Plaintiffs v Defendants

Supreme Court of Victoria|2011-08-16|Before: BEACH J

DEFAMATION - Practice and procedure - Pleading - Multiple amendments - Whether material published capable of giving rise to imputations pleaded by plaintiffs - Whether imputations are bad in form - Whether imputations embarrassingly vague and ambiguous - Pleading imputations in the passive voice - Inference on an inference.

1 Fairfax Media Publications Pty Ltd, the first defendant, is the publisher of the BRW magazine. In January and February 2008, Jane Lindhe, the second defendant, was employed by the first defendant as a journalist.

2 Franchise Central (Australia) Pty Ltd, the first plaintiff, is a company that provides consultancy services in relation to franchising businesses. Mary Giannakoulias, the second plaintiff, is a director of the first plaintiff. Nickolas Giannakoulias, the third plaintiff, is an employee of the first plaintiff. The precise nature and extent of the third plaintiff's role with the first plaintiff is an issue in dispute in this proceeding. The second and third plaintiffs are also known respectively as Mary James and Nick James.

3 In January 2008, the defendants published an article in the BRW entitled "From building to bail out" ("the first article"). Further, in February 2008, the defendants published an article in the BRW entitled "ASIC acts on franchise accusations" ("the second article"). The articles were also published on a website accessible to paid subscribers.

4 The plaintiffs contend that each article was published of and concerning each plaintiff. In this proceeding, each plaintiff claims damages for defamation in respect of both articles.

5 The proceeding was commenced by writ filed 14 May 2008. The writ was endorsed with a statement of claim. On 25 July 2008, an amended statement of claim was served. On 3 December 2010, the proceeding was fixed for trial commencing on 22 February 2011.

6 On 9 February 2011, some 13 days before trial, the plaintiffs served a further amended statement of claim. The trial commenced on 22 February 2011. Significant time was taken during the trial arguing about the pleadings. Applications to amend the statement of claim were made by the plaintiffs. Applications to amend the defence (which were said to be responsive to the plaintiffs' amendments) were foreshadowed and made by the defendants.

7 It is not necessary to set out in detail the history of the pleadings and disputes that occurred at trial. It is sufficient to say that on 28 February 2011 (day four), I adjourned the trial to enable the parties to finalise their pleadings. I did this because, whilst late amendments are generally to be deplored, I took the view in this case that it would not be in the interests of justice to prevent one or both sides from running the case they wished to run. Further, it was clear to me that the pleadings were not capable of being finalised on the run in a way that would not do injustice to one or both sides: very small changes in the text of each side's pleadings[1] were, it seemed to me, capable of substantially altering the evidentiary basis upon which the trial would be conducted. It was anticipated that each side would (in a relatively short period of time) amend its pleadings so as to formulate permissible claims and defences that set out the cases each side wished to run. Unfortunately, this has proven to be a somewhat forlorn hope.

8 Following the conclusion of the trial, the plaintiff has delivered two further amended statements of claim and a proposed draft further amended statement of claim. The proposed draft further amended statement of claim ("the eighth statement of claim") is the plaintiffs' eighth statement of claim in this proceeding. The defendants contend that the plaintiffs' case has changed substantially over these eight "separate" statements of claim. Multiple objections have been taken by the defendants. On the other hand, the plaintiffs contend that it is "simply wrong to say there have been eight separate statements of claim". They contend there have only "been four genuinely separate statements of claim (all of which have complained about essentially the same issues), together with a series of attempts to appease the defendants in order to avoid semantic arguments at trial and expensive and time consuming applications like this". The disputes between the parties are ongoing. Whatever the merits of the plaintiffs' contention, it might be thought that no great regard appears to be being given by the parties to an economic and efficient resolution or determination of this proceeding.

9 In the present application, the plaintiffs seek leave to file and serve the eighth statement of claim.

10 The defendants oppose the plaintiffs' application. The defendants contend:

(a) the imputations pleaded in paragraphs 7(h), 8(b), 9(c), 12[B](a), 12[B](b), 12[C](c) and 12[C](d) of the eighth statement of claim are deficient;

(b) the true innuendo pleaded in paragraph 12A of the eighth statement of claim is deficient on its face, as are the particulars of extrinsic facts that are said to support it;

(c) because of the deficiencies referred to in sub-paragraphs (a) and (b), leave to file and serve the eighth statement of claim should be refused;

(d) as a condition of any leave to replead, the plaintiffs ought to be compelled to provide further and better particulars of the allegations in paragraph 14 of the eighth statement of claim in response to the requests delivered by the defendants on 14 April and 24 May 2011, which remain unanswered; and

(e) the plaintiffs ought to be ordered to pay the defendants' costs thrown away and occasioned by reason of their various attempts to formulate their statement of claim (including the costs thrown away and occasioned by the abandonment[2] of the special damages claim), and the defendants' costs of and incidental to the present application.

11 On the other hand, the plaintiffs contend that in reality the present hearing and the defendants' submissions concern an attempt by the defendants to raise a series of applications, namely:

(a) an application by the defendants to strike out certain imputations from the eighth statement of claim;

(b) an application by the defendants for further and better particulars of the eighth statement of claim;

(d) an application by the defendants for the costs of their expert report.

