SELECTA HOMES v ADVERTISER-NEWS WEEKEND No. SCCIV-00-1033 [2001] SASC 140

Supreme Court of SA|2001-05-08|Before: Doyle CJ, Gray JJ, Lander J

Judgment No. [2001] SASC 140

On Appeal from DISTRICT COURT OF SOUTH AUSTRALIA (HIS HONOUR JUDGEBRIGHT)

SELECTA HOMES AND BUILDING COMPANY PTY LTD v ADVERTISER-NEWS WEEKEND PUBLISHING COMPANY PTY LTD

DOYLE CJ In my opinion the appeal should be allowed. I agree with the reasons given by Lander J and by Gray J for concluding that the award of damages made by the trial Judge is inadequate. I agree with them that damages should be assessed at $80,000. On the question of interest, I consider that the approach taken by each of them is acceptable, but in this case I favour the approach taken by Gray J. Having regard to the periods of time involved, I consider it unnecessary to attempt to allow for changes in the value of the dollar between 1998 and 2000.

Accordingly, I would allow the appeal, set aside the judgment and orders of the District Court of 13 October and 27 October 2000, order that judgment be entered in the District Court for the plaintiff against the second defendant in the sum of $88,500 inclusive of interest, and order that the second defendant pay the plaintiff's costs of action.

LANDER J. This is an appeal from a decision of a District Court Judge in proceedings for defamation brought by the appellant against the respondent in which the appellant recovered damages of $25,000. The appellant complains about the assessment of damages.

The appellant (the plaintiff in the Court below) is a company which carries on the business of building transportable houses.

On 21 February 1998, the respondent published in its newspaper, the Sunday Mail, a letter from the first defendant, a former customer of the appellant in the following terms:

I AGREE wholeheartedly with "Going out of business" (Sunday Mail, 8/2/98): We have recently had the misfortune to purchase a new transportable home from a company, whose total lack of pride in workmanship and presentation has been unbelievable.

And, how dare we, the client, who has handed over a large sum of hard-earned money, complain. Our complaints were treated with absolute contempt and arrogance. If it is too late for us, but if anyone is buying a transportable home, make sure you go over it with a fine-tooth comb on delivery, because anything not noticed on the day of hand over ultimately will be blamed on the purchaser.

The standard set by some of these unscrupulous builders is supposedly within the incredibly broad guidelines of the building industry. It makes you wonder who sets the "guidelines".

Winning the Design of the Year Award for transportable homes from the Housing Industry Association does not guarantee the quality of workmanship one would expect.

The letter refers to an earlier letter of 8 February 1998 which the plaintiff relied upon to plead a true innuendo. Because the words are defamatory, in my opinion, in their natural and ordinary meaning it is not necessary to refer to that letter.

Indeed on this appeal Mr Whitington QC, counsel for the appellant, eschewed any reliance upon any innuendo for the imputations upon which his client relied.

The appellant released the first defendant during the trial. I shall hereafter refer to the second defendant as the respondent.

The appellant claimed that the letter was defamatory of it and claimed that in the natural and ordinary meaning of the words, or in the alternative, by way of innuendo the following imputations of, and concerning the appellant arose:

"10. (a) Conducted its affairs in a dishonest manner;

(b) Conducted its affairs in an unscrupulous manner;

(d) Produced transportable homes of inferior quality;

The imputations there pleaded are the false or popular innuendoes.

The letter does not refer to the appellant but the trial Judge found, and there is no complaint of the finding, that the letter referred to the appellant and that there were persons who would have understood the letter to refer to the appellant.

The learned Trial Judge based that finding upon the last paragraph of the letter which referred to a party winning the Design of the Year Award for transportable homes. The undisputed evidence was that the appellant had won the Design of the Year Award for transportable homes in October 1997 and no other builder of transportable homes had ever won that award.

The Trial Judge used that fact, rightly in my opinion, to find that there was a class of persons who would have understood the letter to refer to the appellant.

"I have no basis to be at all precise, but I envisage that the total number of people, including joint potential purchasers, who became aware of the letter and who are likely to have identified the plaintiff as its subject, would not have exceeded one or two hundred. The vast majority of the readers of the Sunday Mail, if they read the letter at all, are unlikely to have identified its subject. Nor are they likely to have recalled the earlier letter referred to in any detail - in most cases, at all."

It is not easy to understand how the Trial Judge concluded that the class of persons who would have understood the article to refer to the appellant numbered 100 to 200 persons. I think, with respect, that finding reflects little more than a guess on the part of the Trial Judge.

The respondent denied that the words were defamatory of the appellant or that the words bore any of the meanings pleaded. In the alternative the respondent pleaded that the imputations in par (b) to par (e) were true in substance and in fact. There was no plea of justification in respect of (a). In the further alternative the respondent pleaded that the words bore the following meanings of and concerning the appellant:

"13.1 conducted its business with the first defendant and her husband in an unscrupulous manner;

13.2 treated the first defendant and her husband with disrespect;

13.3 produced a transportable home of inferior quality which was delivered to the first defendant;

13.4 took no pride in the transportable home delivered to the first defendant."

Next the respondent claimed that the meanings which it pleaded were true in substance and in fact and relied upon the same particulars which it had given for its claim that it was entitled to justify the meanings alleged by the appellant.

The appellant did not seek to strike out the respondent's pleaded imputations. Nor did it argue during the trial that the appellant was not entitled to lead evidence to prove the truth of those pleaded imputations. Thus the respondent attempted to justify as true imputations of which the appellant did not complain. These were not imputations which, if justified, must have necessarily proved the appellant's claimed imputations were true. Rather they were imputations which, if proved true, would not answer the appellant's claim. As can be seen the respondent attempted to restrict the imputations arising from the publication to the appellant's treatment and dealings with the first defendant and her husband.

