Primrose Textiles Pty Ltd v Kolliner [1999] VSC 69

8. The second defendant is the owner of the premises and the first defendant is a director of the second defendant. By lease dated 10 October 1997 the plaintiff leases the premises from the second defendant.

11. It transpires that on 15 February 1999 the first defendant, Mr P.J. Kolliner, attended the premises and had a conversation with one Mr Peach, an accountant employed by the plaintiff. The first defendant told Mr Peach that he had been told that the plaintiff was "going broke and would be closing its business within the next two months". The events leading up to the conversation are described by the first defendant on affidavit. He deposed that he wanted to speak to Mr Alfred Zion, a director of the plaintiff, and inform him of rumours he had heard in the latter part of 1998 and in early February 1999 in the textile trade about "the ongoing viability of the plaintiff". The second defendant telephoned the plaintiff's offices and was unable to speak to Mr Zion and spoke to Mr Peach. The first defendant had met Mr Peach on an earlier occasion and observed that there were three executive offices of the premises, one of which was occupied by Mr Peach. As a result the first defendant assumed that Mr Peach was Mr Zion's "right-hand man" in running the plaintiff's business. The first defendant deposed that he told Mr Peach that the contents of the discussion on 15 February 1999 were to be kept confidential and to be conveyed only to Mr Zion. Mr Peach did not file an affidavit in the proceeding.

14. The first defendant deposed that his reason for wishing to convey the substance of the rumours concerning the plaintiff to Mr Zion, and in his absence Mr Peach, was due to his own experience in business and because he considered it appropriate to inform the plaintiff of the rumours in order to give it the opportunity to control and manage the risks and dangers associated with the circulation of the rumours to Mr Zion. Mr Peach did not file an affidavit in the proceeding.

17. The first defendant deposed that his reason for wishing to convey the substance of the rumours concerning the plaintiff to Mr Zion, and in his absence Mr Peach, was due to his own experience in business and because he considered it appropriate to inform the plaintiff of the rumours in order to give it the opportunity to control and manage the risks and dangers associated with the circulation of the rumours.

20. Mr Zion deposed on affidavit that he learned of the visit by the first defendant on the next day when he was informed by his personal secretary that she had heard that the plaintiff "would be closing down its business". Mr Zion deposed that there was no basis for the statement made by the first defendant and that he was extremely concerned that the defendant had spread "a baseless rumour" amongst the plaintiff's staff. Mr Zion was further concerned because he considered he had an established social and working relationship with the first defendant whereby communications could have been arranged beyond the knowledge of the plaintiff's staff. Mr Zion deposed as to the broad financial position of the plaintiff including that it pays its accounts within the stipulated terms of trading, does not have a mortgage debenture on its assets, that all of its funding comes directly from sources outside the company and that the plaintiff always paid its rent for the premises on time, save for the recent withholding of rent arising from the circumstances of this dispute.

23. Upon receiving the information concerning the visit by the first defendant Mr Zion instructed his personal secretary to request the first defendant to disclose the source of the statements he had made to Mr Peach. No affidavit by Mr Zion's secretary, Ms Sanders, has been filed on behalf of the plaintiff. It seems that as a result of Mr Zion's secretary requesting the identity of the source of the relevant rumours on 16 February 1999 the first defendant wrote to Mr Zion in the following terms:

"I would like to apologise to you in relation to yesterday. On reflection it was incorrect on my part to talk to Michael Peach about the rumours which I had heard. I should have brought them to your attention exclusively. In my defence I have to say that I assumed Michael to be your right-hand man and a person who would inevitably get to hear the gist of my message. Further, my visit was made on impulse as I had been visiting the Pewter Workshop in Dandenong and being so close I decided to drop in to relay the message I had heard quite some time before. In the event the whole episode was unpremeditated and not thought out by me with the result that I appear to have offended you and as I said I can but apologise. Having said this the intent of my visit remains helpful and my intention was to make you aware of scuttlebutt regarding your company so that you can take measures to inform the market that the rumours are not true. Certainly the rumours are not promulgated by me and the only one I have mentioned them to is Michael. I rather wish to keep the source of the information to myself as it would be uncomfortable in the extreme for me to become involved in any disputation you may have. One of the sources of the rumour was a small fabric outlet. I do not know whether they are a customer or not whilst the other can be certainly referred to as "someone in the trade" but not at all a past staff member. Please believe me when I say that my intentions were honourable and I hope that the explanation contained in this letter will restore the excellent working and private relationship which has developed between us in the last 20 months or so. I would be pleased to have a telephone discussion with you in the near future regarding the situation and would appreciate if you would see your way clear to make contact."

27. On 17 February 1999 Mr Zion wrote to the first defendant and repeated his request for disclosure of the sources of the statements made to Mr Peach. At no time has the first defendant or the second defendant disclosed the identity of the persons referred to in the letter dated 16 February 1999 as "a small fabric outlet" and "someone in the trade". In his affidavit filed in the proceeding the first defendant has not disclosed the identity of the person sought by the plaintiff or provided any explanation as to why the identities have not been revealed. The only explanation is that contained in the letter of the first defendant of 16 February where he said "I rather wish to keep the source of the information to myself as it would be uncomfortable in the extreme for me to become involved in any disputation you may have".

30. Mr J. Peters of counsel, who appeared on behalf of the plaintiff, stated quite plainly that the plaintiff was not concerned with any cause of action it may have against the first defendant or the second defendant; that cause of action is known already. Rather, the concern of the plaintiff was to ascertain the identity of the persons said to be the sources of the rumours described by the first defendant in order that the plaintiff could pursue proceedings lying in defamation and possibly misleading and deceptive conduct against those persons.

