This is an application for specific performance. The plaintiff seeks to enforce an agreement by the defendant to compromise a defamation action which the plaintiff brought against the defendant in the Common Law Division.
The defendant, Nationwide News Pty Limited ("NWN"), is the publisher of the Sydney Daily Telegraph and Sunday Telegraph. The plaintiff, Mr Damien Vass, is also known as Damien Vasales and Damien Koutsovasiles. He is a businessman who is also an art collector. His defamation action was over an article published in the Sunday Telegraph about his purchase of a $250,000 painting by the Australian contemporary artist, Ms Del Kathryn Barton.
[2]
Claims and issues for determination
About two years after Mr Vass began his defamation action, NWN made an offer to settle it. The offer was made because Mr Vass had asserted that the allegations made against him in the article were false and NWN then considered that it was unable to substantiate the story.
About ten months after the offer was made, Mr Vass accepted it. Under the offer, NWN agreed to make an apology, to pay $50,000 by way of compensation to Mr Vass, and also to pay his costs. It is that agreement which Mr Vass seeks to enforce in these proceedings.
NWN now says that Mr Vass' claim was a false one. NWN has uncovered evidence that, it claims, shows that its story was true and Mr Vass' assertions to the contrary were lies. NWN has cross-claimed for rescission of the agreement on the ground of fraud.
If the agreement cannot be set aside, NWN contends that Mr Vass still cannot get specific performance, and can only recover damages. This would mean, in particular, that Mr Vass could not compel NWN to publish the apology specified in its settlement offer. There is also an issue about whether, on free speech grounds, the Court should refuse to order publication of the apology in any event.
[3]
Chronology of key events
The artwork by Ms Barton around which these proceedings revolve is called "the heart land". I will refer to it as the "DKB work".
The DKB work was painted in 2013-2014. It covered five separate panels and was referred to in the course of the proceedings as a pentaptych. It was a very large work. Each panel was 2.4 metres high and the five panels had a total width of nine metres. A photograph of the work is reproduced below:
In 2014, Ms Barton was selling her paintings through an art gallery in Paddington in Sydney called the Roslyn Oxley9 Gallery. The Gallery employee responsible for selling the DKB work was Ms Cassandra Bird.
The DKB work was shown at the Melbourne Art Fair on 14 and 15 August 2014. Mr Vass saw it there. Over the following two weeks he negotiated with Ms Bird about buying the work. Eventually a price was agreed of $252,000. Mr Vass paid $52,000 on 26 August, and the balance of $200,000 on 28 August. The work was collected on his behalf from the Gallery on the evening of Friday, 29 August.
According to Ms Bird, a multi-panel painting such as the DKB work would generally be worth more broken up into five separate paintings than kept together. Ms Barton was keen to avoid this, as she thought it would detract from the artistic integrity of the work. Before the work was released to Mr Vass, he was required to sign terms of sale which reflected Ms Barton's concerns.
The terms of sale included obligations on Mr Vass not to sell any panel of the work separately and to ensure that if the work was sold, a corresponding obligation would be imposed upon the purchaser. The terms also included an acknowledgement that failure to do so would infringe Ms Barton's moral rights under the Copyright Act 1968 (Cth).
In deciding to buy the work, Mr Vass says he relied on advice from a friend of his, Mr Steve Nasteski. Although Mr Nasteski is not himself an art dealer, he is apparently a player in the contemporary art market. He has had dealings involving Mr Vass with other artworks apart from the DKB work.
In a way which was not made clear in the evidence, some of Mr Vass' art transactions have involved Mr Vass' brother, Mr Chris Vasales, who is also Mr Vass' business partner. Mr Vasales was consulted by his brother about the purchase of the DKB work. It was he who signed the sale terms on his brother's behalf in order to have the painting released from the Gallery. The precise extent of his involvement otherwise is a matter of dispute and remains somewhat unclear.
The evidence also leaves it unclear what exactly happened to the DKB work after it was collected from the Gallery on the evening of 29 August 2014. But in March 2015, another art collector, Mr Richard Ernster, was offered, and purchased, one of the panels from the DKB work. Mr Ernster bought the panel from an art gallery in Woollahra owned and operated by Ms Fellia Melas.
Mr Ernster was unaware when he bought the panel about Ms Barton's concern that the work should be kept together. The particular panel which he bought was unsigned, and he wrote to Ms Barton telling her that he had purchased it and asking her to sign it for him. At this point, Ms Barton and the Gallery became aware that one of the panels had been sold off.
Ms Barton took the discovery badly. Mr Ernster, who had apparently acted in good faith throughout, and whose request to have the panel signed had been polite to the point of obsequiousness, was told that Ms Barton would not be signing or acknowledging in any way the "broken part" of the work that he held.
On 17 April 2015, a solicitor acting for the Gallery and Ms Barton, Mr Ian McDonald, wrote a formal letter of demand to Mr Vass. The letter recited the terms of sale and stated that Mr Vass had sold at least one of the work's panels separately to Mr Ernster. The letter accused Mr Vass of both breach of contract (the terms of sale) and infringement of Ms Barton's moral rights under the Copyright Act.
The letter was strongly worded. It stated:
You were fully aware that Ms Barton, as the author of the Work, insisted that the panels comprising the Work be displayed in a specified order and that they not be disposed of separately and you acknowledged in writing that breaching the relevant provisions of the clause would infringe Ms Barton's moral rights.
…
In selling a panel separately, you have not just severely, but also knowingly and flagrantly, damaged the integrity of the Work as a whole.
…
You have disrupted the Work's flow and rhythm; you have unbalanced it. Ms Barton now regards the Work as broken and vandalised and you should not underestimate either the hurt and outrage you have caused Ms Barton, or how seriously she views this matter.
The letter concluded by demanding that Mr Vass: (1) identify whether he had sold any of the other four panels, and if so, to whom; (2) refrain from displaying the panels retained by him; (3) enter into good faith negotiations with Mr Ernster to reassemble the work either in his or Mr Ernster's ownership; (4) undertake to comply in future with his obligations under the terms of sale; and (5) propose a method of compensating the Gallery and Ms Barton for his breach of contract and his infringement of Ms Barton's moral rights.
Mr Vass replied that he had never agreed to the terms of sale. He added that he had sold the work (in one piece) to someone else anyway. He refused requests by Mr McDonald to identify the purchaser or produce evidence of the sale, and ended by telling Mr McDonald to stop wasting his (Mr Vass') time.
A few weeks later, on 3 May, the article which led to these proceedings was published in the Sunday Telegraph. The article was headed "painter has art attack after buyer 'ruins' work". It was based on the letter from Mr McDonald, a copy of which had been anonymously provided to the paper. The article quoted the allegations in the letter at length, including the passages which I have set out above.