12 It is put by the plaintiffs that much of what the defendants are doing is tactical, attempting to set up an entitlement of costs "in the hope that they [the defendants] will not have to fight the case on the merits". It is not necessary to determine this submission. Whatever the truth of it (and I expressly say nothing about that at this stage), appropriate trial management dictates that I resolve the present application by considering the defendants' arguments concerning the deficiencies they allege exist in the plaintiffs' proposed pleading - remembering that the ultimate goal is a trial on proper pleadings which do not permit one side to successfully contend at trial that they are taken by surprise by the other raising some particular point.

13 In this application, it is of course necessary to look at the form of the proposed pleading. Leave ought not be given to file and serve the eighth statement of claim in its current form if any part of the pleading is defective. For that reason it is necessary to examine each of the paragraphs in respect of which the defendants make complaint.

14 Whilst different complaints are made in respect of each of the imputations alleged to be deficient, in respect of a number of them there is a complaint that the relevant imputation is not capable of arising. It is thus necessary to consider, describe and set out the text of both articles.

15 The first article was published under the heading "From building to bail out". Under this heading, there was a sub-heading "An agreement with a consultancy firm to help expand a franchise business led to claims of high fees and a lack of services. Report: Jane Lindhe".

16 With the addition of paragraph numbers for ease of reference, the first article was in the following terms:

A franchising consultancy locked in a bitter dispute with a former client has been accused of making unsustainable claims about some of the services it offers, and of being managed by an undischarged bankrupt.
With three of Franchise Central's former clients contacted randomly by BRW unsatisfied with its services, the owner of one Victorian company says she has been put off franchising after her experiences with the consultancy.
The founder and managing director of Melbourne pet lifestyle company Puppy Phat, Kristy Andruszko, says she came to the brink of a financial and emotional collapse after her dealings with the company. She claims the experience also contributed to her losing her house and relationship. Her once successful business is now for sale.
In May 2005, Andruszko decided to use Franchise Central's services to help develop her expanding business. In one year, she paid a $35,000 fee to create a franchising agreement plus regular fees totalling about $20,000.
Having decided she needed help to appoint franchisees after receiving hundreds of inquiries about franchising, she was attracted to Franchise Central's pricing - which was about half the amount of competing consultancies.
Franchise Central's brother-and-sister team, Nick and Mary James also appeared to be "very approachable and capable", of franchising her business, which had four stores in Victoria until recently.
It was nine months before Andruszko signed her first franchisee agreement. Of the $33,000 fee paid by the franchisee, Franchise Central received $8000 for its services. By that stage, Andruszko had begun to question why things had taken so long.
"I had passed on scores of leads to Franchise Central, but none of them ever eventuated to anything," she says. "I started to worry."
But Nick James says Andruszko had few potential franchisees because of a "tough market" and Puppy Phat's limited ability to make profits. "When [potential franchisees] got to the financials, they said, 'We're not forking out this kind of money to earn nothing'."
Asked why Franchise Central would choose to represent a company with little ability to attract potential franchisees, James says he thought Puppy Phat was a good business. "I still think it's a good business, I just don't think it has a lot of legs in terms of money and return. [Andruszko is] in the same boat as a lot of franchisors in the country - there's a lot of inquiries but not many people buying."
Andruszko's first franchisee turned out to have troubles of her own. Andruszko spent six months working to find a suitable site for the new store. But despite the efforts of both Andruszko and her franchisee, they were unsuccessful.
Landlords rejecting the applications said the franchisee, 22, seemed too young to maintain a lease and suggested she seek financial security from a third party. But rather than continue with the contract, the franchisee chose to sue Andruszko for failing to find and approve an appropriate site.
A panicked Andruszko, who says her worst fear in business was to be sued, then approached Franchise Central for advice. "All I wanted to know was whether my franchisee had the right to sue me under my franchise agreement."
Franchise Central recommended she seek the advice of a litigation lawyer that charged an upfront fee. "After spending about $55,000 all up, including a $715 monthly support fee, I thought they could answer some questions about the franchise agreement they wrote."
Andruszko says their claims are confusing. "They are 'legal' when it comes to writing up documentation, but as soon as something goes wrong they wash their hands of it."
Franchise Central was unable to clarify the legal advice it can provide. On its website, which refers to a network of lawyers, the company claims its services include litigation in all courts. However, Nick James told BRW that it doesn't provide litigation advice. In another interview, he said it hires in-house lawyers.
Presented with mounting costs and the threat of being sued by her only franchisee, Andruszko told company director Mary James she wanted to end her relationship with Franchise Central.
By that stage she had stopped paying its $715 monthly service fee because she felt she was not getting value from the service. "I never called Franchise Central for advice, but occasionally I would call Nick for an update," she says. "In my opinion, the fee should have been taken when franchises were sold, not on an ongoing basis when I saw very little being achieved."
In an email, Andruszko told Mary James that she wanted to put a stop to the recruitment of Puppy Phat franchisees. "I no longer feel confident or [have] the desire to pursue the search for franchisees," she said.
Mary James wrote back: "Maybe you should join your furry friends in obedience school and learn the tricks of the trade - no doubt you will find that a pat and a treat would come your way more often in life than a swift kick up the arse, for God's sake." In another email, she said: "That is our advice and that is what you need to do - get a lawyer. What part of the English language don't you understand?"
After the heated exchange, Andruszko says she called the Franchise Council of Australia for advice, but was told her complaint was "more an issue for the ACCC [Australian Competition and Consumer Commission] or perhaps consumer affairs".
She says: "They seemed unsure of what I should do. At that point, I was at a loss of where to turn."
Nick James claims his sister's emails were sent in haste after much frustration. "That was out of frustration at the end of the day when Kristy was pointing the finger at everyone else," he says. "There were hundreds of emails, but generally the emails were pretty friendly. At that stage, both parties were frustrated."
James challenges Andruszko's account. "She is in the wrong in regards to her franchise agreement ... She thinks that if you draw up a document then it's watertight, but if you're not doing the right thing as a franchisor then the franchisee has the right to challenge you."
Franchise Central has no responsibility to assist Andruszko with problems with her contract because it doesn't deal with litigation matters, he says. "At this stage I am mediating, and that is not my role."
He says his company will attempt to bankrupt Andruszko for a $715 support fee she has failed to pay despite her payments of almost $55,000. "We are now taking action to bankrupt her ... the debt has been outstanding for some time, and for Kristy it's about not spending a cent," he says.
Nick James is banned from managing or acting as a director of a business under Corporations law. His insolvency trustee, Nick Mellos of Grant Thorton, says he became bankrupt in April 2005 for personal tax debts of about $50,000.
James is prevented from operating as a director or manager of a company until April 2, says Mellos, who will investigate his role at Franchise Central.
All of the Franchise Central clients contacted by BRW were unaware that Nick James is an undischarged bankrupt.
BRW also came into the possession of one of Nick James's business cards that lists him as director of the company. The business card was distributed in May, a month after his bankruptcy was filed.
James says his activities in the business do not mount to running the company. His official role is senior franchise adviser.
Asked whether this amounted to managing the company, he says: "Not really, we employ people to do the same things [when it comes to] the recruiting and selling. There's no reason why I can't give advice."
It also emerged during BRW's inquiries that the James's registered surname is Giannakoulias, not James. Nick James says the use of the name is not related to his bankruptcy, but rather a name he has used for 25 years since university. He has never changed his name. "People just know me as Nick James," he says.
Andruszko is not alone in her problems with Franchise Central. A former client, Duster Dollies, stopped using its services after finding them unsatisfactory.
Founder Julie Finch-Scally says that while she does not want to impugn James's character, she was unsatisfied with the company's service.
"I have a Sydney business, and Nick moved from Sydney to Melbourne without telling me," Finch-Scally says. "In my opinion, he has spread his services too thin and finds it hard to manage the needs of so many clients.
"At one stage, I was providing a number of leads but I just wasn't getting the service. I decided to go elsewhere."
Finch-Scally - who was shocked her business was still being advertised as one of Franchise Central's clients on its website - was concerned by his status as an undischarged bankrupt.
Franchise Central also advertises a de-registered gold-plating business, The Gold Club, of which Nick James is a former director.
Andruszko is devastated by her experience but believes her story is an important lesson for small businesses considering franchising.
Her once successful business is now on the market and she says she will never contemplate franchising again.
"I feel like the business has been bastardised and I have lost the passion," she says. "I am exhausted and I just feel as though someone else with the right vision might be able to revive my business. That person is just not me."

