Palmer Bruyn & Parker Pty Ltd v Parsons

Palmer Bruyn & Parker Pty Ltd v Parsons - [2000] NSWCA 53 - NSWCA 2000 case summary — Zoe

[8]

The plaintiff company carried on a surveying business. One aspect of its activities was to conduct negotiations with councils on behalf of persons submitting development applications to those councils. In mid 1995 McDonald's Australia Ltd engaged the plaintiff to act for it in relation to a proposal to establish a McDonald's outlet at Wallsend. In that regard a rezoning application was to come before the Newcastle City Council on Tuesday 26 March 1996, and councillors representing the Australian Labor Party were to have a caucus meeting on that subject on Sunday 24 March 1996. 3 The defendant was a councillor of the Newcastle City Council and represented the Australian Labor Party. He had been lobbied for support by the plaintiff in that he had been telephoned a number of times by, but had not returned the calls of, Mr Christopher McNaughton. Mr Christopher McNaughton was a technical surveyor employed by the plaintiff, responsible for obtaining Council consent for the McDonald's rezoning application. The defendant had also been sent a letter by Mr Christopher McNaughton seeking a meeting to discuss the rezoning, and the defendant believed that Mr Christopher McNaughton had attempted to persuade a local Federal Member of Parliament representing the Australian Labor Party to lobby the defendant and two other Labor councillors. This conduct of Mr Christopher McNaughton had irritated the plaintiff. 4 On Sunday 24 March the defendant sent a letter by facsimile transmission bearing the date 24 March and the transmission time 1.38pm to another councillor representing the Australian Labor Party, Mr John Manning, who knew of Mr Christopher McNaughton's conduct towards the plaintiff. The letter sent by the defendant was composed in the following way. He took the letter which had been sent by Mr Christopher McNaughton in relation to the rezoning. He cut the letterhead and signature block off. He wrote the words complained of. He then photocopied the letterhead, the words complained of and the signature block as a composite document. 5 The words complained of were as follows: "To the Newcastle City ALP Caucus. Dad said to tell you his final offer 4 big Macs and 2 choc sundaes per week for the rest of your life AND 1 free Golden Arches birthday party per year with Mum available to play the accordion. If you don't he's gonna tell his best friend Robert Webster and Bob Carr and Ernie Page and Kim Beazley and Fred Nile and anyone else who'll listen. They're gonna pressure you to support the Wallsend McDonalds rezoning just like the good old days. Frank and Dennis said they're disgusted with youse. Final warning, do a deal, fuck all residents, they'll love it when it's built OR Dad will remember something you said about him somewhere, sometime and you can expect a letter from Hunt and Hunt next Wednesday at the latest. You'll be sorry."

[10]

Mr Manning then sent the document by fax bearing a transmission time of 1.41pm on 24 March 1996 at least to the offices of the plaintiff. 7 Later, after the caucus meeting of Newcastle city councillors representing the Australian Labor Party, Mr Manning sent a fax bearing a transmission time of 9.46pm on 24 March 1996. This third fax did not contain the additional words placed on the second fax, but consisted of the original fax together with the added words: "It appears there is a hoax on me. J.M." 8 The second and third faxes were sent to the offices of the plaintiff. They were found on the fax machine at about 7am on Monday 25 March 1996. 9 Apart from the two faxes sent to the offices of the plaintiff, Mr Manning sent faxes containing the material complained of to four members of the Labor caucus on Council including the defendant, three councillors representing the Greens, and the general manager of the Council. The general manager showed it to the director of planning. All these persons destroyed the copies they received, save that a copy of the first fax sent by Mr Manning to the general manager of the Council remained on its files, though a fax bearing a transmission time of 9.25pm on 24 March 1996 was sent contending that the initial fax was a hoax. 10 The faxes sent to the plaintiff were delivered to the New South Wales Police Service by the plaintiff. The plaintiff also wrote to the Council on 26 March 1996 disassociating itself from the offending letter. 11 On 11 May 1996 an article appeared in the Newcastle Herald. It stated: " BOGUS LETTER OFFERED FREE FAST FOOD Newcastle police confirmed yesterday they were investigating a bogus letter sent to ALP councillors on Newcastle City Council around the time the council was considering rezoning land at Wallsend for a McDonalds restaurant and service station. A rezoning was sought by Newcastle surveying firm Palmer, Bruyn & Parker whose managing partner is a former Lord Mayor of Newcastle Mr John McNaughton. The Newcastle Herald has learnt that the forged letter purported to be from Chris McNaughton, the son of the former Lord Mayor. It was written on a Palmer, Bruyn & Parker letterhead. The bogus letter offered the councillors a free supply of items from the McDonalds menu."