This is not the vehicle to determine whether the respondent was entitled to plead those imputations and then plead and attempt to prove they were true in substance and in fact. The matter was not argued before the Trial Judge and was not a ground of appeal to this Court. In the end the respondent's plea became irrelevant and that was recognised on this appeal. In those circumstances it is not necessary to decide whether the dictum of Brennan CJ and McHugh J in Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 at 528 can be understood as representing the law on pleadings of this kind. They said:

"A plea of justification, fair comment or qualified privilege in respect of an imputation not pleaded by the plaintiff does not plead a good defence. It is immaterial that the defendant can justify or otherwise defend the meaning which it attributes to the publication. In our view, the Polly Peck defence or practice contravenes the fundamental principle of common law pleadings. In general it raises a false issue which can only embarrass the fair trial of the actions."

Two other members of the Court did not share the same view: Gaudron v Gummow JJ at 543. The other member, Kirby J, did not express a concluded view.

Whether a defendant is entitled to plead a Polly Peck defence has been the subject of discussion and decision in Victoria in Carrey v A.C.P. Publishing Pty Ltd [1999] 1VR 875 and David Syme & Co Ltd v Dyson Hore-Lacy [2000] VSCA 24. The matter has also been considered in the ACT in Kelly v Nationwide News Pty Ltd (1998) 147 FLR 410 and Steiner Wilson & Webster Pty Ltd (T/A Abbey Bridal) v Amalgamated Television Services Pty Ltd & Anor [1999] ACTSC 123; (2000) Aust Torts Reports 81-537. The matter has also been the subject of comment in three separate articles: Andrew T Kenyan, "Pleading defamatory meaning, fair report defences and damages: Chakravarti in the High Court" (1999) Tort Law Journal 9: Michael Gillooly, "False Innuendoes and the Polly Peck Defence" (1999) 7 Tort Law Review 189; Anthony J Morris QC, "Polly Peck Defence: Its Future In Australia" (2000) 74 ALJ 760.

There was also a plea of fair comment but that was only faintly pursued and was in due course rejected by the Trial Judge. No more needs to be said of that plea.

The issues on liability therefore the imputations that the words bore, whether the words were defamatory and whether the imputations as pleaded by the appellant were true in substance and in fact. As I have said, I believe the respondent's pleaded imputations were irrelevant. If the appellant's pleaded imputations did not arise on the natural and ordinary meaning of the words then the words were not defamatory. If, on the other hand they did, then the question to be decided was whether the respondent could justify those imputations, or indeed any of them.

The appellant claimed damages including loss of profits.

It claimed that it had lost a significant number of sales contracts it would otherwise have secured from potential home buyers and lost the profit on those sales. It claimed that its market share fell from 24.1 per cent to 18.2 per cent. It claimed that it suffered a loss of gross profit of $186,467 and the loss of use of that money.

It also claimed that it was entitled to aggravated damages by reason of the respondent having approached the appellant's customers and making inquiries about their dealings with the appellant and the quality of the appellant's performance.

Finally, it claimed that it was entitled to exemplary damages.

The respondent took issue with the claim for damages.

It seems to me that the appropriate way to address the matter was first to determine whether the words were defamatory of and concerning the plaintiff. This the learned Trial Judge did and of that there can be no criticism. Next it was necessary to determine the imputations which arose on the natural and ordinary meaning of the words.

A true innuendo was pleaded but not addressed by the Trial Judge. His failure to address the question of innuendo does not matter much. In my opinion, the words are defamatory in their natural and ordinary meaning. The appellant did not need to rely upon any innuendo. As I have said it abandoned the innuendo on this appeal.

Next it was necessary to determine what imputations arose.

Whilst the Trial Judge determined that the words were defamatory, he did not clearly determine the imputations which arose. He allowed his consideration of the appellant's pleaded imputations and the respondent's pleaded imputations to become embroiled in his discussion of the evidence led by the respondent on justification.

In my respectful opinion there was no point in considering the defence of justification until the Court had first decided what imputations arose. A court cannot determine whether any imputation has been justified without first finding what imputations arise.

It is not entirely clear from the reasons what imputations his Honour found proved. His Honour said at par 89 and par 90:

"I largely accept the first alleged imputation set out in paragraph 10 (a) of the Statement of Claim. The imputation that the plaintiff conducted its affairs in an unscrupulous manner is no more than a statement of the direct and literal meaning. The imputation that the plaintiff treated its customers with disrespect is made out clearly by the words: "Our complaints were treated with absolute contempt and arrogance.".

The statement that the plaintiff is a company "whose total lack of pride is in workmanship and presentation has been unbelievable" would suggest to a reasonable reader that the plaintiff produced transportable homes of inferior quality, in which it took no pride. The allegedly defective "guidelines of the building industry" and the absence of "the quality one would expect" reinforce this notion. Unless justified, or limited, they are serious libels."

It is also not entirely clear whether his Honour found any of those imputations were justified. I think on balance he did find that the imputations pleaded by the appellant were not justified.

"The defendant has not in my view, justified those imputations as a matter of generality. However, the defendant says that the letter does not support the generalised allegations pleaded. The letter was from one customer about one house. It says the letter, makes a much more limited attack. It records problems in this one instance only. There were a number of defects to be rectified. In so far as dishonesty was imputed, I do not think it was justified, even on this limited basis. The allegation of disrespect to the Ferriers is proved."

I am not sure what his Honour means in the first sentence of that paragraph. I am not sure whether the Trial Judge has found that the appellant's third pleaded imputation has been justified or not.

"I conclude that, unjustified either as fact or comment, the defendant has libelled the plaintiff by

b) alleging a total lack of pride in workmanship and presentation."