On 8 May, solicitors acting for Mr Vass wrote to NWN as the publisher of the Sunday Telegraph. The letter took the form of a "concerns notice" which is the formal step required before commencement of proceedings under the Defamation Act 2005 (NSW) ("2005 Act"). The letter identified the article as having conveyed the following imputations:
1. Mr Vass, an art collector, vandalised and destroyed the work of artist Del Kathryn Barton;
2. Mr Vass, an art collector, knowingly and flagrantly damaged the work of Del Kathryn Barton;
3. Mr Vass, an art collector, breached his contract with Gallery Roslyn Oxley9 by selling one of five panels of a piece of artwork and is liable to pay the Gallery damages.
4. Mr Vass, an art collector, infringed the moral rights of artist Del Kathryn Barton in relation to her painting 'the heart land' and is liable to pay her compensation for that infringement.
The letter asserted:
Each of these imputations is highly defamatory and completely false. The publication of the matter complained of has, and is likely to have a significant impact on Mr Vass, an art collector.
It was never a term of the agreement to purchase Ms Barton's work that it be kept in one piece.
In any event, our client did sell it in one piece - all five panels - to the same purchaser. The entire premise of the matter complained of and its content is thus utterly false.
The letter stated that Mr Vass intended to bring proceedings but invited NWN to settle the dispute by: (1) paying a sum "to be agreed" by way of damages; (2) paying Mr Vass' costs; (3) taking the article off NWN's website; and (4) publishing an apology. The terms of the apology proposed were:
APOLOGY TO DAMIEN VASS
On 3 May 2015 News Limited [sic] published articles about a piece of artwork by Del Kathryn Barton.
It was suggested in those articles that art collector, Damien Vass had dealt inappropriately with that artwork.
Those allegations were false. Mr Vass purchased the artwork in question and later sold it to another collector. There was nothing improper about his conduct in dealing with that artwork.
News Limited unreservedly apologises to Damien Vass for the publication of those articles.
Mr Vass' solicitors sent a similar letter threatening action against Ms Barton. In the end this was not pursued.
The matter was handled for NWN by an in-house solicitor, Ms Larina Alick (then known as Larina Mullins). Ms Alick's job title was Senior Litigation Counsel. Both Ms Barton and the Gallery had gone to ground and Ms Alick's enquiries failed to elicit any direct proof that Mr Vass had separately sold the panel which had surfaced with Mr Ernster. Ms Alick sought copies of any relevant documents from Mr Vass' solicitor but that was refused.
On 5 June, NWN made a "without prejudice" offer to Mr Vass to resolve the proceedings. NWN offered to take the article down from its website, to publish an apology in the terms sought by Mr Vass, and to pay Mr Vass' reasonable expenses. There was to be a deed of release, which was to contain a warranty from Mr Vass that the imputations in the article were false.
This offer was not acceptable to Mr Vass because it did not contain any compensation for the damage he claimed to have suffered to his reputation. Ms Alick had the article removed from the website anyway, so as to limit the damages Mr Vass might claim. There the matter rested for about ten months.
In April 2016, Mr Vass commenced his action in the Common Law Division. Mr Vass claimed damages for financial loss, and aggravated damages on the basis that the article had been published when NWN knew it was false. The statement of claim was amended on several occasions, culminating in a second further amended statement of claim filed in April 2017.
Following the filing of the second further amended statement of claim, Mr Vass made a formal offer of compromise under the Rules. The offer provided for judgment in Mr Vass' favour in the sum of $149,001.
In response to this offer, NWN made the offer which is the subject of the claim for specific performance in these proceedings.
The offer was made on 9 May 2017. It superseded the offer made on 8 June 2015, as was permissible under the 2005 Act. The offer provided for NWN to agree not to publish the matter complained of; to publish an apology in substantially the terms sought by Mr Vass; to pay Mr Vass' reasonable costs incurred up to the making of the offer, and of considering the offer; and to pay $50,000 in damages.
The terms of the apology offered were:
APOLOGY TO DAMIEN VASS
On 3 May 2015 The Sunday Telegraph published articles about a piece of artwork by Del Kathryn Barton.
It was suggested in those articles that art collector, Damien Vass had dealt inappropriately with that artwork.
Those allegations were false. Mr Vass purchased the artwork in question and later sold it to another collector. There was nothing improper about his conduct in dealing with that artwork.
The Sunday Telegraph unreservedly apologises to Damien Vass for the publication of that article.
Ms Alick had obtained instructions to make the offer from Mr Mick Carroll, the editor of the Sunday Telegraph. Perhaps ironically, given NWN's claim in these proceedings, the making of the offer was delayed in order to give the impression that there had been a hard-fought battle internally for Ms Alick to increase NWN's previous offer. In fact the instructions to make the offer were obtained almost immediately following receipt of Mr Vass' offer on 28 April.
In her advice to Mr Carroll, sent by email at 2:24 pm on 28 April, Ms Alick recorded that Mr Vass was "adamant" that he sold all five panels together and would "produce evidence of that fact". She noted that the paper was unable to substantiate its story. The following email exchange then took place between Mr Carroll and Ms Alick:
Mr Carroll at 2:48 pm:
The problem is we don't know that he didn't do this.
Ms Alick at 2:53 pm:
The real problem is we can't prove he did it. We bear the burden of proof, so we have no defence. We are liable for defaming him.
On the strength of this, Mr Carroll accepted Ms Alick's recommendation.
Mr Vass did not accept NWN's offer and the interlocutory steps in the proceedings continued. On 19 May, Mr Vass' solicitors responded to a request for particulars from NWN which had been made in the meantime. The response identified Mr Nasteski as the person to whom Mr Vass had allegedly sold the DKB work. Mr Vass also produced for the first time what purported to be documentary evidence of the sale.
The documentary evidence produced by Mr Vass included a formal sale agreement purportedly dated 2 September 2014 (the Tuesday after Friday, 29 August when the painting was collected). The document provided that Mr Nasteski bought the DKB work (the full five panels) from Mr Vass for $463,000. Payment was to be made by March 2015. The document was signed by Mr Vass and Mr Nasteski, and witnessed by Ms Silvana de la Croix. Ms de la Croix is the sales manager of the business operated by Mr Vass and Mr Vasales.
Following receipt of this material, a defence was filed on behalf of NWN on 1 June. It contained a plea of justification, on the basis that any imputations arising from the article were true.
In August 2017 the action was fixed for trial, which was to begin on 30 April 2018. On 30 January, Mr Vass made a further formal offer of compromise. This further offer provided for judgment in Mr Vass' favour in the sum of $449,001. The offer was not accepted by NWN.
Ms Alick had left NWN's employment in November 2017. Her successor as Senior Legal Counsel was Ms Marlia Saunders. In February, as part of her preparation of NWN's case for the trial, Ms Saunders had a subpoena issued to Mr Ernster.
On 21 March 2018, the same day on which the subpoena to Mr Ernster was due to be answered, Mr Vass reversed his position on settlement. His solicitors wrote to NWN purporting to accept the offer which had been made by NWN in May the previous year.
A dispute then arose about whether the acceptance was a valid one. NWN contended that, in accordance with ordinary contractual principles, the offer had been rejected and had ceased to be effective once Mr Vass made his counter-offer in January 2018. It was contended on Mr Vass' behalf, however, that the effect of the relevant provisions of the 2005 Act was that the offer could still be accepted.