17 The first article was published with a photograph of Ms Andruszko sitting next to a small dog in her shop. The caption of the photograph read:

Exhausted: Founder Kristy Andruszko is selling her business, Puppy Phat.

18 The second article was published under the heading "ASIC acts on franchise accusations". Again, adding paragraph numbers for ease of reference, the second article provided:

Allegations that a consultant involved in a Melbourne franchise consultancy has made unsustainable claims about some of the legal services the company says it can provide are being investigated by the Australian Securities and Investments Commission.
ASIC launched an inquiry into the actions and role of consultant Nick James at the company, Franchise Central, after the publication of an article in the BRW Fast Franchises edition.
An analyst from ASIC's national assessment and action division, who contracted BRW for further information about James, says the regulator will assess whether he has made any breaches under the legislation it administers.
James became an undischarged bankrupt in 2006 with personal debts of about $50,000. Under corporations law, it is illegal for him to act as a director or manage a company. While his sister is listed as the sole director of the company, at least three of his clients claim he runs the organisation, which he denies.
James says that acting as a franchise consultant and managing clients does not amount to managing a company.
Former client Kristy Andruszko, founder and managing director of Melbourne pet lifestyle store Puppy Phat, says she was turned off franchising by her dealings with Franchise Central. She alleges the lack of services and support she received from the company is one of the main reasons her once-successful business is now for sale.
James denies the claim, saying Andruszko has been provided with more than the usual level of support for clients. Problems she encountered with her first franchisee were her own fault, he says.
An investigation by BRW found that James' real surname is Giannakoulias. His sister also uses the surname James. Both have not legally changed their names, but say that James is a name they have used for many years.

19 The second article was published with a photo of Ms Andruszko holding a small dog in one of her shops. The caption next to this photograph read:

Sold out: Puppy Phat founder Kristy Andruszko paid a high price for advice.

20 I turn now to consider the various complaints made by the defendants in respect of the imputations pleaded by the plaintiffs. Before doing so, it is necessary to set out some relevant principles.

21 The principles for determining whether or not a matter complained of is capable of conveying particular imputations were summarised by Hunt J in Farquhar v Bottom.[3] His Honour said:[4]

"In deciding whether the matter complained of is capable of conveying to the ordinary reasonable reader the imputations relied upon by the plaintiff, I must be guided and directed by the test of reasonableness. I must reject any strained, or forced, or utterly unreasonable interpretation: Jones v Skelton ([1063] SR (NSW) 644). I must proceed upon the basis that the ordinary reasonable reader is a person of fair, average intelligence: Slatyer v Daily Telegraph Newspaper Co Ltd ((1908) [1908] HCA 22; 6 CLR 1 at 7); who is neither perverse: ibid; nor morbid or suspicious of mind: Keogh v Incorporated Dental Hospital of Ireland ((1910) 2 Ir R 577 at 586); nor avid for scandal: Lewis v Daily Telegraph Ltd ([1964] AC 234 at 260).