The conclusion appears to be narrower than his Honour's earlier findings. I do not read the 'conclusion' in par 94 as limiting the earlier findings that all of the imputations pleaded by the appellant arose and that none of those imputations had been justified, except to the extent that the third pleaded imputation had been justified in that the appellant had failed to show this particular customer disrespect.

"Much of the letter was justified. It went too far in suggesting dishonesty and in generalising from the specific problems with Mr Ling. So much of the letter as was justified may well have affected sales of the plaintiff. I accept the proposition that "bad news" can spread rapidly, though the whispers may be impossible to prove in detail. The plaintiff is to be compensated only for such additional loss as was caused by the unjustified parts of the letter."

That statement makes it even more difficult to understand what imputations the Trial Judge has found to have been justified.

The respondent conceded, rightly in my opinion, on this appeal that the Trial Judge had found that the imputations in par (a), (b) and (e) did arise from the publication, and that the respondent had failed to justify those imputations. The parties disagreed, however, as to whether the Trial Judge had found that the imputations pleaded in par (c) and (d) arose. However, Mr Trim QC, again conceded that if these imputations did arise the respondent had not justified them. This Court is in as good a position as the Trial Judge to determine whether the pleaded imputations arise on the natural and ordinary meaning of the words. Rather than resolve an arid debate on what findings were made it is better for this Court to determine for itself whether the imputations in par (c) and (d) arise.

In my opinion, the imputation pleaded in par (c) does not arise on the natural and ordinary meaning of the words. The publication complains only of the appellant's treatment of the persons in the author's description of 'we'. In my opinion, the publication does not allow it to be said that the words refer to the appellant's treatment of its customers generally. The imputation that its customers generally were treated with disrespect does not arise. The pleaded imputation is too wide. The respondent's defence that it does not arise has been made out.

Mr Trim QC conceded the imputation pleaded in par (e) did arise but not the imputation pleaded in par (d). It is difficult, with respect, to understand how the publication could apply to the wider group in par (e) but not the wider group in par (d). There can be no doubt that the imputation that the appellant delivered an inferior home to the author arises. Indeed the respondent pleaded as much. But, in my opinion, the imputation is wider. I think that a combination of the first paragraph, the third sentence in the second paragraph and the third and fourth paragraphs allow it to be said, as the appellant complains, that the appellant produced transportable homes of inferior quality. In my opinion the imputation pleaded in par (d) does arise.

The appellant was entitled to have its damages assessed on the basis that the four imputations in par (a), (b), (d) and (e) arose, and that the respondent had failed to justify them. In those circumstances the respondent's pleaded imputations were irrelevant. Moreover, it was equally irrelevant that the respondent might have justified its pleaded imputations.

The appellant's damages were to be assessed on the basis that it had been the victim of a serious defamation out of which four imputations arose, none of which were true, and for the publication of which there was no defence.

The appellant sought three types of damages, compensatory, aggravated and exemplary damages. The Trial Judge assessed the appellant's compensatory damages at $25,000. He allowed interest of $3,317. It is not clear how the interest was calculated and whether regard was had to the award of damages which apparently included damages for loss of use of the money.

The Trial Judge refused to award aggravated or exemplary damages. No complaint is made of the failure to award aggravated damages on this appeal. The appellant contends that exemplary damages should have been awarded and that the compensatory damages awarded are inadequate.

The appellant, being a corporation, is entitled to damages in the nature of compensatory damages but only for injury to its reputation. It cannot receive damages for injury to its feelings: Lewis v Daily Telegraph [1964] AC 234 at 262. It did not need to prove any special damage but it was entitled to attempt to establish that it had suffered actual loss of income or earnings by reason of the defamation. If it could not make out actual loss it was still entitled to damages if the defamation was calculated to damage the appellant in its reputation in the way of its trade or business: Gatley 8th Edn par 960; South Hetton Coal Co Ltd v North Eastern News Association Ltd [1894] 1 QB 133; Australian Broadcasting Corporation v Comalco Ltd (1986) 12 FCR 510 at 599-601.

"A corporation is entitled to compensation for such economic loss as it can prove resulted from the libel."

If, by that, he meant a corporation was only entitled to that damage then I cannot agree. But I do not think that is what he meant. I think that he meant that a corporation would be entitled to such loss, in addition to any damages for damage to reputation.

The appellant sought to prove that it had suffered a direct financial loss by reason of this defamation. It claimed the loss arose in two ways. First it said it had lost a significant number of sales contracts and the profit on the sales contracts. It claimed its market share decreased from 24.1 per cent to 18.2 per cent which meant a loss of 9 sales at an average sale price of $53,313. It also suffered a loss because it did not increase its price by 7 per cent for a period of five months which it would have done but for this defamation.

It claimed that it had lost the profit on nine sales calculated at the average sales price plus 7 per cent which amounted to $95,340.

It also claimed that its decision not to increase prices by 7 per cent cost it $91,127 on actual sales made in the period after the defamation.

It claimed a total loss of $186,467 and the interest which it could have earned on that lost profit: Hungerfords and Others v Walker and Others [1989] HCA 8; (1988) 171 CLR 125.

On this appeal the appellant maintains that it is entitled to the direct financial loss arising in the two ways which I have mentioned. It no longer pursues damages for loss of use of that money, instead it seeks an award of interest under s 30c of the Supreme Court Act 1935 (SA).

The appellant relied upon the evidence of its managing director and an independent accountant Mr McPharlin to establish its loss. It also relied upon the evidence of the State Manager of Construction Research of Australia Limited to prove the market in which the appellant operated and its share.

The Trial Judge was not persuaded that the evidence established the market or the appellant's share in it. He was not satisfied that the only impact upon the market generally and the appellant specifically, after the publication of the defamation, was the letter itself. He was not satisfied that the appellant had established a loss of nine contracts.