Despite the dispute, preparations for the hearing continued. On 14 April, Ms Saunders made contact with Ms Melas. Ms Saunders had become aware of Ms Melas' involvement through documents produced by Mr Ernster. On 16 April NWN served a subpoena for production of documents on Ms Melas. On 17 April, Ms Saunders filed and served an affidavit which stated that she had been told by Ms Melas that the panel ultimately sold to Mr Ernster had been consigned to Ms Melas by Mr Vass the previous August.
The dispute about Mr Vass' acceptance of NWN's earlier offer was the subject of a separate hearing before McCallum J (as her Honour then was) on 19 April. Her Honour delivered judgment on the following day: Vass v Nationwide News Pty Ltd [2018] NSWSC 639. She upheld Mr Vass' contention. She made a declaration that the offer of 9 May 2017 remained open for acceptance, and had been validly accepted by Mr Vass' solicitors' letter of 21 March. The hearing date was vacated.
NWN appealed to the Court of Appeal but the appeal was dismissed: Nationwide News Pty Ltd v Vass [2018] NSWCA 259. In effect, the Court of Appeal upheld Mr Vass' contention that acceptance of an offer under the Act is governed by the provisions of the 2005 Act rather than the rules applicable under the general law of contract.
Following the decision of the Court of Appeal, the proceedings were returned to the Common Law Division. By consent, they have been taken out of the Defamation List, but no order was made disposing of them and they remain formally pending.
In late October 2019, solicitors acting for Mr Vass made a formal demand on NWN for it to comply with the terms of the May 2017 offer. This was resisted by NWN, resulting in the proceedings before me.
[4]
Witnesses
Mr Vass was the main witness in his case. His brother, Mr Vasales, gave evidence in support. Both of them were extensively cross-examined and their credit was challenged. I deal with the reliability of their evidence later in the judgment.
Ms de la Croix was also called to give evidence in Mr Vass' case. She was cross-examined, but only relatively briefly.
NWN called evidence in its case from Ms Alick, Ms Bird and Ms Saunders. Ms Bird and Ms Saunders were briefly cross-examined on their affidavits, without any challenge being made to their credit. Ms Alick was not required for cross-examination.
NWN also called Ms Melas as a witness. She had declined to give an affidavit but NWN served a statement of her intended evidence and Ms Melas attended court in answer to a subpoena. She was cross-examined briefly, and no attack was made on her credit.
Mr Nasteski was not called as a witness. There is a debate about whether an inference can be drawn against Mr Vass as a result of the failure to call Mr Nasteski, which I deal with later in the judgment.
[5]
Mr Vass' companies
In August 2014 Mr Vass was operating through various companies. The following information was established by documentary evidence and is otherwise not in dispute.
Mr Vass and Mr Vasales' main business operates under the name "Quality Blinds". As the name suggests, the business involves the supply of blinds and other window coverings. Customers of the business include both developers looking to arrange window coverings for whole developments at a time and high-end private customers. The business operates from premises at Randwick. Mr Vass is largely responsible for the sales and Mr Vasales for back office and accounting functions.
"Quality Blinds" is a registered business name belonging to a company called QBC Pty Limited ("QBC"). Up until 2017, the shares in the company were held by Mr Vass and Mr Vasales in equal shares. They were also the directors. Mr Vasales is now the sole shareholder and director.
Some of the correspondence in these proceedings was sent by Mr Vass on the letterhead of "AAAardvark Blinds". This business appears to be a division of the larger Quality Blinds business.
Three other companies associated with Mr Vass and Mr Vasales come into this judgment. They are:
1. Love the Dream Pty Limited ("LTD");
2. Arthur Wong Pty Limited ("AW"); and
3. Arxidia Pty Limited ("Arxidia").
LTD and AW were incorporated in May 2011 and December 2011 respectively. The shares in both companies are held by Mr Vasales and Mr Vass equally; Mr Vasales is the sole director. Arxidia was incorporated in December 2011, with Mr Vasales as the sole shareholder and director.
[6]
Mr Vass' dealings with the DKB work
Documentary evidence: The negotiations between Mr Vass and Ms Bird took place partly by way of text message, partly by email and partly orally. The list price of the DKB work was $280,000. In evidence are text messages between Mr Vass and Ms Bird between 14 August and 17 August. In the course of those text messages Ms Bird wrote (emphasis added):
We have spoken with Del and she would be happy for you to have the work with a 10% discount, $252,000. As this is a hugely significant work by Del and the largest painting she has created to date we are determined for it to stay together as one piece. We have had an overwhelming response to this work and at this stage she has no plans to paint another work in this size. Please give me a call if you'd like to talk or come by the booth today.
Mr Vass eventually offered $220,000. He texted Ms Bird that he wanted to buy the work for his daughter (who was then one year old) so that she could have it for "all her life". Ms Bird replied that he could have the work for $250,000. On the afternoon of 17 August, Mr Vass texted her saying that he and his wife could not afford more than $220,000, and ending the negotiation. That day Mr Vass returned from Melbourne to Sydney.
Eight days later, on Monday, 25 August Mr Vass re-opened the negotiations. He emailed Ms Bird at 4:39 pm, offering $230,000. On the following day Ms Bird countered with a ten per cent discount from the list price, namely $252,000 (a slight increase on the figure she had been prepared to sell the work for in Melbourne). That figure was agreed, apparently orally. At 6:45 pm that evening, Ms Bird emailed Mr Vass (emphasis added):
We are pleased you have chosen the beautiful and outstanding work by Del Kathryn Barton, 'The Heartland'. Please find the attached invoice with details for payment via bank transfer, we will get back to you shortly with a written agreement to confirm that the work will remain in one piece. In the meantime, please don't hesitate contacting me should you have any further questions.
The invoice accompanying the email was dated 26 August. It was addressed to Mr Vass and contained a colour picture of the DKB work.
Mr Nasteski now appears in the documentary record. At 1:58 pm on the following day (Wednesday, 27 August) he sent Ms Melas a copy of the invoice. His covering email stated:
Which panel do you want I'll ask Damien if can do
Later that afternoon, Mr Vass paid $52,000 to the Gallery. The payment was made on his personal credit card. Receipt was confirmed by Ms Bird at 5:21 pm.
It is apparent that around this time, Mr Nasteski and Ms Melas agreed on the sale of one of the panels. The following morning (Thursday, 28 August), the following emails passed between Mr Vass and Mr Nasteski:
Mr Nasteski at 9:39 am:
Damien please email Felia your banking details and invoice her please so as she can transfer $95k today urgent matter.
Mr Vass at 9:50 am:
Was done yesterday. Funds still not showing.
Mr Nasteski at 9:50am:
You obviously didn't email to right email address Felia best payer in Aust please execute properly.
Mr Vass at 10:07 am:
Done. Resent again.
Sorry had wrong email address.