This ordinary reasonable reader does not, we are told, live in an ivory tower. He can, and does, read between the lines, in the light of his general knowledge and experience of worldly affairs: Lewis v Daily Telegraph Ltd (supra at 258); Jones v Skelton (supra at 650); Lang v Australian Consolidated Press Ltd ([1970] 2 NSWR 408 at 412). It is important to bear in mind that the ordinary reasonable reader is a layman, not a lawyer, and that his capacity for implication is much greater than that of the lawyer: Lewis v Daily Telegraph Ltd (supra at 277); Morgan v Odhams Press Ltd ([1971] 2 All ER 1156 at 1163); Lang v Australian Consolidated Press Ltd ([1970] 2 NSWR 408 at 412); Middle East Airlines Airliban SAL v Sungravure Pty Ltd ([1974] 1 NSWLR 323 at 34)."

22 In Soultonov v The Age Company Limited & Another,[5] Kaye J described the hypothetical ordinary reasonable reader in the following terms:[6]

"The issue which I must determine on the defendants' summons is a question of law, namely, whether the article was reasonably capable of conveying the imputation, pleaded by the plaintiff, to the ordinary reasonable reader. The hypothetical "ordinary reasonable" reader has been described as an ordinary person who does not live in an ivory tower, and who reads between the lines in the light of his or her general knowledge and experience of worldly affairs. Such a reader is described by the law as someone who is not "avid for scandal" and who is neither "unusually suspicious nor unusually naïve". He (or she) does engage in a degree of loose thinking, and is understood to read between the lines. In particular, it is important to take into account that the ordinary reasonable reader is a lay person, and not a lawyer, and that his or her capacity for implication is much greater than that of a lawyer. On the other hand, as observed by Mason J in Mirror Newspapers Limited v Harrison, it is necessary to draw a distinction between the reader's understanding of what the article is actually saying, and a judgment or conclusion which the reader may reach as a result of his or her own beliefs and prejudices after reading the particular matter in question."[7]

23 Many authorities have dealt with the rules relating to the pleading of imputations. Whilst whether an imputation has been properly pleaded is to be determined as a matter of practical justice and in the relevant circumstances of the impugned publication, the following propositions emerge from the authorities:

(a) First, distinct meanings should be pleaded - and the test for distinctiveness is whether the evidence required to justify each meaning would be substantially different.

(b) Secondly, distinct meanings should be distinctly pleaded - because of the potential for a rolled up plea to cause confusion.

(c) Thirdly, an imputation must express the precise act or condition asserted of or attributed to the plaintiff or of which the plaintiff is charged.

(d) Fourthly, an imputation should represent the final distillation of the alleged defamatory meaning.[8]

24 The principals to be applied when determining whether an imputation has been properly pleaded on the one hand, or is too vague and imprecise on the other hand, were discussed by Kaye J in Trkulja v Google Inc Llc & Anor.[9] His Honour said:[10]

"First, the question, whether an imputation has been properly pleaded, is to be determined as a matter of practical justice, rather than as an exercise of close semantic or linguistic refinement. Secondly, the question whether a particular imputation is sufficiently specific depends, essentially, on the context in which it is pleaded. In some publications, the allegation about a plaintiff may be so unspecific as to give rise only to the most general imputation. For example, a billboard alleging that a particular plaintiff is "corrupt" may, in an appropriate case, only give rise to an imputation pleaded in the most general form. On the other hand, and by contrast, a publication may, by its context, give rise to one or more possible meanings of a particular condition attributed to the plaintiff. In such a case, where the plaintiff pleads that the publication imputed that condition to him, the plaintiff is obliged to specify how and in what respects that condition is conveyed in the imputation.

Those two propositions can be derived from the leading judgment of Gleeson CJ in Drummoyne Municipal Council v Australian Broadcasting Corporation. In that case, the primary judge had struck out three imputations in a statement of claim, which alleged "corrupt" conduct or acts of the plaintiff council. The Court of Appeal (by majority) upheld that decision. In doing so, Gleeson CJ stated the principle as follows:

'The requirement that a plaintiff must 'specify' the act or condition which he claims was attributed to him, that is to say, the statement which he says is made about him, which follows from the scheme of the Defamation Act, the provisions of the Supreme Court Rules, and the ordinary rules of pleading, is one which, in its practical application, raises questions of degree. Almost any attribution of an act or condition to a person is capable of both further refinement and further generalisation. In any given case a judgment needs to be made as to the degree of particularity or generality which is appropriate to the occasion, and as to what constitutes the necessary specificity. If a problem arises, the solution will usually be found in considerations of practical justice rather than philology. ... Furthermore, whilst the principles relevant to the plaintiff's obligation remain constant their practical application may depend upon the facts and circumstances of the given case, and the relevant circumstances may include the manner in which the defendant, or the author of the defamatory matter, has expressed the defamatory matter. Defamation may come in the form of snide insinuation or robust denunciation, or something in between those two extremes. The attribution to a person of an act or condition may be done with a high degree of particularity or it may take the form of the most generalised and non-specific abuse. ... If a defendant has posted in a public place a sign that simply says 'X is disgusting', the degree of specificity with which it is appropriate to require X to formulate the defamatory imputation will need to be related to the nature and content of the defamatory matter'."[11]

