NHB Enterprises Pty Ltd v Sydney Magazine Publishers Pty Ltd

Judgment 1HER HONOUR: These are proceedings for defamation and injurious falsehood arising out of the publication of an article in the November 2012 edition of The Veterinarian. Broadly speaking, the article discussed potential risks associated with the use of compounded veterinary medications. The first plaintiff is a company which produces and distributes such medications. The second plaintiff is an individual who appears to be the principal of the company. Neither plaintiff is named in the matter complained of and it contains no depiction of the second plaintiff. However, the article included a photographic image of a number of the corporate plaintiff's products, including a jar carrying the corporate logo. 2The third defendant has taken various objections to the form of the pleading. The first and second defendants join in those objections. This judgment determines those applications. 3The first set of objections relates to the form of the imputations pleaded by the second plaintiff, who is the only plaintiff in the action for defamation. 4First, there was a global objection to the form of all of the imputations. In the first version of the pleading, imputations were pleaded in the following form: The second plaintiff acted wrongly in permitting Bova Compounding [to do various things]. 5Objection was taken to the imputations in that form. Those objections were argued before Rothman J in the last defamation list. Counsel for the second plaintiff, without the benefit of the transcript of that argument, stated that he had understood his Honour otherwise to have approved the form of the imputations so long as the word "wrongly" was removed from each imputation. In fact, an examination of the transcript at pages 34 to 35 reveals that his Honour evidently had a concern that, even if the word "wrongly" were removed, all that the imputations would do would be to state a fact (without identifying any defamatory sting). In any event, his Honour did not give any ruling on that issue. Rather Mr Evatt, who appeared on that occasion with Mr Rasmussen for the plaintiff, indicated that he proposed to re-plead the imputations and there the matter ended. It is accordingly necessary for me to determine the defendants' objections to the new form of the imputations. 6The second plaintiff now pleads a similar style of imputation in the following form: the second plaintiff permitted Bova Compounding [to do various things]. 7The defendants' first objection to that form of imputation is that it does not identify the capacity in which the second plaintiff is alleged to have permitted those things to occur. Specifically, it is submitted that the imputation in each case fails to identify any obligation or power the second plaintiff had, if any, to cause the company to act or to stop the company from behaving in the manner identified in each imputation. 8The difficulty is illustrated in the example of an imputation which said of a person that he or she permitted a child to do something dangerous. Without some identification of the capacity in which the person was alleged to have had an obligation or ability to control the conduct of the child, such an imputation would be embarrassing. If the imputation within its terms identified the plaintiff as a parent, teacher or other carer of the child, the problem would be obviated. That, as I understand it, is the tenor of the first global objection taken by the defendants. In my view, the objection has some force. 9A second global objection taken to all of the imputations in that form, which is perhaps their real vice, is the use of the word "permitted". As submitted on behalf of the defendants, that term is apt only to convey passive inaction on the part of the second plaintiff. Without more it is, in my view, incapable of identifying the defamatory sting in each case. For those reasons alone, each of the imputations is liable to be struck out. 10However, in deference to the individual arguments put and in order to assist the second plaintiff in the event that he decides to re-plead the defamation claim, I propose to determine the further individual objections taken to the imputations. 11Imputation (a) is: that the second plaintiff permitted Bova Compounding to make and sell compounded veterinary medications which can cause severe adverse reactions, including death, in horses. 12The defendants submitted that the imputation is not capable of being defamatory because it does not specify what is wrong with making and selling medications that "can" cause severe adverse reactions in horses. Mr Richardson, who appears for the third defendant, submitted that it was akin to saying that a person produced penicillin. That is a drug which can cause severe adverse reactions, but it can also save lives. It is doubtful whether it would be defamatory of a person to say that he produced penicillin. Mr Richardson accordingly submitted that no act or condition allegedly attributed to the second plaintiff by the article is identified in the imputation. In my view, there is force in that submission. 13Mr Rasmussen, who appears for the plaintiffs, submitted that the article as a whole is disparaging of compound veterinary medications and that the imputation should be read in that context. However the difficulty is, as submitted by Mr Richardson, that the imputation really does no more than to state an attribute of a medication. It does not designate any attribute to the second plaintiff. 