The invoice which was sent, and the covering email, are in evidence. The invoice was issued on the letterhead of Quality Blinds and addressed to Meltags Pty Limited ("Meltags"). This was a company controlled by Ms Melas and used by her to purchase stock to be sold in her gallery. The description on the invoice was "Art Work Del Kathryn Barton" and the price was $95,000. The covering email was sent from Mr Vass' email account at 10:06 am to the email address of Ms Melas' gallery.
Although the emails between Mr Nasteski and Mr Vass referred to Ms Melas' payment being made by direct debit, that procedure was not followed. Instead Ms Melas drew a $95,000 cheque on the account of Meltags. The cheque was made out to cash. Bank records show that it was banked at 10:48 am into the Quality Blinds account at the Commonwealth Bank of Australia ("CBA"), Double Bay, presumably by Mr Vass or Mr Vasales or someone working for them.
On the same day a transfer of $190,000 was made from LTD, one of the companies belonging to Mr Vass and Mr Vasales, to the Quality Blinds CBA account. A transfer of $200,000 was then made from that account to the Gallery to pay the balance due for the DKB work. The transfer instruction was lodged (apparently by Mr Vasales) at 3:55 pm.
Ms Bird confirmed receipt at 6:29 pm. She wrote in an email to Mr Vass:
Thank you, we have received the notification of the transfer from the bank however the funds have not yet been cleared. Once we have received confirmation from the bank of the cleared funds you are welcome to collect the work at 1pm tomorrow. We will keep you updated and look forward to seeing you tomorrow.
As foreshowed in Ms Bird's email of 26 August, terms of sale were prepared which formally required the work to be kept together. The terms were incorporated into a fresh version of the 26 August invoice (retaining the date). They provided:
TERMS OF SALE
In addition to paying for "the heart land" ("the Work"), I agree, on behalf of myself, my heirs, my assigns and successors:
to display the Work only in the order shown above;
not to dispose of the component panels of the Work separately;
only to dispose of the Work as a whole; and
to impose these same listed conditions on any person or entity to whom I dispose of the Work.
I further acknowledge that displaying or disposing of the Work other than as set out above would infringe Del Kathryn Barton's moral right of integrity in the Work under the Copyright Act 1968 (Cth) and leave me open to claims from her.
Emails in evidence show that the terms eventually included in the invoice were prepared by Mr McDonald (the Gallery's solicitor: see [18] above) in liaison with Mr Tony Oxley, one of the owners of the Gallery. The terms were framed as an ambit claim; Mr McDonald recognised that they might need to be modified if Mr Vass raised a "hue and cry".
Although Ms Bird's email had stated that the DKB work would be available for collection from 1:00 pm on the following day (Friday, 29 August), it was not until after 5:00 pm that delivery contractors retained by Mr Vass arrived at the Gallery. The following text messages and email were exchanged between Ms Bird and Mr Vass:
Ms Bird (by text) at 5:27 pm:
Your transport people have arrived which is great. We just need you to sign the agreement on the painting before it can leave the gallery. Let me know when you'll be here.
Mr Vass (by text):
Sorry in a meeting pls email I will email back asap
Ms Bird (by text):
Just sent it to you via email.
Ms Bird (by email) at 5:38pm:
Apologies for any inconvenience, please find the agreement attached. If you could sign it and send it back, then the boys can leave with the work. Let me know if you have any questions.
Mr Vass (by text):
All done. email coming through. Sorry in a very important meeting.
At the time Mr Vass was in his car driving to Canberra, but Mr Vasales was at the Quality Blinds office and had access to Mr Vass' email account. Mr Vasales initialled the invoice containing the terms of sale and emailed it back to Ms Bird using Mr Vass' email. Ms Bird then released the work to Mr Vass' delivery contractors, completing the transaction.
Bank statements for the Vass/Vasales companies LTD, AW and Arxidia reveal four further sets of transactions which require reference.
First, on 22 October 2014, $463,000 was transferred from AW to LTD. On the following day $462,100 was paid out of LTD's account to buy some sculptures by the British sculptor Sir Antony Gormley.
Then on 11 November, $490,000 was transferred from Arxidia to LTD. This was followed by a payment of $469,600 from LTD to the White Cube Gallery. The White Cube Gallery is headquartered in London and it is agreed that this payment was also for the purchase of Gormley sculptures.
Then on 13 February 2015, LTD received a transfer of $463,000 from Mr Nasteski. The transfer had the narrative "Gormley". On the following day, $464,000 was transferred from LTD to AW. Effectively these payments reversed the flow of funds associated with the purchase of the Gormley sculptures the previous October.
Then on 26 February, LTD received a further transfer of $495,100 from Mr Nasteski. Again, the narrative for the transfer was "Gormley". The receipt was followed by two transfers from LTD, one to Arxidia of $330,000 and one to AW of $165,500. Again this appears, more or less, to have reversed the flow of funds for the November sculpture purchase.
Mr Vass' previous statements: Mr Vass' earliest statement about his dealings with the DKB work is found in his response to Mr McDonald's letter of demand on behalf of the Gallery and Ms Barton dated 17 April 2015. On 21 April he replied by email:
I received from your office terrible news on a previous purchase I bought on a Del Kathryn.
I like [sic] to inform you that I no longer have the painting, I made a miscalculation on the size!
The painting was sold onto another private person.
I never agreed on the terms provided.
Sorry I can't be any more help on this matter.
On 24 April Mr McDonald replied, demanding the name of the buyer mentioned by Mr Vass and evidence that the terms and conditions of the sale complied with the terms of sale between the Gallery and Mr Vass. The letter enclosed a copy of Mr Vass' email of 29 August 2014 attaching the signed terms, and rejected Mr Vass' contention that he had not agreed to those terms. Mr Vass replied later that day:
Like I said don't have the paintings anymore!
I never agreed on any terms with the gallery or the artist.
You need to take this up with them, there was no legal document with the artist, gallery and myself agreed upon.
…
Furthermore,
I sold the painting of 5 panels to one private individual!
To further clarify, there was no agreement entered into with the artist and the gallery.
Nothing was witnessed to agree by the terms mentioned.
On 28 April, Mr McDonald tried again. He wrote an email to Mr Vass pointing out that the email of 29 August 2014 had been sent from his email address and the terms of sale had on the face of it been signed or initialled by him. Mr McDonald asked whether Mr Vass was denying that the email and the signed terms of sale had been sent by him or on his behalf, and if so who else might have sent them. Mr McDonald also pointed out that the terms of settlement did not have to be witnessed to be legally effective. Mr Vass replied later that day by email (apparently after a telephone conversation with Mr McDonald):
Furthermore to the phone discussion,
I've on sold the work to a private individual as one work. What that person has done with the work is out of my control.
I personally didn't agree with any of those terms with the Gallery or the Artist.
I was in Canberra over that period of time, there was no way I was in the office to sign any agreement.
My phone records and witnesses can prove this.
I'm moving on and stop wasting my time!