25 Finally, there has been debate from time to time in the authorities as to the desirability of imputations being pleaded in the active, rather than the passive, voice. In Jackson v John Fairfax & Sons Limited,[12] Hunt J said that "In very few cases can it be a proper compliance with the pleader's obligation where the imputation is cast in the passive voice".[13] Whilst it is desirable that an imputation be expressed in the active voice and, unless the publication does not admit of it, that the imputation should identify the conduct of the plaintiff that, as a matter of the natural and ordinary meaning of the publication, is said to give rise to the suspicion or belief pleaded, the question of whether a particular imputation has been properly pleaded remains to be determined as a matter of practical justice, rather than as an exercise of linguistic refinement.[14]

26 I turn now to consider the imputations, with which the defendants take issue, in the eighth statement of claim.

27 In paragraph 7(h) of the eighth statement of claim it is pleaded that the first article meant that "the first plaintiff dishonestly advertised a gold plating business for acquisition that was defunct". The reference to a gold plating business in the first article appears in paragraph 39. ("Franchise Central also advertises a deregistered gold-plating business the Gold Club, of which Nick James is a former director").

28 The defendants submit that there is nothing in the first article capable of conveying to ordinary, reasonable readers the purpose for which the first plaintiff advertises the Gold Club. Further, it is submitted that nothing in the first article suggests that the first plaintiff makes businesses available "for acquisition".

29 In considering the defendants' submissions as to whether imputation 7(h) is capable of arising, the words of McPherson JA in Favell v Queensland Newspapers Pty Ltd[15] are apposite. His Honour said:

"Whether or not [the pleading] ought to and will be struck out [as disclosing no cause of action] is ultimately a matter for the discretion of the judge who hears the application. Such a step is not to be undertaken lightly but only, it has been said, with great caution. In the end, however, it depends on the degree of assurance with which the requisite conclusion is or can be arrived at. The fact that reasonable minds may possibly differ about whether or not the material is capable of a defamatory meaning is a strong, perhaps an insuperable, reason for not exercising the discretion to strike out. But once the conclusion is firmly reached, there is no justification for delaying or avoiding that step [at] whatever stage it falls to be taken."[16]

30 Whilst this is not a strike-out application, as I have said above, leave should not be given to the plaintiffs to deliver the current proposed pleading if it is properly concluded that one or more of its imputations are incapable of arising. That said, appropriate caution should be exercised in determining that a particular imputation, in respect of which the defendants make complaint, is incapable of arising.

31 There is obvious force in the defendants' submissions that there is nothing in the first article suggesting that the first plaintiff makes businesses available for acquisition, or indeed the purpose for which the Gold Club was advertised. However, as I have already said, the issue at this stage is whether the claimed meaning is open - not whether it was actually conveyed. Remembering that the ordinary reasonable reader does read between the lines and does have a capacity to engage in a degree of loose thinking, I am not prepared to conclude that the first article (when read as a whole) is incapable of giving rise to imputation 7(h). Accordingly, I reject the defendants' complaints with respect to it. This conclusion, of course, says nothing about whether imputation 7(b) will be made out at trial. It may well not be made out.

32 In paragraph 8(b) of the eighth statement of claim it is pleaded that the first article meant that "it was reasonably suspected that [the second plaintiff] was dishonestly using a false name to assist her brother in avoiding detection of his bankruptcy in circumstances where he was illegally de facto directing the first plaintiff". The defendants make a number of related complaints about this imputation: first it is expressed in the passive voice ("it was reasonably suspected..."); secondly, it does not identify the party or parties who are said to hold the "reasonable suspicion"; thirdly, it does not identify any conduct on the part of the second plaintiff upon which the "reasonable suspicion" is said to be based; and fourthly, it is in any event incapable of arising other than by an impermissible process of drawing an inference on an inference,[17] or by a strained or forced or "utterly unreasonable" interpretation of the first article - namely that the second plaintiff was using a false name in order "to assist her brother in avoiding detection of his bankruptcy in circumstances where he was illegally de facto directing the first plaintiff".

33 The plaintiffs contend that imputation 8(b) is open. They contend "it is patently obvious who the person or persons are who are said to harbour the reasonable suspicion: it is those employees of BRW who made the enquiries and/or the writer of the article and/or the publisher of BRW, and the readers are invited to accept their view". Additionally, they contend that imputation 8(b) is not defective because the conduct of the second plaintiff is expressly stated in the imputation.

34 Having regard to the plaintiffs' contention that the people who are said to harbour the reasonable suspicion are "those employees of BRW who made the inquiries and/or the writer of the article and/or the publisher of BRW, and the readers are invited to accept their view", in order that there be no doubt as to the ambit of the plaintiffs' case, and in order to avoid embarrassment at trial, I am of the view that imputation 8(b) should be recast so as to reflect this contention. At present, there is an unnecessary and undesirable vagueness in the way imputation 8(b) is cast. If the reasonable suspicion is limited to the defendants or their employees, then this may result in comment defences being taken. On the other hand, if there is objective conduct said to be attributed to one of the plaintiffs which gives rise to a more general reasonable suspicion, then this should be made clear and the relevant conduct expressly pleaded so that the defendants may plead whatever comment or justification defences that are open to them.