In my opinion, the Judge was entitled to reject the appellant's evidence on the loss of sales. The evidence relied upon assumptions which, in my opinion, were not sufficiently reliable to base a claim for damages. The market was not capable of precise definition. The market shares could not be identified. The raw figures relied upon were not sufficiently reliable for the purpose to which they were put. That is no criticism of the appellant's case or its witnesses. The claim for damages for loss of sales was not capable of proof.

I think the evidence did allow for a finding that sales had been affected by the defendants. The number of sales lost was not capable of calculation. Some allowance had to be made in the damages for loss of sales.

However, that was only one aspect of the direct financial loss claimed. The appellant claimed that it lost $91,127 by delaying increasing its prices by 7 per cent, which it would have done but for the defamation. The appellant had won the Design of the Year Award. It would have capitalised on that award by increasing its prices. The Trial Judge accepted that the appellant so intended.

The figure of $91,127 was arrived at by Mr McPharlin after allowing a 7 per cent increase on revenue or actual sales over the period June 1998 to October 1998. Mr McPharlin recognised that the appellant would not be entitled simply to the increased revenue. The appellant's real loss could not be greater than its gross profit which he calculated to be 5.6 per cent on actual sales. By that method he calculated the loss to be $91,127. I think that approach is conceptually correct. However, in assessing any loss, two other matters needed to be addressed. First, an increase in price might have led to a loss of sales. The average profit on each sale was $10,595. So each sale loss would mean the extinguishment and more of the increased gross profit likely to be associated with increased costs. Secondly the increase of 7 per cent would be likely to operate on increased costs. That would increase the cost of sale and have an adverse effect upon gross profit. Both those matters would mean that the figure of $91,127 had to be discounted. There is no need, in this case, to consider either income tax or capital gains tax. Both parties approached the assessment without any reference whatsoever to any taxation regime. Neither party asked this Court to consider the impact of taxation in the assessment of damages.

The Trial Judge said that he would bear in mind the two matters to which I have referred. He also said that he would bear in mind that the average profit on each sale was $10,595. Finally, he accepted that the appellant would have used what it lost by reason of the defamation by investing the monies back in the business although he said that the return on such reinvestment was speculative.

In my opinion those findings demonstrate that the award of damages of $25,000 is inadequate.

If one accepts the appellant delayed in increasing its prices by 7 per cent and, as a result, thereby lost in the order of $90,000 on proven sales, the sum of $25,000 could not be adequate compensation for such a loss, even given the discounts which must be made from that gross figure.

Moreover, if the appellant would have recovered a sum near that amount it would have had the use of the moneys over the period which it claimed.

It seems to me that the Trial Judge's award is inconsistent with his findings.

In those circumstances it falls to this Court to reassess the general damages.

I am prepared to accept, as the Trial Judge did, that the appellant did not establish, on the balance of probabilities, a loss of nine sales.

However, the appellant established, in my opinion, sufficient to require the Court to allow some amount to represent the loss of chance: Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; (1992-1994) 179 CLR 332.

The appellant also established, in my opinion, that it would have increased its price by 7 per cent and if it had done so it would have recovered a sum in the order of $90,000 revenue on actual sales.

I am not prepared, however, to simply allow the sum of $90,000 as representing the loss, because to do so would be to ignore the possibility that an increase of 7 per cent would have had the potential to reduce sales. It also ignores, for the reasons I have given, the risk that manufacturing costs would increase.

I think the figure of $90,000 has to be reduced by about one half to represent the balance between increased gross profit and possible loss of sales and increased manufacturing costs.

On the Trial Judge's findings I would have concluded that the appellant would have used whatever income it would have received, but for this defamation, in its business and thereby reduced its costs. However, the appellant specifically disavowed any claim for damages for the loss of use of money. Instead it sought an award of interest pursuant to s 30c of the Supreme Court Act 1935 (SA). I will proceed on that basis.

The appellant is also entitled to the loss of its reputation caused by the defamation. In allowing damages for the loss of the appellant's reputation the Court must be careful not to duplicate the damages it is awarding for the economic consequences of the defamation. The appellant is only entitled to be compensated for the damage to its trading or business reputation. That damage should be mainly reflected in the losses upon which the appellant adduced evidence.

The Trial Judge has found that about 200 persons might have understood the letter published by the respondent as referring to the appellant.

In my opinion that finding was not open to the Trial Judge. The Trial Judge was certainly entitled to find that only those who were aware of the appellant's success in the Design of the Year Award would have recognised the letter as referring to the appellant. However, there was no evidence upon which he could find that that group was as small as 200 people.

There must have been a number of persons within the industry and outside the industry who were aware of that fact. In my opinion, it is not possible to categorically state that the class of persons who would have been aware of the appellant's identity was as small as 200.

In my opinion, it would have been appropriate to conclude that the class was small and assess damages accordingly.

Thus, taking into account an allowance for the loss of the chance of sales, a substantial allowance for the loss occasioned by the postponement of the increase in prices, and an appropriate allowance for the general damages for the effect upon the appellant's trading and business reputation, the sum of $25,000 awarded is manifestly inadequate.

In my opinion, an appropriate sum to recognise those elements of damages is $80,000. It is not possible to be precise about the dollar value of each of the components to which I have referred except to say the allowance for the loss occasioned by the postponement of the increase in prices on actual sales is the largest by far of the three components.

The appellant also claims that it is entitled to exemplary damages. It claims that the letter as published was calculated to injure the trade and reputation of the appellant. It says that the strident terms of the criticisms and the recklessness displayed by the respondent in failing to contact either the first defendant or the appellant to verify the allegations, gives rise to the need for such an award.

