NRMA v Snodgrass

COUNSEL : R McHugh (Plaintiff) SOLICITORS : Corrs Chambers Westgarth (Plaintiff) In person (Defendant) CATCHWORDS : CORPORATIONS - management and administration - obligation of company to circulate to members a Members' Statement about a resolution proposed to be moved at a general meeting - exception to that obligation of a statement which is defamatory - meaning of "defamatory" - whether Court can or should sever non-defamatory parts - STATUTES - ACTS OF PARLIAMENT - interpretation - section 249P Corporations Act 2001 Corporations Act 2001 LEGISLATION CITED : Companies Act 1961 Defamation Act 1974 Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 CASES CITED : Culhaci v Telco Australia Ltd [2002] FCA 42, 10 January 2002 Ganter v Whalland (2001) 54 NSWLR 122 Harbour Lighterage Ltd and the Companies Act [1968] 1 NSWR 439 DECISION : See paragraphs 27 and 28

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

4380/02 NATIONAL ROADS AND MOTORISTS' ASSOCIATION LIMITED v WILLIAM SNODGRASS JUDGMENT - Ex Tempore 1 HIS HONOUR: These proceedings were begun two hours ago. They have been given a very urgent final hearing. They are proceedings which are brought by the National Roads and Motorists' Association Limited seeking declarations that a particular document, which has been supplied to the NRMA by Mr William Snodgrass, is defamatory within the meaning of section 249P (9)(a) of the Corporations Act 2001, and that the NRMA is not required to distribute that document to its members or to any of them. 2 The occasion for bringing the proceedings is that Mr Snodgrass, on behalf of himself and some 500 other members of the NRMA, has successfully requisitioned for the holding of an extraordinary general meeting of the NRMA. That extraordinary general meeting is one which was originally called to seek the removal of eight directors of the NRMA. 3 I am told that since the meeting was called one of those directors, Ms Carnell has resigned. The meeting is due to be held on 17 October. I am told from the bar table, without any dissent from Mr Snodgrass, that the NRMA is a particularly large organisation, with some 1.8 million members, so that the wheels of its corporate administration must move somewhat more slowly than is possible in the case of a smaller organisation. It is proposed to send the documents connected with the extraordinary general meeting, for printing next Monday night. A meeting of directors of NRMA is to be held in the course of the day on Monday to approve the documentation which is to be sent to members. 4 Mr Snodgrass wishes to have included in that documentation a members' statement. The opportunity for a member to request the distribution to other members of a statement of this kind is conferred by section 249P of the Corporations Act. It provides in subsection 1 that members "may request a company to give to all its members a statement provided by the members making a request about: (a) a resolution that is proposed to be moved at a general meeting; or (b) any other matter that may be properly considered at a general meeting." 5 I interpolate here that it is sub-paragraph (a) which is relied upon in the present case. 6 After provisions which say how many members are needed to join together in making such a request, and matters relating to the form of request, the section continues: "(6) After receiving the request, the company must distribute to all its members a company of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting." 7 There is an exception to that obligation contained in section 249P (9). It says: "The company need not comply with the request, (a) if the statement is more than 1,000 words long or defamatory; or [another presently irrelevant exception]." 8 Mr Snodgrass has provided to the NRMA a statement which he wishes to have circulated. The NRMA contends that the statement is defamatory, and, hence, that section 249P (9) has the consequence that the NRMA is not obliged to distribute the statement. 9 I should say that the statement which has been sent to the NRMA has been the subject of negotiation between the NRMA and Mr Snodgrass, to a certain extent, and that they have worked together to try to reduce areas of difference between them. The present form of statement which Mr Snodgrass wishes to send out is the seventh draft. However, negotiations between the parties have got to the stage where, even at the stage of the seventh draft, there are still differences between them which they cannot resolve. Hence, the application to the court with such urgency. Meaning of 'Defamatory' in Section 249P 10 Mr McHugh, for the NRMA, submits that section 249P (9)(a) should be construed so that the word "defamatory" is given its usual meaning at common law, namely, whether the meaning of the publication in question has a tendency to lower the plaintiff in the estimate of the ordinary reasonable reader. (For example, Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 at 573). 11 He submits that when the word "defamatory" is used, it does not mean that the statement is one which, if it was the subject of a suit in defamation, would result in a win for the plaintiff. Before a plaintiff wins in an action for defamation, he or she must establish not only that material is defamatory. As well, a defendant must fail in any defences which the defendant puts forward. Mr McHugh's submission is that, in deciding whether a statement is defamatory, one looks only to the meaning of the statement, not to the availability of the defences. 12 It seems to me that the ordinary meaning of section 249P (a) accords with Mr McHugh's submission. Support for this view can also be found in the decision of Emmett J in Culhaci v Telco Australia Ltd [2002] FCA 42, 10 Jan 2002. There, his Honour refused relief on the ground of lateness in applying for relief. However, his Honour also gives consideration to the meaning of section 249P (9)(a). 13 His Honour said, concerning a letter which members wished, in that case, to have distributed: "[20] The letter if the assertions in it are true would give some rise of disquiet as to the management of the company. I say nothing about the correctness of the assertions because I have no evidence on those matters. However, the fact that assertions do give rise to disquiet indicates that at least it is fairly arguable that the proposed letter gives rise to imputations that the affairs of the company were not being conducted properly. That it is capable of being defamatory of those responsible for the management of the affairs of the company, namely, the directors. [21] Section 249 P (9)(a) excuses a company from complying with a request to circulate a statement if the statement is defamatory, whether or not the publication of such a statement would be the subject of a defence." 14 In Harbour Lighterage Ltd and the Companies Act [1968] 1 NSWR 439, Street J considered an application brought under one of the predecessors of section 249P, namely, section 143 of the Companies Act 1961. Section 143 of the 1961 Act differed in some respects from the present section 249P, as it freed the company from an obligation to circulate a requisitionist's statement if "the court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter." 15 Concerning the application of that section, Street J said, at 441:- "To suggest seeking from the directors an assurance that they have not been guilty of such impropriety or abuse of their powers and that they will not hereafter act in this way, it is in my view capable of being regarded as defamatory of the directors. The final statement in the portion I have quoted is clearly enough directed to dissuading the directors from spending the company's money on this operation. I am of the view that not only is this paragraph capable of a defamatory meaning so far as the directors are concerned, but that it does in fact bear a defamatory meaning." 