35 It follows that any leave given to the plaintiffs to file and serve a further amended statement of claim will be given only on the basis that such a pleading not contain the current paragraph 8(b). That paragraph may be re-pleaded (in accordance with these reasons), if the plaintiffs are so advised. Having regard to my conclusion just expressed, it is not necessary to say anything as to whether imputation 8(b) is capable of being conveyed. However, in view of the possibility that the plaintiffs will re-plead imputation 8(b), I should say that if I had not taken the view that imputation 8(b) should be recast, I would (bearing in mind the principles to which I have already referred) not have concluded that the imputation was incapable of arising from the first article.

36 In paragraph 9 of the eighth statement of claim it is pleaded that the first article meant that "it was reasonably suspected that [the third plaintiff] was dishonestly using a false name to assist in concealing his bankruptcy while he was acting illegally in de facto directing the first plaintiff". The defendants make the same complaints about imputation 9(c) as are made about imputation 8(b). I take the same view about imputation 9(c) as I have taken about imputation 8(b). For the reasons I have given in respect of imputation 8(b), imputation 9(c) must be re-pleaded. Accordingly, as with imputation 8(b), any leave given to the plaintiffs to file and serve a further amended statement of claim will be given only on the basis that such a pleading not contain the current paragraph 9(c). Again, that paragraph may be re-pleaded (in accordance with these reasons), if the plaintiffs are so advised.

37 Paragraph 12 of the eighth statement of claim pleads the false innuendos in respect of the second article. Paragraph 12[B](a) pleads a false innuendo in respect of the second plaintiff that "as the director of the first plaintiff, she had committed or permitted it to act or be involved in the matters referred to in [A] (a) to [A] (c) inclusive hereof". Having regard to the internal reference to "[A] (a) to [A] (c)" in paragraph 12[B](a), it is necessary to set out paragraph 12[A](a) to (c). Those paragraphs provide:

"12 In its natural and ordinary meaning the Second Article was defamatory of the plaintiffs and meant and was understood to mean:

[A] In respect of the first plaintiff, that:

(a) the Australian Securities and Investment Commission ("ASIC") was conducting an investigation into the plaintiffs because it reasonably suspected that they had knowingly made false claims about legal services the first plaintiff could provide

(a)(b) ASIC had launched an investigation into the plaintiffs as to whether they had knowingly made false claims about the legal services the first plaintiff could provide

(b) ASIC was conducting an investigation into the plaintiffs because it reasonably suspected that the third plaintiff was illegally managing the first plaintiff whilst an undischarged bankrupt

(b)(b) ASIC had launched an investigation into the plaintiffs as to whether the third plaintiff was illegally managing the first plaintiff whilst an undischarged bankrupt

(c) that [sic] the lack of services and support from the first plaintiff was one of the main reasons that client Kristy Andruszk of Puppy Phat's once-successful business had suffered significant damage."

38 The first complaint about imputation 12[B](a) made by the defendants is that the second plaintiff is not named anywhere in the second article, and therefore, they assert, any meaning defamatory of the second plaintiff can only arise in respect of readers with knowledge of extrinsic facts. The plaintiffs dispute this proposition and say that it is open to them to plead meanings defamatory of the second plaintiff because of the references to her in paragraphs 4 and 8. In support of their contentions, the plaintiffs rely upon well known authority to the effect that it is not necessary that the words complained of refer to the relevant plaintiff by name - provided that the relevant words would be understood by reasonable people to refer to the plaintiff. Again, it must be remembered that at this stage the Court is not looking at the question of whether or not the second plaintiff will establish a particular matter or matters at trial - but rather, the question is whether it is open to the second plaintiff to make the particular plea she wishes to make. In my view it is open to the second plaintiff to plead false innuendos in respect of the second article (and without the need to plead extrinsic facts relating to identification). Whilst the second plaintiff may ultimately fail on the issue of identification (a matter about which I say nothing at this stage), the current proposed pleading is not so unarguable as to disentitle the second plaintiff from pursuing it.

39 The real problem with imputation 12[B](a) is its form. Distinct meanings should be distinctly pleaded. Rolling up all of the "matters referred to in [A](a) to [A](c)" in one imputation is very likely to give rise to difficulty at trial. The precise conduct which the second plaintiff alleges is attributed to her by the second article should be distinctly pleaded. Any leave given to the plaintiffs to file and serve a further amended statement of claim will be given only on the basis that such a pleading not contain the current paragraph 12[B](a). That paragraph may be re-pleaded (in accordance with these reasons), if the plaintiffs are so advised.

40 In paragraph 12[B](b) it is pleaded that the second article meant, in respect of the second plaintiff, that "she dishonestly used a false name to assist her brother in avoiding detection of his bankruptcy in circumstances where he was illegally de facto directing the first plaintiff". The defendants complain about this imputation, relying on arguments and variants of arguments to which I have already referred. First, there is the argument that the second plaintiff is not named in the article. I reject this argument for the reasons already given.

41 Secondly, the defendants contend (on two bases) that the imputation is incapable of arising. The short answer to this submission is that I am not persuaded that it is not open to the plaintiffs to make the plea they wish to make. Again, one must remember that ordinary, reasonable readers do engage in a degree of loose thinking and are understood to read between the lines. The real question in this case is whether the pleaded imputation actually arises. That is not a question for me at this stage.