14Mr Rasmussen proposed to address the problem by deleting the word "can". However, if that were the change made, the imputation would, in my view, be incapable of being carried by the article since it does not attribute any severe adverse reaction to those medications prepared by the plaintiffs but rather to medications of that kind produced overseas. 15Imputation (b) is: that the second plaintiff permitted Bova Compounding to make and sell compounded medications which had been associated with severe health risks to patients. 16As with imputation (a), the defendants submitted that the vice of the imputation is that it does not specify what is wrong with making and selling such medications and, accordingly, that it fails to identify any defamatory sting. For the reasons given in respect of imputation (a), I agree. 17Imputations (a) and (b) are liable to be struck out on those additional grounds. 18Imputation (c) is: that the second plaintiff permitted Bova Compounding to make and sell compounded medications which are not as safe as registered products. 19The defendants submitted that that imputation is not capable of being defamatory. It was submitted that, without more, the permitting of the manufacturing of a group of products less safe than another group of products does not give rise to any defamatory sting. 20Mr Rasmussen submitted that the imputation "only just gets over the line", but is still disparaging. I do not accept that submission. I do not think the imputation in its present form is capable of being defamatory of the second plaintiff. 21Imputation (d) is: that the second plaintiff permitted Bova Compounding to bulk manufacture compounded sulphadimidine paste without following strict quality assurance procedures. 22Once again, the difficulty with the imputation is the proposition that it is defamatory of a person to say that he allowed the production of material without following strict quality assurance procedures. There is no indication in the imputation that any such procedures were compulsory, or even appropriate. Absent such indication, I accept the defendants' submission that the imputation does not identify any defamatory sting. 23Imputation (e)(i) is: that the second plaintiff permitted Bova Compounding to sell and distribute its compounded medications which were of inferior quality to veterinarians thus causing them not to follow best practices. 24The wording of the imputation is difficult. It emerged during argument that the imputation was intended to mean that the second plaintiff permitted Bova Compounding to sell the inferior medications to veterinarians (not that the second plaintiff permitted Bova Compounding to sell medications which were inferior to those supplied by veterinarians). The imputation accordingly rests on the notion that compounded medications are "of inferior quality" without identifying what it is that they are inferior to. Thus understood, the imputation may be seen, as submitted by the defendants, to be directed to the conduct of the vets who purchased the medications. That is to say, it imputes that the vets did not follow best practices without explaining how the second plaintiff is said to have caused such conduct. The imputation says nothing specific about the vendor. 25Further, it is doubtful whether it is even defamatory of the vets, without more, to say that they did not follow best practices. 26Mr Rasmussen did not withdraw the imputation but made no submissions in response to the points made by Mr Richardson. I see no reason why the imputation should be allowed to stand when counsel who drafted it or at least puts it forward was not prepared to put any submission to defend it. The submissions put by the defendants, in my view, were made good. 27Imputation (e)(ii) is: that the second plaintiff permitted Bova Compounding to sell and distribute its compounded medications directly to veterinarians and not to the patient/animal owner. 28The defendants submitted that the imputation fails to identify any defamatory sting. It is simply an allegation as to the identity of the persons to whom the medications were sold. 29Mr Rasmussen submitted that the defamatory sting of the imputation comes from paragraph 14 of the matter complained of, where it is stated that compounding pharmacies are regulated by the Therapeutic Goods Administration and that TGA legislation states that compounded products "should be delivered to the patient/animal owner, not to the veterinarian". 