Exemplary damages are available to a plaintiff in defamation proceedings: Uren v John Fairfax and Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118. They are available where it would be appropriate to punish the defendant for its contumelious disregard of the plaintiff's rights or for its reprehensible conduct: Whitfield v De Laureat & Co Ltd [1920] HCA 75; (1920) 29 CLR 71.

In libel cases exemplary or punitive damages may be awarded against publishers of newspapers.

Usually such an award would be imposed where the plaintiff had proved that the defendant was actuated by malice, ill will or was so reckless that the defendant's conduct could be described as contumacious, and thereby deserving of censure by the imposition of 'punitive', 'vindictive' or exemplary damages.

It is claimed that the respondent is in the business of selling newspapers and that, in those circumstances, it is in their interest to publish provocative articles. It may be in the newspaper's interests to publish defamatory statements in that it encourages sales of the newspaper: Jones v E Hulton & Co [1909] 2 KB 444 per Farwell LJ at 483. It was also claimed that the respondent had failed to make inquiries which, if made, would have established that the Office of Fair Trading had mediated in the matter and had resolved the issues between the appellant and home owners. It was further claimed that the republication of the letter by the respondent was contrary to the ethics of journalism. It was the appellant's case that compensatory damages "would be inadequate to punish the second defendant for its conduct and an award of exemplary damages is necessary to deter the second defendant from similar conduct in the future."

Compensatory damages are not awarded to punish a defendant and in that regard the appellant's claim is misconceived. Exemplary damages are awarded to punish and deter. However, the circumstances giving rise to this publication in the respondent's newspaper do not call for an award of exemplary damages. The failure of the respondent to make enquiries which would have alerted it to the falsity of the allegations, even if in breach of the ethics of journalism, about which I make no finding, is not of itself enough to give rise to an award of exemplary damages. The editor or subeditor of the respondent newspaper made a decision to delete material from the first defendant's letter. However, it cannot be said that the respondent's editor should have therefore made enquiries of the first defendant or of the appellant about the contents of the letter.

It was said that the respondent should have allowed the appellant a right of reply. I think it was suggested that a right of reply should have been published simultaneously with the first defendant's letter. There is no evidence that, if offered, such a right of reply would have been accepted. I would have thought it would have been a better commercial decision to refuse the offer. To reply would have identified the appellant to the whole of the Sunday Mail readership; about 800,000 people.

Indeed, in due course, the appellant's solicitors in their letter of demand of 26 February 1998 [P25] specifically did not seek the publication of an apology "as our client believes that any such apology and retraction will only exacerbate the libel ... it will only have a detrimental effect in that the apology and retraction (together with the publication complained of) will identify our client to even more readers."

The Trial Judge was entitled to conclude that the publication in this newspaper was not actuated by malice nor was it in contumelious disregard of the appellant's rights.

The appellant's reputation will be vindicated by an award of compensatory damages. There is no need to visit any damages by way of punishment on the respondent. Therefore, in my opinion this is not a case which calls for the award of exemplary damages.

I would therefore set aside the award of damages of $25,000 and in lieu thereof substitute an award of damages of $80,000.

Since writing my reasons I have had the opportunity of reading in draft the reasons of Gray J. His Honour has found that the republications by the appellant's two competitors were relevant to the loss which flowed from the original publication.

An original publisher may be liable for republication by others even though the original publisher did not intend there to be a republication, authorised the republication and there were no circumstances which imposed a duty on anyone to republish. In Speight v Gosnay (1891) 60 LJ QB 231 at 232 Lopes LJ said:

"If the repetition of these words had been the natural consequence of the defendant's uttering them, that would have been sufficient."

The original publisher will be liable for any republication by a third party where such republication was the natural and probable consequence of the original publication.

In those circumstances, if the words are defamatory, both the original publisher and the re-publisher would be separately liable in respect of the republication to the party defamed.

A republication of defamatory matter gives rise to a new cause of action. In this case the appellant did not rely upon the two republications as giving rise to further causes of action against the respondent.

It is not necessary, however, to plead a separate cause of action in respect of any republication. Instead the injured party may rely upon the republications as matters going to damages: Sims v Wran (1984) 1 NSWLR 317.

"Where a prominent politician such as the defendant makes a statement at a press conference, it may be taken without doubt that the natural and probable result of this act will be that his statement will be republished in the media, thereby making him responsible for that republication: Speight v Gosnay (1891) 60 LJQB 231 at 232; and usually in whatever form in which that republication takes place: Webb v Bloch [1928] HCA 50; (1928) 41 CLR 331 at 363-366. But, if the plaintiff intends to complain separately of that republication, he must plead each such republication in haec verba as a separate paragraph in his statement of claim, to enable the defendant to plead to it whatever defence may be appropriate to that particular publication.

On the other hand, as I say, a plaintiff is entitled if he wishes to complain only of the original publication, but to seek to recover as a consequence of that original publication the damage which he suffered by reason of its repetition or republication where the defendant is responsible for that repetition or republication: Cutler v McPhail [1962] 2 QB 292 at 298, 299. But, if the plaintiff intends to do so, he is obliged to make his intention clear in his statement of claim: Pt 15, r 13(1). The difficulties which may otherwise arise are well illustrated by the case of McLean v David Syme & Co Ltd (1970) 72 SR (NSW) 513; 92 WN 611."

The appellant gave extensive particulars of its damages but the appellant did not plead the fact of the republications and give particulars of those republications. Nor did it plead how the republications were the natural and probable consequence of the respondent's publication in its newspaper. It did not plead that republished article was understood to refer to the appellant by any party. Lastly it did not plead how the republication gave rise to any damages not already caused by the original publication.

The respondent was entitled to know that the appellant relied upon the republications in the assessment of its damages. Moreover the respondent was entitled to be put on notice that the appellant claimed that it was responsible for republications by the appellant's competitors, and was entitled to know how it was that the appellant claimed those republications gave rise to damages, not otherwise caused by the original publication.

