Palace Films Pty Ltd v Fairfax Media Publications Pty Ltd

CASES CITED : Nationwide News Pty Limted v Warton [2002] NSWCA 377 Palace Films Pty Limited & Ors v Fairfax Media Publications Pty Limited & Ors [2010] NSWSC 415

Palace Films Pty Ltd (First Plaintiff) Antonio Zeccola (Second Plaintiff) Benjamin Zeccola (Third Plaintiff) Fairfax Media Publications Pty Ltd (First Defendant) PARTIES : Brian Rosen (Second Defendant) Michaela Boland (Third Defendant) Screehub Pty Ltd (Fourth Defendant) John Paxinos (Fifth Defendant) Alexander Prior (Sixth Defendant) Fairfax Digital Australia & New Zealand Pty Limited (Seventh Defendant)

R. Rasmussen (Plaintiffs) COUNSEL : A. T. S. Dawson (First, Third & Seventh Defendants) R. Potter (Second Defendant) M. Richardson (Fourth, Fifth & Sixth Defendants)

Millen Lawyers (Plaintiffs) SOLICITORS : Banki Hadedock Fiora (First, Third & Seventh Defendants) DLA Phillips Fox (Second Defendant) Kennedys (Fourth, Fifth & Sixth Defendants)

• 10 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

09/297851 PALACE FILMS PTY LTD & ORS v FAIRFAX MEDIA PUBLICATIONS PTY LTD & ORS

JUDGMENT 1 HER HONOUR: These are proceedings for defamation arising out of the publication of a printed article in the Australian Financial Review newspaper on 15 July 2009 and two related internet articles. On 14 May 2010, I struck out the whole of the statement of claim with leave to replead: see Palace Films Pty Limited & Ors v Fairfax Media Publications Pty Limited & Ors [2010] NSWSC 415. 2 On 11 June 2010, the plaintiffs filed a further statement of claim in accordance with the leave granted. This judgment determines further objections taken by the defendants to the amended pleading. My determination of those objections should be read in the context of the reasons published in my earlier judgment.