I have already summarised the representations made on Mr Vass' behalf to NWN in his concerns notice of 8 May 2015 ([23] above). On 21 May Ms Alick wrote to Mr Vass' solicitors, acknowledging receipt of the notice and asking for copies of documents showing that Mr Vass had sold the DKB work in one piece to one purchaser.
On the following day, 22 May, Mr Vass' solicitors replied:
It was incumbent upon your client to not publish defamatory allegations about Mr Vass unless it was sure that those assertions were correct. It clearly failed in that regard.
Our client has no obligation to provide to you his business records. You either accept his position, as set out in the concerns notice, or not.
If you inform us that News Corp and/or NWN intend to accept our client's offer upon receipt of those documents, then they will be provided. Otherwise, in the absence of any indication from you that your client wishes to settle these proceedings, we see no reason why he should comply with your demands.
Nothing further was forthcoming from Mr Vass for the two years or so before NWN made its offer of 9 May 2017. Then on 19 May, Mr Vass' solicitors responded to a request for particulars from NWN. The response asserted that, as a result of the publication of the article and worry about its effect on his reputation, Mr Vass was suffering from mental health problems and had been diagnosed with severe depression and anxiety. Also, for the first time, details of the alleged sale of the DKB work by Mr Vass were provided. This was done by enclosing copies of three documents.
The first document was a handwritten one dated 2 September 2014 and headed "Bill of Sale". It was addressed to Mr Nasteski and stated that Mr Vass sold the DKB work ("All 5 panels") for "the agreed price of $463,000". Terms were "maximum six months" with a payment instruction to LTD's CBA account. The names of Mr Vass and Mr Nasteski were written at the foot of the document, but the document was signed only by Mr Nasteski. According to Mr Vass, the handwriting was that of Mr Nasteski.
The second document was a typewritten document in similar form. It too was dated 2 September 2014. It stated that Mr Vass had sold the DKB work ("5 x panels") to Mr Nasteski. The date of purchase was stated as 2 September 2014 and the consideration as $463,000. Conditions of sale were specified that "the full payment must be meet [sic] by March 2015" and payment was to be made to LTD's CBA account. The document contained signatures by Mr Vass as seller, Mr Nasteski as "recipient" and Ms de la Croix as witness.
The third document was a tax invoice apparently generated by a computerised billing system. It contained an ABN and an invoice number but was printed on blank paper rather than a letterhead. It was dated 2 September 2014 and addressed to Mr Nasteski. The description identified the sale as being the DKB work "all 5 panels signed for the agreed price" of $463,000 "as per payment six month terms". Stamped on the invoice were the words "payment entered" and underneath a handwritten date of 13 February 2015 and a signature or initials.
For the first time, these documents identified Mr Nasteski as the alleged purchaser of the DKB work. The documents were all dated 2 September 2014 which was the Tuesday following the Friday on which the DKB work had been collected from the Gallery. They thus post-dated the sale of the panel to Ms Melas. Nor did any of the documents contain a provision passing the obligations in the terms of sale onto Mr Nasteski as those terms required.
About six months later, in November 2017, Mr Vass made a verified statement in answer to interrogatories which had been administered by NWN. The interrogatories concerned two subjects which are relevant for present purposes: Mr Vass' dealings with Ms Bird of the Gallery and Mr Vass' dealings with Mr Nasteski.
The text messages and the emails between Mr Vass and Ms Bird which I have summarised above come from the records of Ms Bird or the Gallery. Mr Vass was interrogated about his records of such communications. He stated that he had "no record of the SMS communications nor a clear recollection". Concerning email communications, he stated:
Various email communications between 25 August 2014 and 28 August 2014, between me and Cassandra [Ms Bird]. On 29 August 2014, Cassandra sent an email to my email address [this was the one attaching the revised invoice containing the terms of sale: see [73] above] but not then seen by me. I did not communicate in reply with Cassandra and no one was authorised to do so on my behalf.
Copies of emails passing between Mr Vass and Ms Bird were attached to the statement as an annexure. The annexure included copies of Ms Bird's email of 29 August attaching the terms of sale, but not the email in response attaching a signed copy of those terms. In answer to a request to identify the document or documents setting out the terms of his contract with the Gallery, Mr Vass annexed a copy of the original 26 August invoice ([63] above) which did not contain the terms of settlement.
Mr Vass stated that his contractual dealings with Mr Nasteski were both oral and in writing. He gave the following answers concerning the oral part of the agreement:
The substance of each communication:
Steve Nasteski is an art adviser and an art collector that I met through my various art dealings. I recall that I had a conversation in or about September 2014 with Steve Nasteski and I informed him that I had recently purchased the Artwork and that the Artwork was too large to be hung at my parents home. Steve Nasteski made an offer to purchase the Artwork from me. I said to Steve Nasteski that if I were to sell the Artwork it would be for a certain price and I mentioned to Steve that all five panels of the Artwork were to remain in one piece. He accepted the price and he agreed to purchase the Artwork from me on the conditions stated.
Any contractual conditions or terms:
Condition 1: Sale price was $463,000.
Condition 2: Payment of $463,000 to be made in instalments over a 6 month period.
Condition 3: Sale of Artwork to Steve included all 5 panels.
Place, date and time the oral agreement was made:
In or about September 2014, at my place of employment and Steve's house.
The written part of the agreement was set out in an annexure which included copies of four documents. The first three were the documents which had accompanied the particulars provided in May 2017 ([86]-[88] above). There was also a fourth document. This was an internet transaction report generated for Mr Nasteski's bank account, providing particulars of the payment of $463,000 to LTD made on 13 February 2015 ([78] above). The report set out details of the paying and receiving accounts and also the remitter name, but did not contain the "Gormley" narrative which had appeared on LTD's statement. It was generated on 25 May 2015. At the foot of it appeared a handwritten note (given the content, and a comparison with the handwritten "bill of sale", I infer that the handwriting was that of Mr Nasteski):
Damien paid in full Del Kathryn Bartin [sic]. Remittance attached. Cheers mate.
The interrogatories required Mr Vass to produce all relevant communications between himself and Mr Nasteski. But the email exchanges which took place on the morning of Thursday, 28 August concerning the sale of the panel ([66] above) were not produced (the copies of those emails in evidence were produced by Ms Melas, having been forwarded to her with the email from Mr Vass attaching the invoice for the panel ([67] above)). In fact, no email communications with Mr Nasteski were produced by Mr Vass in answer to the interrogatories at all. Nor was the email and invoice to Ms Melas.
The final piece of evidence emanating from Mr Vass' camp which pre-dates these proceedings came in April 2018. Ms Alick's affidavit recording that she had been told by Ms Melas that Mr Vass had consigned a single panel of the DKB work to her ([44] above) was served on Mr Vass' solicitors on 17 April. On the next day, 18 April, Mr Vass' solicitors responded, serving an affidavit of Ms Melas. That affidavit stated that Ms Melas had dealt only with Mr Nasteski about the panel.
Mr Vass' testimony: Mr Vass' affidavit for the purpose of these proceedings was made in September last year. This was more than six years after his purchase of the DKB work in August 2014.