30Mr Rasmussen submitted that the defamatory sting does not need to be articulated within the imputation itself, citing "Nikolopoulos" (presumably a reference to the decision of the Court of Appeal in Greek Herald Pty Ltd v Nikolopoulos (2001) 54 NSWLR 165 particularly at [26]-[28] per Mason P; Wood CJ at CL agreeing at [31]; but cf Young CJ in Eq at [32] to [64]. Mr Rasmussen stated that, in accordance with that decision, in order to glean the defamatory sense of an imputation it is appropriate to go to the context in which it was published in the matter complained of and that one reads the imputation in that context to determine whether it is defamatory and what the sting actually is. 31I think that represents a misreading of the decision. As noted by Mason P at [28], the principle for which the decision stands as authority "must not become the passport to sloppy or ambiguous pleading of imputations". It remains, on my understanding of the law, an essential requirement of pleading that the imputation itself should distil the act or condition allegedly attributed to the plaintiff by the matter complained of in a way that identifies some defamatory meaning of the kind that would cause ordinary, decent folk to think the less of the plaintiff. Resort to context cannot supplant that essential pleading requirement. In my view, there is no defamatory sting in imputation (e)(ii) as it presently stands. 32Imputation (f) is: that the second plaintiff permitted Bova Compounding to manufacture and sell compounded products which carried such risks to patient health that veterinarians who used them instead of registered products ran the risk of disciplinary procedures and insurance claims. 33So far as the form of the imputation is concerned, the defendants took no objection beyond the global objection considered above. However, there was also an objection to imputation (f) on the basis that it is incapable of arising. 34The imputation is said to derive in particular from paragraph 13 of the matter complained of, which states: As compounded products are manufactured without the requirements for testing or GMP standards this means that the products can be produced at a lower cost and veterinarians can potentially save money on purchase price and possibly supply the product to the owner at the same price as a registered product and profit from the difference. Veterinarians should be aware of their liability when using compounded products. There is ample evidence in the literature to support that the use of registered products where possible as being 'best practice' and AVA Policy is to use a registered product where one is available. Failure to adhere to best practice may result in issues arising with Veterinary Boards and insurance companies should an adverse reaction occur and a complaint be made. 35Mr Richardson submitted that the reference in that passage to the possibility that a failure to adhere to best practice could result in "issues with the veterinary boards" cannot sustain the leap in the imputation to disciplinary proceedings. 36It is important to bear in mind that the full passage relied upon states that failure to adhere to best practice may result in issues arising with veterinary boards and insurance companies "should an adverse reaction occur and a complaint be made". In my view, on a capacity basis it would be open to the ordinary, reasonable reader to infer that what was being suggested was that a vet, having failed to adhere to best practice, who saw an adverse reaction and received a complaint may face issues with the veterinary board. It would further be open to infer that such issues could comprehend the possibility of disciplinary proceedings. Accordingly, subject to the reformulation required on the strength of the global objection, I would not strike out imputation (f) on the grounds of capacity alone. It remains, however, to be seen how that imputation is reformulated. 37Separately, although this point was not taken, the imputation may be problematic in referring globally to both disciplinary procedures and insurance claims, but that is perhaps an argument for another day. 38Imputations (g)(i), (ii) and (iii) may be considered together. They are that the second plaintiff permitted Bova Compounding to make and sell illegitimate compounded products; illegal compounded products and pirated compounded products. The defendants took no objection to those imputations on the grounds of form other than the global objection, acknowledging that they at least identify outcomes of the "permitted" conduct that are potentially defamatory. 39However, there was a capacity objection to those imputations as well. The part of the matter complained of relied upon by the plaintiff is paragraph 12, which states: Compounding in veterinary medicine has greatly increased since the mid-1990's in the USA and in Australia over the last 507 years. In the US the compounding industry is worth approximately $50m-$60m per yr. It has been reported in the US that up to 30 per cent of drugs used are compounded which has led to considerable concern regarding use of these medications. A recent article in The Horse.com summarised the value and concerns regarding the use of compounded medications. It concluded with the following advice from owners and veterinarians, which would be very applicable in Australia. The key points were: Always use an FDA (equivalent to AVPMA) approved drug if its available; Do not purchase illegitimate/illegal/pirated compounded products; She away from pharmacies that sell expensive drugs cheaply; Avoid compounded products that are sold in large quantities and without a prescription; and Ensure that both the veterinarian and owner/caretaker understand the risks associated with using compounded products. 