16 Street J then went on to consider the next leg of the test, namely, whether the section was being abused to secure needless publicity for defamatory matter. 17 It is clear, however, that his Honour regarded the expression "defamatory matter" in section 143 as referring to the common law test, without any consideration of the availability of defences. 18 The defences in defamation are frequently complex. They include substantial truth and public interest (Defamation Act 1974 section 15); contextual truth (section 16); reasonableness (section 22); comment (section 32-34); and unlikelihood of harm in the circumstances of the publication (section 13). Often in defamation litigation it is necessary for there to be interlocutory procedures such as discovery or interrogatories to explore the question of whether any of these defences are available. It would often be very hard for a company, which received a statement from a member, to make a properly informed decision about whether any of these defences were available. That Mr McHugh's construction of section 249P (a) avoids these practical difficulties provides comfort that that construction is the one Parliament intended. 19 It is an undoubted effect of the construction for which Mr McHugh contends that, in a case such as the present, where there is a requisition to remove directors, freeing a company of an obligation to circulate a statement which is defamatory will to some extent stifle the debate. Nonetheless, it seems to me that that is the meaning of the words which Parliament has included in the section. That debate will, to some extent, be stifled in a situation such as the present, is not, in my view, a sufficient reason to alter what appears to be the meaning of the words in their ordinary meaning, particularly when the Court has previously construed a legislative predecessor of section 249P so that "defamatory" is construed in the way for which Mr McHugh contends. That some undesirable consequences can be seen to arise, in some situations, from the ordinary - meaning construction of a statutory provision is not enough to justify departure from that ordinary meaning: Ganter v Whalland (2001) 54 NSWLR 122 at 131. 20 As well, it needs to be remembered that section 249 P is a section which is directed to a multitude of situations, where members wish to have material put before their fellow company members, not just to the situation where there is a resolution to remove directors. In many of the cases where section 249P is pressed into service, it will be perfectly possible for any matter at issue to be properly ventilated regardless of the company not being obliged to circulate material which is defamatory. Non-Publication Order 21 When Mr Snodgrass' draft was tendered I made an order that, until further order, it not be published. An order of that type must be made if the bringing of proceedings like these is not to itself produce injustice by bringing about the publication of material which is defamatory. That order is interlocutory, intended to enable the proceedings to be heard, and may need to be modified or revoked once the hearing is over and the time for making final orders arrives. Can Any Non-Defamatory Parts be Severed? 22 There are many parts of the statement which have been submitted to the NRMA which are accounts of factual matters, concerning which the NRMA takes no objection. It is only a handful of paragraphs which are said to give rise to the defamatory imputations. Even so, if I were of the view that those few paragraphs were defamatory, it seems to me that it is the consequence of section 249P (9) that the statement as a whole could then be characterised as defamatory, and the company would not have any obligation to circulate it. That view is one which is consonant with the view which Street J expressed in Harbour Lighterage concerning section 143 of the Companies Act 1961. His Honour said, at 442: "A statement under section 143 must stand or fall in its entirety; if in respect of any portion of such a statement it can be shown that the rights under the services are being abused to secure needless publicity for defamatory matter then the statement as a whole must fall. Either the company is bound to send out the circular deposited with it or it is not. Neither the company nor the court is charged with the duties of amending or severing any portion of the document prepared by the requisitionists." Is the Statement Defamatory? 23 Against that background, I turn to consider the statement itself. I do not, lest this judgment become the vehicle for circulating defamatory material, intend to discuss the statement in any detail. Suffice to say that there is discussion in it of circumstances in which some of the earlier affairs of the NRMA have been conducted. In relation to one particular matter, it seems to me that a reader could draw the conclusion that a person charged with carrying out some functions for the NRMA had advanced his own interests in an improper way. That is the sort of conclusion which would result in the material being defamatory. As well, it seems to me that the ordinary reader of the material could draw from it, and indeed would be likely to draw from it, a conclusion that particular directors had engaged in a cover up. That is a course of action which would be in breach of their directors' duties and it seems to me that likewise the statement is defamatory for that reason. I stress that there has been no occasion for me to decide whether these defamatory imputations are, or are not, soundly based. 24 It follows that I am prepared to make the declarations which the NRMA seeks. Mr Snodgrass put to me, in opposition to the making of any such declaration, submissions that all the facts which were asserted were correct. He submitted that it was in the public interest for it to be published, and that he needed to be able to publish it in the interests of proper corporate governance. He pointed out that the statement related only to the people who were criticised in their role within the NRMA. He submitted that if anyone accepts a job as a director, they must accept with it the prospect that there might be a measure of criticism. He submitted that suspicion has been aroused by the conduct of the directors themselves, and that his statement was merely a statement which pointed out the matters which caused such suspicion to be raised. He invoked the desirability of free speech. 25 If one were making a decision about what conduct was desirable, completely devoid of any statutory context, these arguments undoubtedly would have some force. It is not for me to say whether in such a context these arguments would ultimately be ones which would prevail. The point for present purposes is that we are not in such a context, free of statutory controls. The decision needs to be made by reference to the obligation which Parliament has imposed on companies under section 249P to distribute statements to members, and, equally, upon the qualification contained in section 249P (9)(a) upon that obligation. 26 It seems to me that, because the statement is defamatory, that is, quite, simply, the end of the matter, so far as the NRMA's obligation to distribute is concerned. Of course, section 249P (9) does not oblige the NRMA not to distribute it. All that subsection says is that "the company need not comply with the request if the statement is defamatory." (emphasis added) However, Parliament has, when the statement is defamatory, entrusted the decision about whether to distribute it or not to the company. Declarations and Orders 27 I declare:

(a) that the document annexed to the cross-claim in these proceedings and marked A is defamatory within the meaning of section 249P (9)(a) of the Corporations Act 2001 (Cth);

(b) that the cross-claimant is not required to distribute that document to its members or to any of them. 28 I order that the contents of the document which is annexed to the cross-claim and marked A not be published or made available to any person, save the parties to these proceedings, without further order of a judge, unless NRMA chooses to distribute it to its members. Costs 29 That leaves the question of costs. The NRMA seeks costs of this application. To fully comprehend the reasons for making a judgment about costs it is necessary to record some of the circumstances which happened when this matter first began to be heard before me. Mr Snodgrass had approached the court intending to bring an application to seek the converse of the orders which NRMA has sought. He had told NRMA of his intention to seek orders from the Court, so NRMA was here when Mr Snodgrass first made his application. He had not filed any initiating process at the time he first appeared before me. Because of the way that the rules which govern the payment of fees for the filing of initiating processing work, it was not possible for me to simply waive the payment of the fees on an initiating process, nor was it possible for me to accept an undertaking from Mr Snodgrass that he would pay the fees later. 30 While there was some consideration given to whether I would be able to hear the matter without any initiating process being filed at all, the NRMA was anxious to have the matter determined, and cut through that debate by itself filing in court a document called a cross-claim, which was treated as though it was an initiating process. I mention these matters to show it was really at Mr Snodgrass' initiative that the parties came to court today. 31 Mr Snodgrass has submitted, in opposition to an order for costs, that he has had judgments for costs in other proceedings concerning the NRMA, where he has had orders for party/party costs which have nonetheless left him out of pocket. He has submitted that he is, something of the order, $25,000 out of pocket, as a result of various litigious disputes with the NRMA. He says that he represents 500 members but still NRMA is asking that he pay the costs personally. 32 The decision about costs needs, in my view, to be made within the parameters of this litigation. It is litigation which Mr Snodgrass, effectively, initiated and has lost. That is a sufficient reason, in my view, why he should pay the costs. 33 I order the cross-defendant to pay the costs of the cross-claimant of the proceedings. **********

Last Modified: 10/28/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.