In his affidavit, Mr Vass acknowledged that he was told by Ms Bird of Ms Barton's desire that the five panels of the work should be kept together. He did not however consider that that was a term which was contractually binding on him. The reference in Ms Bird's email of 26 August to a written agreement confirming that the work would remain in one piece he understood "from memory" to refer to an agreement that the work was being purchased in one piece. But that did not mean that once he had purchased it, he could not do with it whatever he wanted.
Mr Vass stated that he understood on 29 August that a document had to be signed before the work would be released by the Gallery, but he thought the document was only a delivery receipt. He authorised Mr Vasales to sign it on this understanding, and did not read it at the time. What he meant to convey by his statement in answer to NWN's interrogatories that no one was authorised to communicate in reply to Ms Bird's email was that no one was authorised to enter into any agreement with Ms Bird on his behalf.
In cross-examination, Mr Vass was pressed on his discussions with Ms Bird about the work being kept together. He acknowledged that he knew that this was what both Ms Barton and the Gallery wanted. He also acknowledged that he told Ms Bird about his daughter owning it for her whole life so as to reassure Ms Bird on this score. After some prevarication, he eventually conceded that, given Ms Bird's email of 26 August, it came as no surprise to be sent an agreement for signature by way of formal commitment.
Mr Vass was also pressed on his statement that he thought the document which was signed to obtain release of the work was only a delivery receipt. He acknowledged that Ms Bird's text to him referred specifically to an "agreement" (see [73] above). Although he first said this was "vague", in the end he accepted that he knew that Ms Bird was talking about an agreement to keep the panels together. He was referred to Ms Bird's email attaching the terms of settlement and gave the following evidence:
Q. You read that?
A. Correct.
Q. You read the terms of sale and saw that they accorded with what Ms Bird had previously said to you about keeping the work together?
A. Correct.
This evidence could not have been clearer. Counsel proceeded by taking Mr Vass to his previous statements denying any knowledge of the terms of settlement. But Mr Vass would not accept that his statements had been false. He then denied that he had in fact read the terms, saying that all he had intended to convey by the answer I have just quoted was that he had read the terms in the (virtual) witness box. At a later point in the cross-examination he resiled further when he was asked about the terms of sale:
Q. They attached, didn't they, the agreement that had been emailed back to Cassandra Bird at about 5.38 on 29 August, that was the subject of your text message at or about the same time?
A. That was - that was slipped in terms which I believe was the delivery docket to receipt the goods. But I wasn't aware of any of these terms. During the process, and when I paid the deposit, or during the negotiation period.
Q. That's not truthful evidence, is it, Mr Vass?
A. That's truthful.
Q. You've already accepted that Ms Bird told you in writing on at least two and possibly more occasions, that it the work had to be kept together?
A. What's together mean?
Q. That the work had to be kept in one piece?
A. Well, together. I don't understand the word together. Like, in sequence, in the same room? What's together? Or delivery - delivered together? All in one piece.
Q. Is that a serious answer, Mr Vass? You don't understand the word together?
A. Well, like I said before, I purchased the goods, and I believed I was receiving all goods, all panels, together.
…
Q. It could not have been any clearer that she [Ms Bird] required a written agreement to confirm that the work would remain in one piece?
A. Well, I didn't assume we'd reached an agreement at that time.
Q. You understood that was a term of the sale, didn't you?
A. I never received any firm agreement to sign. I've never signed - I've never signed any contract with the gallery. I think.
…
Q. You got your brother, or someone else, to initial the invoice that was sent, emailed to your email address, and sent back and confirmed by you to Ms Bird in a text?
A. That was - that it received money in the beginning, and they've slipped in some terms in the end. Which I wasn't aware of until Mr Simpson [McDonald; his firm was called Simpsons] sent me an email.
Q. So you weren't aware of any agreement at all?
A. You either - you either got to believe me, or call me a liar. That's the truth.
In his affidavit, Mr Vass said that in 2014 he had known Mr Nasteski for fourteen years and they were "very good mates". Mr Nasteski had been collecting art since 2010 and that was how he (Mr Vass) had become involved in it.
Mr Vass stated that Mr Nasteski visited the Melbourne Art Fair with him and encouraged him to buy the DKB work, but Mr Vasales "found out" about his proposed purchase of the DKB work before he had made any payment to the Gallery. Mr Vasales was upset. He said that there was no room at the shop to hang a work of that size. Mr Vass had thought it would fit at their parents' house but Mr Vasales said that it would not and told him to cancel the sale.
According to Mr Vass' affidavit, he then had a discussion with Mr Nasteski. Mr Nasteski told him to go ahead with the purchase and that he (Mr Nasteski) would then buy the work from him and he would make a profit. Mr Nasteski was happy to take the work for more than Mr Vass paid for it because he thought that Mr Vass was getting it for a bargain price. He agreed to pay $463,000. Mr Vass agreed because he had had dealings of this kind with Mr Nasteski before and trusted his judgment. Mr Vasales then agreed to go along with the deal.
Mr Vass acknowledged that he received the emails from Mr Nasteski on the morning of Thursday, 28 August asking him to invoice Ms Melas for one panel out of the work. He had not been told anything by Mr Nasteski about any dealings with Ms Melas but asked Mr Vasales to act on Mr Nasteski's instructions.
Mr Vass stated that on the following Tuesday, 2 September, Mr Vasales told him to document the arrangement with Mr Nasteski. Mr Nasteski prepared a signed handwritten note (the "bill of sale" referred to at [86] above) which he brought to the Quality Blinds office. A typed version was then prepared in the office ([87] above). Mr Nasteski and Mr Vass both then signed the typed version in front of Ms de la Croix.
Mr Vass stated that his memory had been "very hazy" when in November 2017 he verified the statement in answer to NWN's interrogatories which placed the agreement with Mr Nasteski as having occurred in September 2014. Having seen "the various documents, that were not available to me when I did the interrogatories" he now knew that the initial conversation and oral agreement had in fact been in late August.
Mr Vass stated that he had no idea that the work had been broken up until he received the letter from Mr McDonald on behalf of the Gallery and Ms Barton in April 2015. Following the publication of the article in May 2015, he had a falling-out with Mr Nasteski. They were no longer friendly.
In cross-examination, counsel for NWN pressed Mr Vass on when he reached his supposed oral agreement with Mr Nasteski. Mr Vass insisted it was before he had made any commitment to the Gallery. He said he was told by Mr Vasales (and Ms de la Croix) on Monday, 25 August that they were against the purchase. He spoke to Mr Nasteski after that.
Counsel pressed on by asking why, if he did not wish to keep the work, Mr Vass nevertheless resumed negotiations with Ms Bird. Mr Vass said there was money to be made. When asked why he did not simply let Mr Nasteski, his friend, save himself $211,000, Mr Vass said that he did not think that Mr Nasteski had finance in place to make the purchase.