[12]

The Trial Judge's Conclusions 14 At the trial the only cause of action for which the plaintiff contended was injurious falsehood. 15 The trial judge found, in relation to the allegation in paragraph 3 of the Statement of Claim that the material complained of was false in that it attributed to Mr Christopher McNaughton statements that he had never made, that it was false. He found that it was likely to injure the plaintiff in its business. He found that it was published maliciously. 16 The trial judge found that it was the natural and probable result of the original fax sent at 1.38pm on 24 March 1996 that it would be republished to the members of the Australian Labor Party caucus, the general manager of the Council, the Green councillors, the plaintiff, its solicitor and the New South Wales Police Service. However, he found that no actual damage occurred within that group of recipients. Hence the test had not been made out in relation to them, since actual damage is a necessary ingredient in the tort of injurious falsehood. 17 The trial judge found that it was not the natural and probable result of the defendant sending the facsimile at 1.38pm on 24 March 1996 to Mr Manning that it would be republished in the Newcastle Herald, and that prevented the defendant from being liable for that republication. The trial judge also found that the defendant was entitled to a verdict on the ground that there was a "very significant departure in sense and substance from the original publication" to be found in the newspaper article. 18 The trial judge found that the plaintiff lost its contract with McDonald's as a result of Mrs Richards, a responsible executive, learning of the 24 March 1996 letter through the newspaper article. The trial judge appears to have found that a claimed loss of $38,000, though not evidenced wholly satisfactorily, was "reasonable actual compensation for the loss of" the McDonald's contract. But he found that the defendant was not liable for that loss because of his findings as to the lack of nexus between the defendant's letter and the newspaper article. He also said that even if the plaintiff had recovered a verdict, punitive damages would not have been awarded.

[18]

If this is a finding that there was malice in the sense of intent to injure, it would support the plaintiff's submission. But Fleming propounded two distinct tests, and it is not clear that the trial judge thought both were satisfied, or, if he thought only one was, which he thought was satisfied. The defendant could have had an improper motive without necessarily having an intention to injure. 24 Secondly, even if the trial judge did make a finding of the kind asserted, there is a disconformity between the damage supposedly intended and the damage actually found to have been suffered. The trial judge found that the damage suffered by the plaintiff was loss of the McDonald's contract. There was no finding that the plaintiff suffered injury in its efforts to persuade the Council to approve the rezoning application by reason of the defendant's conduct. The loss of the McDonald's contract had nothing to do with that process. 25 Thirdly, the submission treats the defendant's intention to cause damage as the sole criterion by which to determine whether damage actually occurred. While in certain circumstances an intention to achieve a result can assist in drawing a conclusion that the intention was successful, there is a fundamental difference between an intention to cause damage and the causing of damage in fact. Spencer Bower, assuming that that work propounded the law correctly, highlighted that by stating as a separate and distinct requirement that the plaintiff must have "sustained actual damage by reason" of the malicious publication of false matter. The references to the natural and probable result and to intention are references to remoteness of damage limitations, not to causation issues. Even if there were an intention to cause damage, there would have to be proof of causation of loss in fact. 26 Fourthly, this aspect of the plaintiff's argument was supported by a reference to the following passage from a work on United States law, Harper, James and Gray, The Law of Torts, 2nd ed (1986) p 270: "If the harm was intentionally caused by the defendant, there is no difficulty about the problem of legal causation, since all intended consequences are legal or proximate."

