the words.

1. [1971] 1 W.L.R., at p. 1245; [1971] 2 All E.R., at p. 1163.

Accordingly, I agree with the conclusion expressed in the reasons for judgment of Mason and Jacobs JJ. that the defamatory meaning is one which is capable of arising on the natural and ordinary meaning of the words published.