Counsel also pressed Mr Vass on the issue of the invoice to, and the receipt of payment from, Ms Melas on the morning of Thursday, 28 August. Mr Vass accepted that Mr Nasteski was not a director of any of the Vass/Vasales companies, including Quality Blinds. Nevertheless, he insisted that he simply left the matter to Mr Nasteski.
Mr Vass acknowledged that the payments in October 2014 ($462,100) and November 2014 ($469,600) were for Gormley sculptures. He denied, however, that the payment that LTD received from Mr Nasteski on 13 February the following year ($463,000) was a reimbursement for one or more of those sculptures. He insisted it was a payment for the DKB work. Mr Nasteski's "Gormley" payment reference must have been a mistake. Mr Vass professed an inability to recall any of the detail or background of these purchases.
Mr Vass agreed that it was not until his statement and answers to interrogatories in November 2017 that he asserted that his agreement with Mr Nasteski required (allegedly orally) that Mr Nasteski undertake to comply with the terms of sale about keeping the work together. He denied that he made this up when he realised that the documents purporting to record the sale to Mr Nasteski did not contain any such obligation when they should have. He accepted that over the course of time his story had changed but denied this was because he was inventing it as he went along.
Mr Vass accepted that he became aware at the time of Ms Saunders' affidavit stating that she had been told by Ms Melas that Mr Vass had consigned a panel to her for sale. Following this, Mr Vass spoke to Ms Melas on the telephone. Mr Vasales was also present. Mr Vass obtained Ms Melas' telephone number from Mr Nasteski.
Mr Vass accepted that he raised his voice and was angry but denied that his anger was directed towards Ms Melas for unravelling his story. He denied that he was aggressive towards Ms Melas or asked her not to produce documents in accordance with the subpoena which had been served on her. All he told her was to "tell the truth".
Despite the fact that the interrogatories administered in 2017 had dealt with the question of documents, NWN made an application for disclosure in these proceedings of, among other things, all documents recording Mr Vass' dealings with Mr Nasteski. Still the communications with Mr Nasteski and Ms Melas on 28 August were not produced. Instead, the list of documents produced by Mr Vass, and verified by him, stated that there were no such documents in his possession.
Mr Vass' copy of the email to Ms Melas attaching the invoice for the panel was eventually produced pursuant to a notice which was given at trial after Mr Vass had completed his evidence. But Mr Vass' copies of the emails from Mr Nasteski on the morning of 28 August were not produced. Mr Vass was recalled for further cross-examination.
Initially Mr Vass said he had no knowledge of how the email to Ms Melas had come to be belatedly produced. Later he said that the email to Ms Melas was produced by him following a request from his solicitor. In re-examination, he sought to explain the inconsistency with his previous answer by saying that he had "misunderstood".
Mr Vass was taken to the list of documents which he had verified in November 2020. He acknowledged that none of the emails had been disclosed in that list. He denied that this was deliberate and blamed a cyber-attack in December 2019. He acknowledged that he had not disclosed that before. No explanation was given as to why the email to Ms Melas was produced but the emails with Mr Nasteski were not.
I consider the credit issues which arise on Mr Vass' testimony at a later point in this section of the judgment.
Mr Vasales' testimony: In his affidavit, Mr Vasales said the first that he knew of the DKB work was when he was told by Mr Vass that he (Mr Vass) had agreed to buy it. Mr Vasales did not like the work and thought there was nowhere to hang it. He told Mr Vass to cancel the sale. According to Mr Vasales, shortly afterwards Mr Vass told him that if he went through with the purchase Mr Nasteski would buy the work and he (Mr Vass) would make some money. Mr Vasales was still reluctant but was prepared for Mr Vass to proceed "so long as we are not out of pocket at the end of the day".
In cross-examination, Mr Vasales confirmed that Mr Vass had a very close friendship with Mr Nasteski. In fact Mr Nasteski was best man at Mr Vass' wedding. Mr Vasales said he was "pretty sure" it was Tuesday when Mr Vass showed him a picture of the work.
It was put to Mr Vasales that if, as he stated in his affidavit, Mr Vass spoke of what would happen "if he went through with the purchase", Mr Vass had not apparently decided on the purchase at that point. Mr Vasales initially disputed this, saying Mr Vass had already apparently decided to proceed. But eventually he accepted the implication from the language in his affidavit. Mr Vasales said at one point during this part of his cross-examination that the deal was that if Mr Vass bought the work but did not like it, Mr Nasteski would buy it from him.
According to Mr Vasales' affidavit, the first approach for the preparation of an invoice to Ms Melas for one of the panels out of the DKB work came to him from Mr Nasteski on the Wednesday afternoon. When he did not act on it immediately, Mr Nasteski took it up with Mr Vass who told him to proceed. Mr Vasales then organised the preparation and sending of the invoice using Mr Vass' email account.
In cross-examination, Mr Vasales maintained this account. He said the transaction did not make sense to him and Mr Nasteski was being a "pest". Mr Vasales was cross-examined about an email from Mr Vass' solicitor which suggested that it was he, Mr Vasales, who had found the copy of the email to Ms Melas of 28 April and attached invoice. Mr Vasales' evidence was quite inconsistent with this. He said that when he received the call from the solicitor, he thought it was a prank call and hung up. The conflict between Mr Vasales' evidence and what was written by the solicitor in his email was never cleared up.
Mr Vasales confirmed in his affidavit that he signed the invoice from the Gallery for the DKB work which contained the terms of sale on Mr Vass' instructions on the evening of Friday, 29 August. He did not himself read the document. He was told by Mr Vass that it was necessary to sign a delivery note. Later, on 2 September, he told Mr Vass to document the transaction with Mr Nasteski.
In his affidavit, Mr Vasales corroborated Mr Vass' evidence of a falling out with Mr Nasteski following the publication of the article. Mr Nasteski came to visit Mr Vass at work and Mr Vass told him to get out. Mr Vass later told Mr Vasales that Mr Nasteski was trying to have the work reassembled.
Mr Vasales did not mention in his affidavit the telephone conversation between Mr Vass and Ms Melas in April 2018 where he had been present. He confirmed that he went over to Ms Melas' house and obtained her signature on the affidavit the following day.
In cross-examination, Mr Vasales was asked about the telephone call. He said that Mr Vass was "furious". He explained this as resulting from the fact that Ms Melas had not provided Mr Vass' lawyers directly with her account of events, and they had found out about it second-hand. In cross-examination, however, Mr Vasales was firm that the conversation took place before the work had been purchased. When asked about why he was worried if it was his brother who would suffer the loss, he referred to them being in partnership but no further details were sought or provided.
I consider Mr Vasales' credit, along with Mr Vass', at a later point in this section of the judgment.
Ms de la Croix's testimony: Ms de la Croix stated in her affidavit, which was prepared in September 2020, that she had been sales manager for Quality Blinds since 2007. She met Mr Nasteski at some point during the first year she worked there. He was a friend of Mr Vass' who visited frequently.