33. The possible cause of action in defamation lies not with the fact that the first defendant made statements concerning the financial viability of the plaintiff to a staff member of the plaintiff but rather, that unidentified parties in the market place have made statements that the plaintiff alleges are defamatory and misleading and deceptive, and accordingly the plaintiff wishes to ascertain the identity of those persons. If the persons are identified, and assuming the plaintiff has enough facts otherwise to plead its cause of action in defamation it is entitled to institute such proceedings (see South Hetton Coal Company v. North Eastern News Association (1894) 1 QB 133 at 139, 141 and 145 (CA); also ABC v Comalco (1986) 68 ALR 259, 333).

36. As a matter of law a trading corporation or company may bring an action for defamation in respect of the publication of defamatory matter which affects its business or trading reputation. Thus, allegations will be actionable which reflect adversely on the financial position of the company (see South Hetton Coal Company v. North Eastern News Association, supra; also Jones v. Jones [1916] UKHL 2; (1916) 2 AC 481 at 491). I am satisfied that the substance of the matters described by the first defendant in his conversation with Mr Peach and in his letter of 16 February 1999 potentially could have an adverse impact on the financial position of the plaintiff company.

39. Rule 32.03 permits an applicant having made reasonable enquiries and who is unable to ascertain the description of the person sufficiently for the purpose of commencing a proceeding against that person to seek an order against some person whom it appears has or is likely to have knowledge of facts or has or is likely to have or has had or likely to have had in his possession any document or thing tending to assist in ascertaining the identity of the first person. Under the rule the court has power to order attendance before the court for oral examination in relation to the description of the person concerned and discovery of all documents relating to the description of the person concerned.

42. The rule does not contain a requirement that the applicant show that there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the court before an order will be made. However, more is required than a mere hunch, suspicion or hope (see McCracken v. Stockdale (an unreported judgment of Beach J no. 9148 of 1994, reported 27 March 1995). An analogous approach was taken with respect to rule 32.05 by the Court of Appeal in Schmidt v. Won (1998) 3 [VR] 435. Furthermore, the Court of Appeal has stated that rules of the type of rule 32.05 should be viewed benevolently (see Schmidt v. Won, supra 445). It follows that the same benevolent approach should be applied to rule 32.03.

45. As to whether the plaintiffs will have a cause of action in misleading and deceptive conduct in breach of the Trade Practices Act and the Fair Trading Act depends upon a number of factors. However, if the rumours were falsely made in the course of engagement in trade and commerce, the cause of action may be founded. On the basis of the affidavit material filed in this proceeding thus far I am satisfied that the plaintiff has made reasonable enquiries to ascertain the description of the persons who were the source of the rumours described by the first defendant.

48. It was clear from the time of letter of 16 February 1999 that the first defendant would not divulge the identity of the persons sought. This position was subsequently maintained in correspondence from the defendants' solicitors. Furthermore, in light of the matters stated in the letter of the first defendant dated 16 February it is clear that he and/or the second defendant has had knowledge of facts and/or both he and the second defendant may have or had in their possession a document or things tending to assist in the ascertainment of the persons from whom the rumours emanated. Furthermore, on the basis of the financial matters deposed to by both Mr Zion and Lady Potter, for the purposes of this interlocutory application I can be satisfied that the plaintiff is a corporation that is not at risk financially. Indeed, so much is acknowledged by the first defendant in his affidavit.

51. Mr Bick, one of Her Majesty's counsel, appeared for the defendants. He argued that there was no cause of action for the publication if any by the first defendant to the plaintiff's staff. Whether this is correct is not pertinent to the matter I must decide. In the exercise of the discretion under rule 32.03 I must, in part, be satisfied that the plaintiff may have a cause of action in defamation against the persons described in the letter of the first defendant of 16 February. For the reasons already stated I am so satisfied.

54. Mr Bick criticised the sufficiency of the evidence by the plaintiff of loss and damage. I consider that similar to the requirement of being satisfied of a possible cause of action underlying the discretion the plaintiff need only make out potential loss and damage. I am satisfied it has done so. It is a trading entity that operates and trades on a satisfactory financial basis. The plaintiff operates in a defined market place and its reputation is valuable to it.

57. Finally, Mr Bick forcefully challenged the bona fides of the proceeding. He submitted that the application and all the surrounding circumstances were a vehicle being used by the plaintiff to terminate its lease of the premises approximately one year before the expiration of its term. This assertion may well be borne out, however, that is not a matter I can determine on this application, it is a matter to be ventilated elsewhere.

60. On the basis of the apparent financial standing of the plaintiff and the concern of the plaintiff and its directors as to the effect in the market place on that standing, if the rumours persist the financial reputation of the plaintiff may be damaged. Consequently the plaintiff may have a cause of action against the persons from whom the rumours emanated. Furthermore, if the persons concerned involve a trading corporation and the relevant statements were made in trade and commerce a cause of action may arise under section 52 of the Trade Practices Act and/or section 11 of the Fair Trading Act with respect to misleading and deceptive conduct. I am satisfied that on the basis of those matters the plaintiff has more than a hunch, suspicion or hope that it has a right to relief against the persons from whom the rumours emanated. On the basis that the rumours were false as deposed to by Mr Zion and Lady Potter there may be a case that the plaintiff has been defamed.

63. In all the circumstances before me, therefore, I am satisfied that it is appropriate in this matter for an order to be made pursuant to rule 32.03 and I will hear the parties upon the form of the orders to be made.