[22]

The Plaintiff's Argument Based on Natural and Probable Result 28 The plaintiff contended that since the trial judge had found that it was a natural and probable result of the impugned letter that it would be republished to various persons connected with the Council, the plaintiff, its solicitor and the police, the trial judge erred in failing to find that the defendant was responsible for republication of the impugned letter to Mrs Richards. 29 The trial judge's reasoning was that the plaintiff's loss of its contract with McDonald's was the result of a recommendation by Mrs Richards, and Mrs Richards based her recommendation on the 11 May 1996 article in the Newcastle Herald: "She was confident of the honesty of those she dealt with in the plaintiff company but the incident appeared to her to contaminate the application and affect it in ways which she could not predict. Naturally neither she nor her company do not want to be associated with anything that could cause a doubt with residents and create a perception that the company would be associated with anything that was not straightforward and honest." 30 At one level, the plaintiff's argument was that the trial judge erred in the following passage: "The original communication was from one person to another. Its republication thereafter was limited to a very small number of people who were, on the face of it, addressees or had an interest in the contents. By 'interest' is meant a legitimate interest not mere curiosity. The thrust of the letter is to have immediate impact on the recipient and perhaps a small number of other people. Its content is not such that leads the Court to think that by a grapevine effect it would be disseminated more broadly referred to by Justice Levine in Patrick Nugawela v Reginald Crampton and Royal Australian College of General Practitioners Supreme Court of New South Wales Levine J unreported 31 January 1996. Whilst the Court does not accept that it was meant as a joke it does appear to be in house and for the attention of a small number of people. For these reasons the Court has concluded that it was not the natural and probable result of the defendant sending a facsimile to Mr Manning that it would be republished in the Newcastle Herald." 31 The first criticism launched by the plaintiff was that the inquiry into what was "the natural and probable result" was "not the appropriate test". However, the plaintiff below had at least twice argued to the contrary in that part of its opening which was recorded. For example, the plaintiff's counsel said: "the law of republication is the same in defamation as it is for injurious falsehood, and the defendant is always liable for the natural and probable consequences of his original publication, if that publication be republished." 32 A second criticism launched by the plaintiff was that there was a contradiction between the passage from the trial judge's reasons set out above in relation to the grapevine effect and an earlier passage. The contradiction was said to lie in the fact that the first class of readers was described as comprising "a very small number of people who were, on the face of it, addressees or had an interest in the contents", whereas earlier the trial judge had said it was republished to members of the Australian Labor Party caucus, the Green councillors, the General Manager of the Council, the plaintiff, its solicitor and the police. There is no contradiction. All these people were either addressees (i.e. members of "The Newcastle City ALP caucus") or had an interest in the contents of the letter (being the Greens as potential allies of the Australian Labor Party councillors, the other councillors, the General Manager, the plaintiff who was affected, its solicitor and the police). 