First matter complained of 3 The article in the print newspaper was published under the headline "Money has a starring role in locally made movies". It discussed the high dependence on money of the Australian film-making industry and, in that context, reported that one film distributor, Palace Films, had become "so slow in returning profits to film producers that Federal film funding agency, the Film Finance Corporation, blacklisted the company". The plaintiffs in these proceedings are that company, Palace Films Pty Ltd, and its two directors, Mr Antonio Zeccola and Mr Benjamin Zeccola. 4 The defendants to the action based on that publication are Ms Michaela Boland, the journalist under whose by-line the article was published, Mr Brian Rosen (whom Ms Boland interviewed for the purpose of the article) and two Fairfax companies. They have objected to every defamatory imputation pleaded by Palace Films in respect of the first matter complained of other than those expressly allowed in my earlier judgment. 5 I should record that the plaintiffs have agreed to remove paragraph 11 of the pleading following an election to sue Mr Rosen as an original publisher of the whole of the material in each of the three matters now complained of: see my earlier judgment at [24] to [25]. As a result of that change a further amended document has been distributed but not filed. It is convenient to adopt the numbering of that document. 6 The imputations pleaded by the plaintiffs in respect of the first matter complained of are set out in paragraph 12 of the amended pleading. Imputation 12(a) is: "that [Palace Films] was blacklisted by the Film Finance Corporation because it did not pay profits due to film producers". 7 Mr Rasmussen, who appeared for the plaintiffs, acknowledged during argument that the article does not go so far as to charge that Palace Films did not pay profits. Rather, the criticism is that the company was too slow to pay those profits. He sought leave to amend that imputation so as to read that Palace Films was blacklisted by the Film Finance Corporation because it was too slow to pay profits due to film producers. Leave should be granted to amend so as to rely on an imputation in those terms. 8 Imputation 12(b) is: "that [Palace Films] deliberately failed to honour its distribution commitments thereby placing in jeopardy the production of Australian Films". 9 The imputation is a repleading of an earlier imputation that Palace Films failed to provide distribution guarantees thereby disadvantaging film producers. That imputation was rejected in my earlier judgment for the reasons stated at [45] to [46]. 10 The Fairfax defendants and Mr Rosen object to the new imputation both as to form and on the basis that it is not capable of being conveyed by the article. As to form, it is submitted that the imputation is bad for imprecision by reason of the use of the phrase "distribution commitments", the meaning of which is unclear. 11 Separately, the Fairfax defendants complain that the phrase "placing in jeopardy the production of Australian films" was a formulation rejected in my earlier judgment at [45]. I do not think that is quite what was said in that passage of my earlier judgment. The difficulty with the earlier imputation was that it identified an outcome without identifying any discreditable act or condition causing that outcome. 12 A further objection by the Fairfax defendants is that the term "deliberately" is unclear as to whether it means part of a strategic decision or simply the result of having run out of money. 13 As to capacity, the defendants object that the article says nothing about "deliberate" actions and says nothing about any action of Palace Films placing Australian film production in jeopardy. The capacity objection cannot be considered divorced from the objection as to form. I would observe, however, that to my reading the article is not so innocuous as suggested by the defendants. 14 In my view, there is force in the complaint as to the use of the phrase "distribution commitments". That phrase is used in the article but in quite a different sense from the sense in which it appears to be used in the imputation. In order to explain that conclusion, it is necessary to give close consideration to the whole article. 15 The critical statements in the article are that although Palace is a great supporter of local films, its schedule of titles in production is barren; that the reason for that circumstance is that Palace became so slow in returning profits to film producers that the Film Finance Corporation blacklisted it; that both the Film Finance Corporation and Screen Australia had decided not to accept "distribution commitments" from Palace until certain commercial arrangements were concluded; that the company's executive director Benjamin Zeccola was denying that it had failed to deliver returns to film producers; that aggrieved producers would probably work with the company again; that Palace "owed money on quite a few films"; that Mr Zeccola contended that the company had never failed to meet "a distribution guarantee or payment schedule"; that one producer had complained about being unable to seek "more funds from private investors" as they had not received returns, due to Palace's slow payment; that as Palace Films' slate stalled, producers of films about to go into production found their "distribution guarantees" failed to materialise and that the Film Finance Corporation "stepped into the breach" and "paid the distribution guarantee". 16 Thus the structure of the film industry as described in the article is that film producers (and their investors down the line) rely on film distributors (such as Palace Films) to distribute their films and remit the returns. If those returns are not paid promptly, film producers are left in a weak position to seek the further investment funds they require for the production of future movies. 17 The impression that emerges from a careful reading of the article is that the distribution company plays an important role in the profitability of the film. The article refers (if obliquely) to two aspects of that role. One is the distribution of the film. The article quotes one director as saying that it was "fair enough" that Palace did not distribute his movie, despite having agreed to: "He said when the teen thriller was finished, it just wasn't the right fit for Palaces' art house style". 18 The second aspect of the distributor's role referred to in the article is the return of profits to the film producer. Presumably, such profits can only be earned if the film is successfully distributed. 19 I have explained these matters at some length in order to demonstrate the ambiguity of the contention that Palace Films "deliberately failed to honour its distribution commitments". It could mean that Palace Films deliberately chose not to distribute films despite having agreed to, as in the case of the teen thriller referred to. Alternatively, it could mean that, having distributed films as agreed, Palace Films embarked on a deliberate strategy of not returning the profits to the producer of the film, or that it knowingly failed to return those profits because it was unable to do so. 20 Mr Rasmussen complained that the difficulty arises from the fact that the meaning of the term "distribution commitments" is not clearly defined in the article itself. I accept that it takes some reading to work out what kind of commitment is being referred to in different parts of the article but I think it can be gleaned that there are the two different roles to which I have referred. Ultimately, the task of articulating the case that will be put as to what those words mean is that of the pleader. In my view, the imputation in its present form is imprecise and must be struck out. 21 It is convenient to consider imputations 12(c) and 12(d) together. They are: (c) "that [Palace Films'] conduct in the Australian Film industry is dishonourable". (d) "that [Palace Films'] conduct in failing to honour its distribution commitments is dishonourable". 22 For the reasons discussed above in respect of imputation 12(b), in my view imputation 12(d) is imprecise for its reference to a failure to honour "distribution commitments". 23 Imputation 12(c) raises the issue whether a publication dealing with a specific incident or specific conduct is capable of supporting a general imputation. In my earlier judgment, I referred to the discussion of the relevant principles in Nationwide News Pty Limited v Warton [2002] NSWCA 377 at [56] to [61]. In that case, Heydon JA (as his Honour then was) explained that, although it has been recognised "as a general proposition" that a publication dealing with a specific incident is incapable of supporting a general imputation, that proposition does admit of exceptions in particular circumstances. The task is to pay "close and careful attention to the specific circumstances with a view to determining whether the specific conduct alleged in a particular case, unlike specific incidents alleged in other cases, can support a general imputation": at [60]; Handley JA agreeing at [1]; Hodgson JA agreeing at [63]. 24 Since the imputation which identifies the specific conduct in the present case is to be struck out for imprecision, it is not possible to undertake that task at this stage.