42 In paragraph 12[C](c) it is pleaded that the second article meant, in respect of the third plaintiff, that:

"As a de facto director of the first plaintiff, he had caused or permitted the first plaintiff to be involved in:

(i) the conduct the subject of ASIC's alleged investigation set forth in sub-paragraph 12[A](a) hereof;

(ii) the conduct the subject of ASIC's alleged investigation set forth in sub-paragraph 12[A](b) hereof;

(iii) the conduct of the first plaintiff in respect of the lack of services and support set forth in sub-paragraph 12[A](c) hereof."

43 The defendants submit that imputation 12[C](c) is embarrassingly vague and ambiguous. I agree. Imputation 12[C](c) should be split into discreet and distinct meanings. Further, any relevant "conduct" to which the plaintiffs wish to refer should be separately and distinctly pleaded - rather than by use of an ambiguous referral back to an earlier paragraph.

44 For these reasons, any leave given to the plaintiffs to file and serve a further amended statement of claim will be given only on the basis that such a pleading not contain the current paragraph 12[C](c). That paragraph may be re-pleaded (in accordance with these reasons), if the plaintiffs are so advised.

45 In paragraph 12[C](d) it is pleaded that the second article meant, in respect of the third plaintiff, that "he dishonestly used a false name to assist in concealing his bankruptcy whilst he was acting illegally in de facto directing the first plaintiff". The defendants contend that this imputation is incapable of arising. Their argument is similar to that made in respect of imputation 12[B[(b). Whilst I may at this stage have real doubt as to whether imputation 12[C](d) actually arises, again, that is not the question for me at this stage. It is sufficient to say, on this application, that I am not persuaded that it is not open to the third plaintiff to plead imputation 12[C](d).

46 I turn now to consider the defendants' complaints in respect of paragraph 12A of the eighth statement of claim.

47 Following the service of the defendants' outline of submissions,[18] the plaintiffs gave notice of an intention to amend paragraph 12A of the eighth statement of claim. The form of paragraph 12A that the plaintiffs wish to pursue is as follows:

"12A Further or alternatively, by reason of the extrinsic facts set out below, the second article was defamatory of the plaintiffs in the meanings set forth in paragraphs 12[A](a) and (b), 12[B](a) (insofar as it refers to 12[A](a) and (b)) and 12[C](b).

Particulars

(i) the Australian Security and Investment Commission is a regulatory body charged with the governance of companies;

(ii) ASIC would have complaints referred to it by members of the public which it would examine, but it would only commence an investigation if there was reason to suspect that there had been breaches of the relevant legislation it administers;

(iii) members of the public who read the BRW and who were reading the second article would have knowledge of and understand the import of sub-paragraphs (i) and (ii) hereof."

48 In my view, the proposed paragraph 12A is defective. It impermissibly attempts to roll up a number of possible imputations in a way that is confusing. The plaintiffs should set out each true innuendo that is relied upon and give particulars of the extrinsic facts which support each true innuendo.

49 Whilst a re-pleading of paragraph 12A is likely to produce different particulars from those currently advanced, for the sake of completeness I should say something about the current particulars. The defendants make complaint that particulars of extrinsic facts which allege that ASIC would investigate "if there was reason to suspect" something cannot support an imputation that ASIC "reasonably suspected" the same thing. The defendants submit that having a reason to suspect something is different from something being reasonably suspected. There may be some force in this argument if put at trial. However, I am not persuaded that there is such force in the argument as to deny the plaintiffs the ability to plead true innuendos containing the words "reasonably suspected" supported by extrinsic facts alleging there was "reason to suspect".

50 Paragraph (iii) of the particulars advanced by the plaintiffs is at least ambiguous, if not untenable. On one view, it asserts that all members of the public who read the BRW and who were reading the second article know that ASIC would only commence an investigation if there was reason to suspect that there had been breaches of the relevant legislation it administers. If that is the proper construction of paragraph (iii), then it is untenable. Unless a fact is so notorious that it is known to everyone (in which case there is no true innuendo), it can only be known to a percentage of people. An assertion that a fact is known to every person (whatever their background) simply because they purchase and read a well known magazine which is on sale to the general public is not sustainable. Whatever extrinsic facts the plaintiffs wish to plead in their reformulated version of paragraph 12A should encompass a pleading that those extrinsic facts were known to whatever proportion of readers the plaintiffs wish to allege. Further, the plaintiffs should specify the readers who they allege have knowledge of the relevant extrinsic facts - at least by identifying the characteristics of the group to which they wish to refer.

(a) the defendants' application that the plaintiffs, as a condition of any leave to deliver another statement of claim, be compelled to provide further and better particulars of the allegations in paragraph 14 of the eighth statement of claim; and

(b) an application by the defendants that the plaintiffs be ordered to pay costs thrown away as a result of the various attempts to formulate the statement of claim (including costs said to be thrown away as a result of the abandonment of the special damages claim), and the defendants' costs of and incidental to the present application.

Paragraph 14 of the eighth statement of claim and the request for particulars

52 Paragraph 14 of the eighth statement of claim pleads a claim by the second and third defendants for aggravated damages. Subjoined to paragraph 14 of the eighth statement of claim are paragraphs (a) to (h) of particulars of the aggravated damages claim. Up until 9 February 2011 (when the third statement of claim was delivered), there was only one paragraph of particulars - paragraph (a). On 11 February 2011, the plaintiff pleaded paragraphs (b) to (h) of the particulars in their current form - save that paragraph (f) as originally pleaded did not then contain the further sub-particulars (i) to (xii). The text of sub-particulars (i) to (xii) were first pleaded on 25 February 2011 (after day 3 of the trial) as particulars of malice (a) to (l) under paragraph 2 of a reply to the defendants' second further amended defence of the same date.