33 A third criticism was that the class, whether it can be called "a very small number of people or not" was large enough to engender the "snowball or grapevine effect". This was said to mean "the spreading of the contents or effect of the letter by gossip and rumour". It was submitted that "Council meetings are open to the public and when the letter was discussed there was opportunity for members of the public present to pass on to others what they had heard. Likewise, news of the letter would have spread among Council staff through to their friends and relatives." It was also submitted that "it is sufficient if Mrs Richards learned of the forged letter by the grapevine effect. In a city the size of Newcastle the letter must have caused a minor sensation. The Council even referred it to the ICAC … ." 34 The third criticism did not rest on any allegation of leaking by the police, so that may be put aside. 35 As to councillors, the history is as follows. Two faxes of 24 March were received in the General Manager's office. The first was sent by Mr Manning to Mr Grant, General Manager. It enclosed the impugned letter and said it "needs to be discussed with Greg Heys [the Lord Mayor] first thing - for possible legal advice." This is suggestive of a goal of confidentiality. That would have been reinforced by the plaintiff's letter of 26 March 1996, received on 27 March 1996, denying authorship of the fax. It was forwarded to all councillors on 27 March 1996. On 2 May 1996 the Lord Mayor raised the question of confidentiality. He was advised of very limited circulation within the staff (the General Manager and two others) and advised that since the plaintiff had referred the matter to the police it was inappropriate to refer it to the Council. At the Urban Development Committee of the Council meeting on 21 May 1996 it was recommended that a report be received from the General Manager on the impugned letter. That report was provided on 9 July 1996 on a confidential basis; and it may be inferred that equal confidentiality prevailed on 21 May 1996. An inference also flows from the fact that though Mrs Richards said that she attended a "council meeting … at the end of May", which may well have been the 21 May 1996 meeting, she gave no evidence of what happened at it. This suggests that nothing happened of which she obtained knowledge, and is consistent with confidentiality having been preserved at the 21 May 1996 meeting. In the course of preparing his report, Mr Grant sought legal advice from Sparke Helmore on 20 June 1996 and received it on 27 June 1996. That legal advice was one reason why the Council considered Mr Grant's report in confidential session on 9 July 1996. At that meeting the Council resolved that confidentiality should remain in place until a public statement was issued (which it was on 12 July 1996): this confirms that Council's policy all along had been to preserve confidentiality. It only referred the matter to the Independent Commission Against Corruption because it received legal advice to do so. 36 The only other persons aware of the impugned letter were the plaintiff and its solicitors, Hunt & Hunt. The latter were under an obvious duty to preserve confidentiality, and there is nothing to suggest that that duty was not performed. On the whole the plaintiff's interests would have been best served by preserving confidentiality, and it evidently did so. It did not approach McDonald's on the matter until after the Newcastle Herald article of 11 May 1996. 37 There are two difficulties with the argument that Mrs Richards learned of the impugned letter by the grapevine effect. The first is that there is no evidence that she did. The evidence is that she learned of the impugned letter before Mr Christopher McNaughton discussed it with her only from an article in the Newcastle Herald; the only article in the Newcastle Herald which was in evidence was that published on 11 May 1996. The evidence is silent on what Mr Christopher McNaughton actually said to her. He gave no evidence about it. She gave no evidence about it in chief; in cross-examination all she said about what she was told about the letter was as follows: "I do recall getting a phone call from Chris McNaughton explaining in detail what had happened and we did talk about how it was going to affect the application … ."