40Mr Richardson submitted that there is no suggestion in that paragraph that compounded products fall within those categories. In my view, that should be an issue properly left to the jury. I would accept, as submitted by Mr Rasmussen, that overall the article is derogatory of compounded products. It would be open to the jury to draw that inference, although it is not expressly stated, having regard to the whole of the context of the articles. Accordingly, leaving aside the global objection, I would not strike out imputations (g)(i), (ii) and (iii) on the grounds of capacity. 41Imputation (h)(i) is: that the second plaintiff permitted Bova Compounding to sell its compounded products in large quantities without prescription. 42As with so many of the imputations, that imputation fails to identify what is wrong with the conduct specified. There is, in my view, no defamatory sting in the bare notion of selling a product without a prescription, as the defendants submit. That imputation is liable to be struck out on that basis. 43Imputation (h)(ii) is that the second plaintiff permitted Bova Compounding to bulk manufacture medications made on prescriptions. For substantially the same reasons I accept, as submitted by the defendants, that that imputation identifies no defamatory sting and is liable to be struck out. There is simply nothing in the imputation to identify what is wrong with the conduct identified. 44Imputation (i)(i) is: that the second plaintiff permitted Bova Compounding to make and sell compounded medications to veterinarians of such poor quality that it would be against the best practice and AVA policy for veterinarians to use them. 45The imputation is unhappily worded. As a matter of strict grammar, the phrase "of such poor quality" refers to the veterinarians (being the immediately preceding noun) but it is plainly intended to describe the compounded medications. Understood in the latter sense, I would accept that on a capacity basis the imputation is capable of arising as an inference. 46Mr Richardson asked rhetorically where the matter complained of describes compounded medications as being of such poor quality as to meet the description in the imputation. However, as I have said, I would accept that the article overall speaks in derogatory terms of compounded medications and generally warns people off them. In my view, it would be open to the jury to accept that the imputation is carried as an inference. 47There was no discrete form objection to that imputation beyond the global objection to which I have acceded. 48Imputation (i)(ii) is: that the second plaintiff permitted Bova Compounding to bulk manufacture compounded veterinary medications and not follow strict quality assurance procedures. 49The imputation is a general form of the more specific imputation in (d). For the reasons already given, I do not think the imputation identifies any defamatory sting. It is liable to be struck out on that basis. 50Imputation (j) is: that the second plaintiff permitted Bova Compounding to manufacture and sell a compounded triamcinolone preparation which should not be used by veterinarians. 51Mr Richardson submitted that the imputation is again directed rather to the appropriate conduct of vets and is incapable of being defamatory of the second plaintiff. Nothing in the allegation of manufacturing and selling a product which "should" not be used by vets identifies any act or condition attributable to the plaintiff of the required kind. I agree. The imputation is liable to be struck out, in my view, on the basis that it fails to identify any defamatory act or condition. 52Imputation (k) is: that the second plaintiff permitted Bova Compounding to place invalid patient names on its compounded products. 53Mr Richardson submitted that the imputation is incapable of being defamatory in the absence of any averment that the second plaintiff had any knowledge of the invalidity. 54Mr Rasmussen said in respect of imputation (k), "When read in context it provides the relevant sting". I confess I did not understand that submission and accordingly I would reject it. The submission that the imputation fails to identify any defamatory sting is made good, in my view. 55Mr Rasmussen did not press imputation (l). 56The plaintiff should have leave to re-plead in accordance with these rulings. Since I have acceded to the global objection based on the use of the word "permitted", it follows that all of the imputations must be struck out with leave to re-plead in accordance with these reasons. 57Separately, the defendants objected to the manner in which the injurious falsehood claim has been pleaded. It was common ground that, in order to make out a claim for injurious falsehood, the plaintiffs must establish: (a)a false statement of or pertaining to the plaintiff's goods or business; (b)published to a third person; (c)made maliciously; (d)causing actual damage. Mr Rasmussen did not take issue with that unexceptionable statement of principle. 58The difficulty identified by the defendants with the pleading of the injurious falsehood claim is that nowhere in the pleading have the plaintiffs pleaded or given particulars of the alleged false statements relied upon. 59Ordinarily one would expect, on a disciplined approach to pleading and having regard to the elements of the tort set out above, a section of the pleading setting out the false statements allegedly made, a section of the pleading stating the occasion on which those false statements were alleged to have been published to a third person, a section of the pleading identifying the alleged falsity and separate sections dealing with malice and damage. 