In the trial the appellant proved a republication by calling an enquiry agent who took photographs of the page from the Sunday Mail at the premises of one of the appellant's competitors in September 1999, about 18 months after publication by the respondent. Those photographs were tendered. The photographs show the page from the Sunday Mail with these words written across the page:

"At least two competitors placed copies of the letter in their display centres, helpfully advising that it did not refer to them. Potential customers who were "doing the rounds" of transportable home displays are quite likely to have seen them - so some more potential customers of the plaintiff are likely to have become aware of the letter, though not seeing the original publication. This limited secondary publication seems to me entirely foreseeable."

I can accept that people who did not see the original publication might have seen the exhibited page of the Sunday Mail in the competitors' premises but that does not mean that those persons were able, 18 months later, to identify the appellant in the article.

The Trial Judge made a finding that the publication was foreseeable. In that regard his finding must be understood that the republication was the natural and probable result of the original publication. However I am not so sure that it was foreseeable that competitors of the appellant would republish the article for the purpose of exculpating themselves.

On appeal the appellant argued that the Trial Judge was wrong to hold the effect of the publication would have been spent within a year because of the evidence to which I have referred.

In my opinion the question of republication, as understood in the authorities to which I have referred, was not addressed in this case. It was not pleaded. The only republication proved was on one day at one competitor. It may have been presumed that people saw the republication but it could not be assumed that anyone identified the appellant as being the subject matter of the publication. It was not, in my opinion, established that the respondent was liable because the republication, which was proved, was the natural and probable result of the original publication. The republication seems to have been to protect the reputation of a company not referred or alluded to in the article. Lastly, it has not been demonstrated that any republication has been productive of any other damage other than that caused by the original publication.

Whilst I have arrived at the same assessment of compensatory damages as Gray J, I have not had regard to any republication in my assessment of the appellant's loss.

The plaintiff is entitled to interest under s 30c of the Supreme Court Act, 1935 because no good cause has been shown to the contrary: s 30c.

In those circumstances it would be appropriate to include in the judgment an award of interest in favour of the appellant. We were not addressed on the period over which the interest ought to run or the appropriate interest rate.

In my opinion, ordinarily the period over which the interest should run would be from the date of the defamation until the date of judgment. The appellant's real damage was suffered when those who read the Sunday Mail recognised these defamatory imputations as referring to the appellant. The appellant continued to suffer damage when anyone subsequently read the article and recognised the article as referring to the appellant. The appellant brought its claim to the attention of the respondent within a few days of the publication. In those circumstances the appellant has been kept out of its money for the whole of the period commencing on the date of the publication. However the loss of revenue consequent upon the decision not to increase prices by 7 per cent occurred over the period June to October 1998. It would therefore be appropriate to allow interest for a period of two years. Interest under s 30c is only awarded to the date of the judgment in the trial court: Thompson v Faraonio [1917] ArgusLawRp 74; (1979) 24 ALR 1. Judgment was given on 13 October 2000.

The appellant will be entitled to interest on the judgment pursuant to s 40 of the District Court Act 1991 (SA) and r 84.19 of the District Court Rules 1992. That Act and those Rules operate in their terms and this Court need not be concerned with the question of interest after the date of judgment in the court below.

The rate of interest is not prescribed by the Act and cannot, of course, be prescribed by the Rules: Maidment v Davis [2000] SASC 191; (2000) 77 SASR 167.

The purpose of an award of interest under s 30c is to compensate the successful party, who has obtained a verdict, for being kept out of their money: Wheeler v Page & Harris (1982) 31 SASR 1.

The rate of interest that is adopted must therefore depend upon the method of the assessment of damages. If damages are assessed as at the date of the tort then the rate of interest must be different to the rate which would be applied to an award which has been assessed as at the date of the trial. That is because if the second method is adopted the damages will be assessed in the money value of the date of trial which will mean that the court will have allowed for any inflation operating on the value of money between the date of the tort and the date of the trial.

Commercial interest rates include an allowance for the fear and expectation of inflation. That is to say the ordinary commercial interest rates assume that the value of the money will depreciate over a period of time. The value of that depreciation is included in the interest rate.

Where the award has been assessed as at the date of the trial it would be inappropriate to award interest which included a component for the fear and expectation of inflation because inflation is being compensated for in the method of assessment.

In this case the assessment is something of a hybrid. Whilst the assessment of damages was made as at the date of the trial, or more particularly the judgment, the assessment proceeded upon a consideration of losses which occurred in 1998. In that respect whilst the assessment was in the dollar value of the year 2000 the assessment relied upon the dollar value of the year 1998.

In those circumstances, it seems to me that, the appellant is entitled to a higher interest rate which includes an allowance for an inflationary aspect.

In my opinion it would be appropriate to award interest on the whole of the sum at the rate of 6 per cent over the period between October 1998 and the date of the judgment on 13 October 2000 which is a period of two years. In my opinion, a sum of $9,600 should be awarded to the appellant under s 30c of the District Court Act 1935 (SA).

Interest forms part of the judgment so, in my opinion the following orders should be made:

2 The judgment and orders of the District Court of 13 October 2000 and 27 October set aside.

3 Judgment entered for the appellant against the respondent (the second defendant in the District Court) in the sum of $89,600 which sum includes interest.

4 The respondent to pay the appellant's costs of the trial.

I would suggest the Court hears the parties as to the costs of the appeal.

GRAY J This is an appeal against the adequacy of an award of damages for defamation.

The plaintiff and appellant, Selecta Homes and Building Company Pty Ltd ("Selecta") was a builder of transportable homes. It competed with six others for custom in South Australia. Total market sales of transportable homes was less than 40 a month.