[24]

The reference to "conversations … with Mrs Richards" appears to be a reference to the one telephone conversation which Mrs Richards said she had with Mr Christopher McNaughton after 11 May 1996 and before the "Council meeting" she attended later in May. The reference to "correspondence with Mrs Richards" appears to be a reference to a letter of 9 July 1996 discussed below. The "newspaper reports" referred to comprise the 11 May 1996 Newcastle Herald article and possibly another article not in evidence. As stated above, one problem with this submission (assuming the correctness of the trial judge's reasoning about the 11 May 1996 article, discussed below) is that there was no evidence of what the conversation or the 21 May 1996 meeting or any article other than that of 11 May 1996 disclosed about the impugned letter. Another problem with the submission is that the only letter from the plaintiff to McDonald's before the retainer was terminated, being a letter of 9 July 1996, which mentioned the impugned letter, revealed nothing of its contents. The plaintiff's short criticism of the trial judge on this argument was that the trial judge "wrongfully assumed the only knowledge Mrs Richards had of" the impugned letter was through the 11 May 1996 article. The short answer to that criticism is that there was no evidence that Mrs Richards had knowledge gained from any other sources. 39 The plaintiff repeatedly submitted that Mrs Richards "said she discontinued the services of [the plaintiff] because of the bogus letter". This submission overlooked the fact that she never saw the letter and the fact that there is no evidence that she was ever told of its contents. The submission also fails to grapple with Mrs Richards' evidence-in-chief on the point. The evidence was as follows: "Q. Well now if you look at the article headed 'Bogus letter offered free fast food', that's the article in the Newcastle Herald, it mentions a bogus letter, it mentions McDonalds, it mentions the forged letter and it mentions offering council a free supply of items from McDonald's menu, what effect did that article when you saw it, have on you? …. A. Well a great concern obviously because McDonalds have never given any inducements to councillors or any officials anywhere to get approvals even if it takes a long time, we're quite prepared to go through the normal channel, so to be - feel that initially that that might affect our reputation it certainly gave us cause for concern about the reputation of our consultant Palmer, Bruyn and Parker and in the long - you know, it took - I think it was probably a month or two later that we decided that we couldn't become involved in this and we didn't want to be - we wanted to disassociate ourselves then from a company that might - we were reasonably confident from our meetings with the principals of the firm that they seemed honest but we didn't want to be in any way sort of contaminated by, or affected by it, so we discontinued their services. Q. And that's you say because of the letter, the bogus letter? A. Absolutely. …. Q. Well had there been no forged letter would you have continued with the services of the plaintiff company in this matter? A. Yes."

[27]

(The breaking of the chain of publication is a reference to the finding that it was not the natural and probable result of publication of the impugned letter to the initial small group of people that there would be republication in the Newcastle Herald .) The trial judge also said: "The sense of the original publication is to influence the minds of the expected recipients concerning an immediate political issue before the council. The original publication could not be taken to be a bribe or inducement but rather as a crude attempt to influence members of the caucus in responding unfavourably to the application. This is particularly so as the plaintiff had obvious difficulty in being given the opportunity to advocate the benefits of the application to at least some members of the caucus. In raising offers of a free supply of items as a bribe or inducement in a forged letter in the article the sense is much broader and deeper." 41 The ludicrous references referred to by the trial judge include linguistic usages such as "gonna" (twice) and "youse". Some people speak, but very few write, in that fashion. Some people swear while speaking, but very few in writing. It is ludicrous to suppose that Mr John McNaughton's wife would play the accordion at a Golden Arches birthday party. It is also ludicrous to say that a person connected with the Australian Labor Party like Mr John McNaughton would have as a friend an Independent like the Reverend Nile. It is also ludicrous to suggest that the Federal leader of the Australian Labor Party, or for that matter the Labor Premier of New South Wales, would listen to someone seeking to affect the outcome of a Council decision concerning rezoning of a restaurant at Wallsend. 42 The plaintiff's argument was that the Newcastle Herald article truthfully stated that the impugned letter offered Councillors a free supply of items from McDonald's menus, that the trial judge's different characterisation of the two documents was "a semantic exercise", and there was little if any difference between the imputations conveyed by the two. 43 The trial judge's reasoning survives these criticisms. The impugned letter could be treated as a joke, or as an offer of a bribe, or as a depiction of Mr Christopher McNaughton as a clownish and grossly incompetent negotiator. No-one could seriously treat it as the offer of a bribe in view of its ludicrous aspects. Some treated the letter as a joke: for example, the Council eventually resolved that it had "clear humorous intent". But the trial judge concluded it was not a joke, and neither party complains about that. In essence the trial judge's conclusion was that what the letter did was to ridicule its supposed author as an inept and bumbling lobbyist. By ridiculing the lobbyist who was seeking to bring about a rezoning, the author of the letter was attempting to influence the Australian Labor Party caucus against the cause urged by the lobbyist. That is, it was "a crude attempt to influence members of the caucus in responding unfavourably to the [rezoning] application." The newspaper article, on the other hand, is not to be read in that way: whether or not the letter can be treated as successful ridicule, omission from the newspaper article of all the elements that made the impugned letter a form of ridicule has the result that the article contained starker allegations.