60The amended statement of claim filed 15 July 2013 in the present case adopts the curious approach of pleading the entire cause of action in a rolled up fashion in paragraph 9 of the pleading, as follows: Further in the abovesaid issue of "The Veterinarian" the defendants falsely and maliciously published or caused to be published of and concerning the plaintiffs and their compounded veterinary medications the material in the Schedule marked 'A' and referred to in paragraph 7 above. 61Appended at the conclusion of the pleading are particulars of falsity. The particulars state that each of the imputations referred to in the statement of claim is false. There then follows a series of particulars as to various statements in the matter complained of being false. Finally, at the conclusion of the particulars, it is alleged "generally the entire article is false, misleading and deceptive, and designed to denigrate Bova Compounding products and boost registered commercial veterinary products". 62Mr Rasmussen submitted that the particulars of falsity fulfil the requirement to identify the false statements. I do not accept that submission. Even leaving aside the content of the particulars of falsity in this particular pleading, in my view, as a matter of proper pleading, it is always necessary for the plaintiff to identify the false statements relied upon as the very first step in the pleading of this tort. 63The defendants relied in support of that proposition on the decision of Hunt J in Haines v ABC (1995) 43 NSWLR 404 at 417E to F where his Honour said: I turn now to the more substantial issues raised by the Australian Film Finance Corporation. The first relates to the form of the representation now pleaded. I accept that, as with imputations in a defamation claim, the representation in an injurious falsehood claim or a misleading or deceptive conduct claim must be pleaded with precision, so as to avoid the likelihood of confusion either at the pleading stage of at the trial in relation to the meaning for which the plaintiff contends: cf Singleton v Ffrench (1986) 5 NSWLR 425 at 433, 435; Whelan v John Fairfax & Sons Ltd (1988) 12 NSWLR 148 at 155; Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 137-138, 155. As a defendant can only plead a denial of the two causes of action now pleaded by the plaintiff, the confusion to be avoided relates to the trial rather than at the pleading stage. The representation now pleaded was the result of a continuing discussion during the argument before me. I have no doubt that a mature reflection by the pleader could improve upon its formulation. 64Mr Rasmussen submitted that there is no authority for the proposition that the false statement element of the tort has to be pleaded as a representation and that it is not correct to say that the false statements need be drafted as if they were representations. I must say, I would read Haines in the passage set out above as being authority for that very proposition, unless I am understanding the term "representation" in some different sense from that in which it is understood by Mr Rasmussen. In any event, if there is no authority for the proposition contended for by Mr Richardson, I would apprehend it to be in the category of proposition which is so obvious that no authority is needed for it. 65I do not see how the plaintiffs could contemplate going to trial in an injurious falsehood claim without, even for their own purposes, let alone the requirement of putting the defendants on notice of the case they have to meet, identifying the alleged false statements which will be the subject of the claim. A close analysis of the particulars of falsity appended at the conclusion of the amended statement of claim bears out the good sense of that approach. For example, particular (ii) states: The Statements made in paragraphs 2 and 11 concerning the death of 21 polo ponies in 2009 in Florida is false because the compounded product was not incorrectly prepared. The death was due to incorrect dosage that would have been applicable to registered as well as compounded products. 66That particular does not identify the false statement relied upon. When one tries to discern it by going to paragraphs 2 and 11 of the matter complained of one can readily see that the statements in question are scarcely statements of or pertaining to the plaintiff's goods or business. They pertain to the production of compounded products in Florida. That is only an example of the difficulty. 67Mr Richardson pointed out that some of the particulars, for example (v) and (vi), rest on matters allegedly implied by the article. It follows that those must be representations by implication or omission. They should be spelled out. I do not think it is necessary to go further to illustrate the force of Mr Richardson's point. 68In my view, the pleading in injurious falsehood as presently put is embarrassing for its failure to identify the alleged false statements made of or pertaining to the plaintiff's goods or business and it must be re-pleaded. 69I think it follows that the whole of the amended statement of claim is liable to be struck out with leave to re-plead. I will hear the parties as to the form of any orders I should make and as to costs.