25 Imputation 12(e) is: "[Palace Films'] conduct in not paying profits due to film producers is dishonourable" 26 Leaving aside a complaint that imputation 12(e) does not differ in substance from imputations 12(c) and (d) (which it is no longer necessary to determine), it was submitted that the article is incapable of conveying the meaning that Palace Films never paid the profits. Consistently with the treatment of imputation 12(a), Mr Dawson on behalf of the Fairfax defendants acknowledged that he could not object if the imputation were amended so as to refer to a persistent failure to pay profits when due. The plaintiffs should have leave to make that amendment. 27 It was acknowledged that imputations 12(f) and (g) were in accordance with paragraphs [60] and [62] respectively of my earlier judgment and no objection was taken to those imputations. 28 Imputation 12(h) is: "because of [Palace Films'] slow payment a film producer was unable to seek more funds from private investors". 29 That was a reformulation of an earlier imputation that Palace prevented a film producer from seeking more funds from private investors. That imputation was struck out in my earlier judgment at [63] to [65]. I accept, as submitted by Mr Dawson, that the new imputation suffers from the same vice of failing to identify an act or condition on the part of Palace Films such as to damage its reputation. That imputation should be struck out. 30 Imputation 12(i) is: "that [Palace Films] is taking advantage of vulnerable Australian film producers". 31 Mr Rasmussen submitted that the imputation arose from discussion in the article as to the fact that, since Palace Films is owned by the same family that owns Palace Cinemas, film producers were concerned about being identified for the purpose of the article. He submitted that the article suggested that, in a small and vulnerable industry, "Palace sits astride the whole thing". I confess I did not fully understand the way in which the imputation was said to arise. In my view, it is incapable of arising. Separately, in my view, the imputation is bad in form owing to the imprecision of the phrase "taking advantage of". Imputation 12(i) should be struck out. 32 Imputation 12(j) is: "that [Palace Films'] continuing refusal to pay out returns on time and to honour distribution commitments is causing substantial problems to Australian Film producers." 33 For the reasons set out above in the discussion of imputation 12(b), a difficulty arises by reason of the reference to a refusal to pay out returns on time "and to honour distribution commitments". A distinction needs to be drawn between, on the one hand, a failure or refusal to honour a commitment to distribute the movie and, on the other hand, a failure or refusal to pay out returns received to the relevant film producer. In so far as the imputation is capable of being read as referring to both of those aspects of Palace Films' role, it rolls up two separate allegations. 34 A separate complaint was made in respect of the phrase "causing real problems". Mr Rasmussen suggested that the problem might be cured by amending the imputation so as to refer to "substantial problems" which, in my view, would cure that particular difficulty. Otherwise, the imputation will have to be struck out with leave to replead. 35 Those rulings also dispose of the objections to the imputations pleaded in respect of the second matter complained of (annexure AN to the statement of claim).