In June 1997, Mr and Mrs Ferrier purchased a new transportable home from Selecta. It cost approximately $53,000.00. The home was delivered to a site near Berri. The Ferriers discovered a number of alleged defects. These included departures from the agreed specifications, bad workmanship and transit damage. There was disagreement about responsibility for the alleged defects. Selecta attempted to address many of the complaints. The Ferriers were unhappy with much of the rectification work. Bad feeling developed between Selecta and the Ferriers.

On 11 February 1998 Mrs Ferrier[1] wrote to the Editor of the Advertiser-News Weekend Publishing Company Pty Ltd ("The Sunday Mail") the defendant and respondent:

Could the following be included in your 'Letters to the Editor'.

I agree wholeheartedly with 'Going Out of Business' 8/2/98. We have recently had the misfortune of purchasing a new transportable home from a northern suburb company. The total lack of pride in workmanship and presentation has been unbelievable. And how dare we, the client who has handed over a large sum of hard earned money, complain. Our complaints were treated with absolute contempt and arrogance. It is too late for us, but if anyone is buying a transportable home, make sure you go over the home with a fine tooth comb upon delivery, because anything not noticed on the day of handover, will ultimately be blamed on you the purchaser. The standards set by some of these unscrupulous builders is supposedly within the incredibly broad guidelines of the building industry. It makes you wonder who sets these guidelines. When the Managing Director of a building company is a butcher by trade, I guess the condition our house arrived in is understandable. Certainly winning the Design of the Year Award for Transportable Homes from the Housing Industry Association does not guarantee the quality of workmanship one would expect.

Much of the letter was published in the Sunday Mail on 22 February[2] 1998. It was not published as written by Mrs Ferrier. Words were omitted. Other words were added to disguise the alterations. The altered document was presented as a letter written by Mrs Ferrier.

I AGREE wholeheartedly with 'Going out of business' (SM, 8/2/98); We have recently had the misfortune to purchase a new transportable home from a company, whose total lack of pride in workmanship and presentation has been unbelievable.

And how dare we, the client, who has handed over a large sum of hard earned money, complain. Our complaints were treated with absolute contempt and arrogance. It is too late for us, but if anyone is buying a transportable home, make sure you go over it with a fine tooth comb on delivery, because anything not noticed on the day of hand over ultimately will be blamed on the purchaser.

The standards set by some of these unscrupulous builders is supposedly within the incredibly broad guidelines of the building industry. It makes you wonder who sets the guidelines.

Winning the Design of the Year Award for transportable homes from the Housing Industry Association does not guarantee the quality of workmanship one would expect.

At the time of publication, the Sunday Mail had a circulation of approximately 800,000 readers throughout South Australia.

Two of Selecta's competitors re-published the letter. Copies were enlarged and displayed prominently at their offices. Each copy was annotated informing customers that the company was not the builder under attack. An issue of responsibility for re-publication arose. This issue is discussed later.

Selecta claimed that it had been defamed by the publication and republication. It said that its reputation in trade and business had been damaged. It claimed that it lost market share in deferring a planned price rise for five months so as to mitigate its loss of custom. This led to a before tax loss of approximately $90,000.00. Selecta also claimed that it lost the opportunity to make other sales, on which a pre-tax profit of approximately $10,000.000 per sale could have been expected.

Selecta pleaded that the natural and ordinary meaning of the words in the letter carried the imputation that it:

"(a) Conducted its affairs in a dishonest manner;

(b) Conducted its affairs in an unscrupulous manner;

(d) Produced transportable homes of inferior quality;

The Sunday Mail denied the imputations pleaded. It denied any defamatory meaning. In the alternative, it pleaded that if the meanings alleged by Selecta arose, then they were true in substance and in fact. Particulars of justification were provided.

The Sunday Mail further pleaded that if the words bore any defamatory meaning they meant that Selecta:

"- conducted its business with the first defendant and her husband in an unscrupulous manner;

- treated the first defendant and her husband with disrespect;

- produced a transportable home of inferior quality which was delivered to the first defendant;

- took no pride in the transportable home delivered to the first defendant."

These alternative meanings were pleaded to be true in substance and in fact and particulars of justification were provided.

"I note some dictionary meanings for 'unscrupulous'. The OED defines it as being the opposite of 'scrupulous'. The relevant definition of 'scrupulous' is 'Rigidly directed by the dictates of conscience, characterised by a strict and minute regard for what is right.' A 'scrupule' is a word originally referring to a small weight or measure, perhaps related to a word for a small pebble.

The Macquarie Dictionary defines 'unscrupulous' as 'not scrupulous, unrestrained by scruples; conscienceless; unprincipled'.

Insofar as I look at the meaning to be taken by ordinary readers of the letter, I think that 'conscienceless; unprincipled' fairly represent that meaning. I think that the reasonable reader of the letter would believe that the supplier of her house was asserted by Mrs. Ferrier to be one of the 'unscrupulous' builders. Unscrupulousness applies to honesty and to other standards. It does not apply to honesty alone. Scrupulous care, and the lack of it, apply also to workmanship. In the context of the sentence in which Mrs. Ferrier uses the word, I think it mainly refers to sloppy work, rather than to dishonesty.

I accept that, in common parlance, it often does refer to that inattention to honesty which borders on dishonesty; it can be akin to 'sailing close to the wind'. It can also be used of a person who would not hesitate to be dishonest. It is a word which takes its colour from its context. Here the context is a builder whose workmanship is said to be poor and who takes advantage of a failure to record all defects at hand over to avoid responsibility to rectify. It is an allegation that the builder is 'slippery' in this respect. It is not an allegation that he is otherwise dishonest, but I think it hints that he might be.

I largely accept the first alleged imputation set out in paragraph 10(a) of the Statement of Claim. The imputation that the plaintiff conducted its affairs in an unscrupulous manner is no more than a statement of the direct and literal meaning. The imputation that the plaintiff treated its customers with disrespect is made out clearly by the words: 'Our complaints were treated with absolute contempt and arrogance'.