53 By letter dated 14 April 2011 (some 6½ weeks after the trial was adjourned), the defendants made 14 numbered requests for particulars of the particulars subjoined to paragraph 14 of the plaintiffs' then pleading. Requests numbered 1 to 6 dealt with paragraphs of the particulars first added to paragraph 14 in the third statement of claim on 9 February 2011. Requests numbered 7 to 14 sought particulars of the new sub-particulars in paragraph (f).

54 The plaintiffs resist the defendants' application for particulars of paragraph 14 on the basis that further particulars are not necessary. The plaintiffs contend that all the particulars referred to "were extant at trial without objection by the defendants".

55 The defendants respond by contending that they did not seek the particulars sought in requests 1 to 6 before trial because "the trial was about to commence and we [the defendants' solicitors] were cooperating with you to ensure that, despite the radical re-pleading of your clients' claim, the trial did not go off". Further, the defendants contend that their forbearance in not seeking those particulars should not now be held against them in the present circumstances.

56 The function of particulars is, of course, to inform the other side of the nature of the case to be met and to limit the generality of the pleadings. Further particulars should only be ordered if they are necessary to enable the opposite party to plead, or to define the questions for trial, or to avoid surprise at trial.[19]

57 In my view, no order for further particulars should be made in respect of requests 1 to 6. The defendants' failure to seek those particulars prior to trial underscores the fact that they are not truly necessary for any of the purposes to which I have referred.

58 I take a different view with respect to requests 7 to 14. These are requests of paragraphs added after the conclusion of the third day of the trial. In my view, the second and third plaintiffs should provide further particulars pursuant to these requests. Having said that, I will not make compliance with the order for these particulars a precondition of any leave to file and serve another statement of claim.

59 When the trial was adjourned on 28 February this year, I said that I did not propose to make any order as to costs, other than to reserve costs, because I suspected that the proper order might ultimately depend upon the final form of both sides' pleadings. I remain of that view.

60 Whilst rule 63.17[20] provides for a party who amends a pleading to pay the costs of and occasioned by the amendment unless the Court otherwise orders, I propose to leave all questions of costs relating to the aborted trial and the various amendments until this proceeding is, at least, in a position where both sides agree that it is ready to be tried. Even then, the preferred course at that stage may be to hear and determine the proceeding before making costs orders.

61 So far as the defendants' application for costs thrown away by reason of the abandonment of the special damages claim is concerned, I am of the view that these costs should await the outcome of the trial. It seems to me at least arguable that there is some overlap between the first plaintiff's claim for general damages by reference to a decrease (or lack of increase) in turnover and the former claim for special damages. In my view, these matters are best assessed following the conclusion of the trial of this proceeding.

62 For the reasons given above, and subject to hearing counsel in relation to their final form, I propose to make orders as follows:

(1) The plaintiffs have leave to file and serve a further amended statement of claim in the form of the eighth statement of claim and amended in conformity with these reasons.

(2) The second and third plaintiffs provide further and better particulars of paragraph 14 of the amended statement of claim in compliance with requests numbered 7 to 14 of the defendants' solicitor's letter of 14 April 2011.

[1] Specifically, the imputations to which each side contended the articles gave rise.

[2] In the sixth statement of claim (25 March 2011).

[8] See generally, Chakravarti v Advertiser Newspapers Limited (1998) 193 CLR 519, 543; Lewis v Daily Telegraph Limited [1964] AC 234, 282; Taylor v Jecks (1993) 10 WAR 309, 321; Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135, 137; Sungravura Pty Ltd v Middle East Airlines Airliban S.A.L. [1975] HCA 6; (1975) 134 CLR 1, 13-14; Vitale v Bednall [2001] WASC 278, [8] and Lim v TVW Enterprises Limited [2002] WASC 214, [43]-]57].

[10] Ibid at paragraphs [19] and [20].

[13] Ibid at 42. See further, Ainsworth Nominees Pty Ltd v Hanrahan [1982] 2 NSWLR 823, 827 and Rakhimov v Australian Broadcasting Corporation & Anor [2001] NSWSC 10, [5] and [26]-[29].

[14] See Trkulja v Google Inc LLC & Anor [2010] VSC 226, [19] (Kaye J). See further Sands v Channel 7 Adelaide Pty Ltd & Anor [2005] SASC 182; (2005) 91 SASR 466, approved on appeal in Channel 7 Adelaide Pty Ltd v SDJ [2007] SASC 117 and Sands v Channel 7 Adelaide Pty Ltd [2009] SASC 215; (2009) 104 SASR 452.

[15] [2004] QCA 135, at paragraph [2].

[16] Cited with approval by Gleason CJ, McHugh, Gummow and Heydon JJ in Favell v Queensland Newspapers [2005] HCA 52; (2005) 79 ALJR 1716, at paragraph [6].

[17] As to what was said to be the impermissible process of drawing an inference on an inference, see now John Fairfax Publications v Gacic [2007] HCA 28; (2007) 230 CLR 291, per Callinan and Heydon JJ at 353 [194] and per Kirby J at 335 [150].

At a glance

Court

Decision date

Before

Source

Judgment (110 paragraphs)

Parties

Cases Cited (9)