The third matter complained of 36 The third article sued on is an internet article published on the website "Screenhub". The defendants sued as publishers of that article are Mr Rosen, Ms Boland and three parties who are alleged to be the operators of the website (the Screehub defendants). The imputations alleged to be conveyed by that article are pleaded in paragraph 17 of the draft amended pleading. 37 The article appears under the heading "Palace: of dreams or producers' nightmare?" Imputation 17(a) is: "that [Palace Films] is a producers' nightmare". 38 It was submitted on behalf of Mr Rosen that the imputation suffers from the same vice as an imputation I struck out in Mitchell v Channel Seven Sydney [2009] NSWSC 1051. In that case, I said (at [37] to [38]): [The plaintiff] relies on an identical meaning in imputation 11(j). The vice of that imputation is that it is, as submitted by Mr Smark, rhetorical. The imputation is couched in terms calculated to persuade the jury that the broadcast said something really bad about the plaintiffs, without identifying what. It fails to identify the sting of the charge. 39 I held that the imputation was embarrassing because it was impossible to understand what it meant. I accept that the present imputation is similarly rhetorical.

40 When asked what it means to say of a company that it is a producer's nightmare, Mr Rasmussen submitted that it means "they are a pain to work with" or that they are "the sort of organisation that produces nightmares for these producers" or that they are "a pain in the butt" to deal with. I do not think those submissions clarified the position. In my view, the imputation is defective for imprecision and should be struck out. 41 Imputation 17(b) is: "that [Palace Films] has withheld returns from successful films."

42 Mr Rasmussen appeared to accept that an imputation in those terms is not defamatory and accepted that it would at least have to allege that the returns were wrongly withheld. Plainly, any amended imputation would have to identify the wrongfulness with precision. The imputation must be struck out in its present form. 43 Imputations 17(d), (f), (g) (i), (j) and (k) should be struck out in accordance with my rulings in respect of the same imputations in paragraph 12 of the amended pleading. 44 The only remaining objection is to imputation 17(m), which is: "that [Palace Films] deliberately tries to avoid its financial obligations to film producers." 45 The Screehub defendants submitted that, as with imputations 12(b) and 17(d), the use of the word "deliberately" is problematic because it fails to distinguish between a conscious choice driven by insolvency and something more sinister. In my view, the plaintiffs will have to grapple with that essential ambiguity. I accept, as submitted by Mr Rasmussen, that there is a measure of confusion in the articles themselves, but an ambiguous imputation cannot stand. 46 As to the imputations pleaded on behalf of the second and third plaintiffs, Mr Rasmussen indicated that in light of discussion during the course of argument, he would wish to have an opportunity to recast those submissions as true innuendos rather than as imputations arising from the ordinary meaning of the matters complained of. I initially indicated that it might be appropriate in any event to give rulings on those imputations insofar as the objections were purely objections as to form. On further reflection, and in light of the fact that the pleading is to be extensively amended in any event, I think it may be premature to give any rulings in relation to those imputations at this stage. 47 The orders I make are: 48 (1) The following imputations are struck out: 12(a), 12(b), 12(d), 12(e), 12(h), 12(i), 12(j); 14(a), 14(b), 14(d), 14(e), 14(h), 14(i), 14(j); 17(a), 17(b), 17(d), 17(f), 17(g), 17(i), 17(j), 17(k), 17(m);

(2) I grant leave to the plaintiffs to file an amended pleading in accordance with these reasons which I note should be described as the further amended statement of claim. **********

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