The statement that the plaintiff is a company 'whose total lack of pride is in workmanship and presentation has been unbelievable' would suggest to a reasonable reader that the plaintiff produced transportable homes of inferior quality, in which it took no pride. The allegedly defective 'guidelines of the building industry' and the absence of 'the quality one would expect' reinforce this notion. Unless justified, or limited, they are serious libels.

The defendant does not meet the allegation that the letter imputes dishonesty head-on, nor that the plaintiff was unscrupulous. It reproduces a long list of the faults set out in Ex D47, which I set out earlier. It gives particulars of rude conversation with Mr. Ling. The plaintiff alleges that the imputations refer to its conduct generally and asserts that they are not restricted to the one transaction with the Ferriers.

The defendant has not in my view, justified those imputations as a matter of generality. However, the defendant says that the letter does not support the generalised allegations pleaded. The letter was from one customer about one house. It says the letter, makes a much more limited attack. It records problems in this one instance only. There were a number of defects to be rectified. Insofar as dishonesty was imputed, I do not think it was justified, even on this limited basis. The allegation of disrespect to the Ferriers is proved.

The allegations of lack of pride and of inferior workmanship are made as allegations of fact. The defendant says that, if not wholly justified as allegations of fact, they should be seen as fair comment in all the circumstances. I do not find that the defendant has proved against the plaintiff 'a total lack of pride in workmanship and presentation' either in general, or in relation to this house only. As comment, allegations of some lack of pride and some defects in finish are probably fair, but, even as robust comment, 'total lack of pride' goes too far.

I conclude that, unjustified either as fact or comment, the defendant has libelled the plaintiff by

b) alleging a total lack of pride in workmanship and presentation.

On the other hand, it has established gross disrespect, towards the author of the letter and also the presence of more faults in the finish of the house on delivery than should have been there."

Selecta complained that the trial judge erred in failing to find that the letter conveyed each defamatory imputation pleaded. It was submitted that the findings of the trial judge were not entirely clear.

The trial judge said that he largely accepted imputation (a), yet his reasoning leads to the conclusion that the imputation of dishonesty was established. It is unclear what was intended by the qualification "I largely accept".

The trial judge considered that a defamatory imputation that arose was that the plaintiff had "a total lack of pride in workmanship and presentation."

It was submitted that the trial judge incorrectly merged imputations (d) and (e) that Selecta "produced transportable homes of inferior quality" and "took no pride in its transportable homes".

I agree with these criticisms. In my view, the following imputations were established, namely that the plaintiff:

- "conducted its affairs in a dishonest manner";[3]

- "conducted its affairs in an unscrupulous manner;"

- "produced transportable homes of inferior quality" and,

The letter does not give rise to the imputation that the plaintiff treated its customers generally with disrespect. I reject the complaint that the trial judge should have found that imputation (c) was established. The letter does impute that the plaintiff treated the Ferriers with disrespect, however this is not the imputation alleged. It is of no relevance.

The trial judge correctly observed that damage to reputation is to be presumed where a corporation is defamed in its trade or business.[4] He also recognised that when loss of earnings are claimed as special damage, different considerations apply. A party defamed carries the onus of proving such damage. However the trial judge concluded that Selecta was obliged to prove that the defamatory imputations were the cause of loss.

Selecta submitted that the trial judge erred in his approach to causation. It was said that Selecta only needed to establish that the defamatory imputations were a cause of the loss. I agree. This proposition is well established.[5]

When some of the defamatory imputations in a publication are actionable[6], the judge must eliminate from his mind those which are not. The judge must ascertain the actual defamation and assess damages in relation to the injury caused by that defamation.

In Associated Newspapers Ltd v Dingle[7] Lord Radcliffe said at (394):

"The judge's task in arriving at a figure of damages for the defamation contained in the article ... was not a simple one. He had first to eliminate from his mind that small part of the imputation that he found to have been justified ... Next the judge had to eliminate that part of the article that consisted of extracts from the select committee's report, since under the Act of 1840 such extracts could not in law be treated as a libel. Having done all this, he had to ascertain and measure what was the actionable defamation and assess a figure of damages in relation to the injury it had caused."

This passage was approved in Chakravarti v Advertiser Newspapers Ltd[8]. Kirby J said at [183]:

"Nevertheless, thinking in terms of 'subtraction' or 'reduction' may lead to errors of calculation of general damages which would inappropriately diminish the plaintiff's just entitlements. The decision maker should never lose sight of the objective of the award of damages, once entitlement is established. It is to vindicate the reputation of the party wronged, to compensate that person for the hurt caused by the wrong proved and, at least in some cases, to resolve such matters before the public which may have its own interest to know the outcome. The damages must be such as to sustain the law's assumption that, once they are awarded, there will be no future loss. Irrelevant considerations such as the existence of other discreditable matter which might have been published of the plaintiff, but was not, or the existence of some accurate allegations in the midst of unsustainable ones must simply be put out of mind. The plaintiff is only entitled to recover damages for the actionable wrongs proved. But for them, the plaintiff is entitled to full recovery without subtractions and without reductions."

In the light of this authority it is necessary to consider the trial judge's reasons. He said:

"Much of the letter was justified. It went too far in suggesting dishonesty and in generalising from the specific problems with Mr. Ling. So much of the letter as was justified may well have affected sales of the plaintiff. I accept the proposition that 'bad news' can spread rapidly, though the whispers may be impossible to prove in detail. The plaintiff is to be compensated only for such additional loss as was caused by the unjustified parts of the letter."

At a glance

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Judgment (349 paragraphs)

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Legislation Cited (8)

Cases Cited (14)