[29]

Correctness of the Tests Propounded by the Plaintiff 45 The plaintiff's submissions to some degree propounded, as has been seen, different legal tests in relation to the link between the impugned letter and the loss of the McDonald's contract. Apart from making very brief references to English and American treatises and to the Restatement, the plaintiff did not present sustained legal argument in favour of the selection of any of these tests over other tests as a matter of the law of injurious falsehood as distinct from other torts. The cases offer a variety of verbal formulae: "the direct and natural result" (Kaye v Robinson [1991] FSR 62 at 67); "suffered special damage thereby" (The Royal Baking Powder Co v Wright, Crossley & Co (1900) 18 RPC 95 at 99); "necessary consequence" and "flows naturally" (Haddan v Lott (1854) 15 CB 411 at 426 and 429); "attributable" (Ajello v Worsley [1898] 1 Ch 274 at 281); "falsehood … [which] are calculated in the ordinary course of things to reduce … and do produce, actual damage" and "directly and in the ordinary course of things" (Ratcliffe v Evans [1892] 2 QB 524 at 527 and 529); and "arising" (George v Blow (1899) 20 NSWLR 395 at 399). The treatises offer an even wider range of choices. Some of these formulae appear to propound causation tests, and others appear to propound remoteness tests operating as limits on the recoverability of losses even though they were caused by the defendant. 46 It would not be easy to reach a concluded view as to whether the tests propounded by the plaintiff do in fact represent New South Wales law, because of the notoriously uncertain and conflicting condition of the relatively rare authorities on injurious falsehood. The somewhat extraordinary circumstances of the present case do not make it an attractive vehicle for arriving at a conclusion as to the correct tests. More importantly, it is not necessary to reach a conclusion as to the correctness of the tests suggested by the plaintiff because on any of them the plaintiff's case fails on the facts.

[32]

Damages: Notice of Contention 49 The defendant gave notice of a contention that even if the other ingredients of the tort had been made out, the action ought to have failed because the trial judge "could have found at most only nominal damages". Since nominal damages are awarded where a legal right has been infringed without actual loss, and since actual loss is the gist of injurious falsehood, this contention in truth amounted to a submission that the evidence did not support a finding of any loss at all and hence that no tort had been committed. 50 In view of the conclusions stated above that the appeal should fail because the plaintiff's attacks on the trial judge's conclusion that the causal ingredient of the tort has not been made out have not succeeded, it is not necessary to deal in detail with the defendant's contention of no actual loss. The trial judge said: "The plaintiff's claim is for $38,000, representing two and a quarter years of an actual loss of $17,235. This figure is derived from calculations made by the plaintiff's accountant Mr Coughlan. He is an experienced accountant and worked on a number of assumptions. The first was that the plaintiff's revenue was calculated on an historical basis. He assumed that the level of activity would not fluctuate. He also assumed that, again on his instructions, no work came in to replace that from McDonalds. He calculated the loss, having regard to the reduction in the company's core business, with the loss of the McDonalds contract and produced a nett figure, having regard to administration costs, bearing in mind that these would necessarily be less with a reduction in work being carried out by the surveyors. The approach taken by Mr Coughlan in his calculations were the best that could be done with his instructions. However, a truer position in reality could have been derived if the Court had been informed as to what Mrs Richards would have expected to have taken place had the contract not been lost. It would also have been of interest to know what the company's plans were and what the plaintiff's projections were as to what would be involved in pursuing the application with council. For these reasons there is a certain artificiality in the damages claimed but nevertheless the amount does appear as reasonable actual compensation for the loss of a significant contract to the business."

At a glance

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Judgment (37 paragraphs)

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