Ms de la Croix stated that she was asked her opinion by Mr Vass about the DKB work; he said he had "just agreed to buy" it. She disliked it on aesthetic grounds and told him so. She said she then overheard an argument between Mr Vass and Mr Vasales about the work. She said she also recalled on the Friday afternoon of that week Mr Vasales being "stressed" about delivery of something, and printing documents.
Ms de la Croix stated that on 2 September 2014 she was asked to witness Mr Vass' and Mr Nasteski's signatures on a document. She had done this often before. She had no idea at the time what the document related to.
Ms de la Croix also stated that following the publication of the article there was a falling out between Mr Vass and Mr Nasteski. She recalled that Mr Vass threw Mr Nasteski out of the Quality Blinds premises.
In cross-examination, Ms de la Croix agreed that in 2014 and 2015 she was dealing with hundreds of projects a year. She said however that she had a very strong visual memory (extending even to what people were wearing on particular occasions) although she was not strong on dates, times and places.
Ms de la Croix was questioned on her evidence about witnessing the typed sale document dated 2 September 2014. She gave the following evidence:
Q. You don't have any specific recollection of when you did this independently, can I suggest to you, of the date appearing at the top - and I'll ask that you might scroll down. You see that there's a date appearing at the top?
A. Correct.
Q. You don't have an independent recollection of being in the office witnessing this particular document on 2 September 2014, can I suggest to you, you've taken your guidance for when you did it from the date of the document, do you agree with that?
A. Correct.
In re-examination, counsel for Mr Vass sought to pursue this issue. Counsel submitted that the question had been a double question and I indicated that I would permit questioning to clarify this.
Counsel then asked what Ms de la Croix had understood by the reference to a "specific recollection" in the first question. She said she understood it to refer to a precise date and time. She volunteered that she knew roughly, but not exactly, when she had witnessed the document. The following questions were then asked:
Q. What is the rough time and the rough period?
A. It was around the time that Damien was showing me the painting. All the - it was that period, that week. Or actually, the following week, that I signed, but I couldn't tell you the time. I know that it was in the afternoon; I know that it was at Damien's desk in the office; and it was probably between three and 4pm; but the specific date I could not tell you. I couldn't say it was September second or September seventh. I couldn't even tell you that it was a Monday or a Tuesday; but I do recall where it was and the timeframe it was. It was in the afternoon after - between three and four.
Ms de la Croix's credit was not challenged. In my conclusions on the factual issues below, I consider the weight of her evidence about when the sale document was signed.
Ms Bird's testimony: Ms Bird's affidavit traced her negotiations with Mr Vass through the text messages and emails which have already been summarised. She gave supplementary oral evidence about a conversation with Mr Vass. This took place on the afternoon of Thursday, 28 August. Ms Bird said that she told Mr Vass that the Gallery would be adding something to the final invoice to reflect the need to keep the work in one piece. Mr Vass did not raise any objection to this course.
None of Ms Bird's evidence (including her supplementary evidence) was challenged. I accept it.
Ms Alick's testimony: Ms Alick gave evidence about her handling of the defamation claim from receipt of the concerns notice in May 2015 until she left NWN in November 2017.
When Ms Alick received the concerns notice, she immediately made enquiries with the journalist who had written the article to see whether the paper could substantiate its story. She was told that all the paper had were the anonymously provided copies of the invoice and Mr McDonald's letter of demand to Mr Vass (see [18] above). Neither Ms Barton nor the Gallery would help. Ms Alick was frustrated that Mr Vass' solicitors refused to produce evidence to substantiate his allegations when she asked for that evidence on receipt of the concerns notice in May 2015. But she recognised that Mr Vass was within his rights to take this position.
Following her investigations, Ms Alick was worried that the representations made by Mr Vass, and in particular the representation that he had sold the DKB work as a whole to a purchaser, were "possibly true". The panel might therefore have been sold to Mr Ernster by someone who had purchased the work from Mr Vass. There was no information available to the paper to establish one way or another what had happened.
The position remained the same when Ms Alick received Mr Vass' formal offer of compromise in April 2017, and it was on this basis that she recommended settlement in accordance with NWN's offer of 9 May 2017 (see [33] above). If NWN had had evidence to prove that the imputations in the article about the sale of the panel by Mr Vass were true, Ms Alick would not have recommended the offer.
As previously noted, Ms Alick was not required for cross-examination. I accept her evidence.
Ms Melas' testimony: In her evidence in chief, Ms Melas confirmed receipt of the email from Mr Nasteski on the afternoon of 27 August, inviting her to select a panel of the painting. She also confirmed receipt of the invoice sent to her from Mr Vass' email for $95,000 on the following morning. Ms Melas acknowledged that the deal was not a consignment arrangement, as recorded in Ms Saunders' affidavit of 17 April 2018, but rather a direct purchase of one of the panels. It was clear from the emails of 27 and 28 August ([64] and [66] above) that there had been discussions between her and Mr Nasteski but she could not remember anything more than appeared from those emails.
Clearly Ms Melas saw Mr Nasteski as acting for Mr Vass. But in cross-examination, she confirmed that she did not speak to Mr Vass at the time.
Ms Melas testified that, following the service of Ms Saunders' affidavit of 17 April 2018, she received a telephone call from Mr Vass. She said that the call was very hostile in tone. Mr Vass asked why she was helping NWN in its defence. When he learned that she had been subpoenaed to produce documents, he urged her not to do so. She replied that she was under a legal obligation to comply.
Later that day, Mr Vasales, who had been with Mr Vass when the call was made, came around to Ms Melas' house. He brought with him an affidavit for Ms Melas to sign. The affidavit was very brief. It simply stated that at all times Ms Melas had dealt with Mr Nasteski. Ms Melas thought this was unexceptionable and signed the affidavit. Ms Melas' evidence on this was not challenged in cross-examination.
Ms Saunders' testimony: Ms Saunders in her affidavit gave evidence of the steps she took to prepare the case for trial. She confirmed what appeared in her affidavit of 17 April 2018 about what she was told by Ms Melas. Her evidence was uncontroversial and it is not necessary to say anything more about it.
Credit of Mr Vass and Mr Vasales: Mr Vass was an unsatisfactory witness. I have already referred to his evidence about his knowledge of the terms of sale, in the course of which he failed to make appropriate concessions and then completely resiled from his earlier testimony. This was not the only instance of that happening.
The manner in which Mr Vass gave evidence also caused problems. His answers could be unresponsive and it was not uncommon for him to have to be asked the same question more than once. An example was when he was questioned about Ms Bird's email of 26 August foreshadowing a written agreement to keep the work together:
Q. When you received this email, it did not surprise you that Ms Bird told you that the work had to remain in one piece, did it?
A. I was collecting all five panels in one piece, correct.
Q. Can you answer my question please, it did not surprise you that she had told you in this email that the work had to remain in one piece?
A. Well, I interpreted it in a different way and I stated that I was getting all five panes in one piece, correct.
Q. Could you answer my question, it did not surprise you that she wrote to you, "We will get back to you shortly with a written agreement to confirm that the work will remain in one piece", did it?
A. An invoice, yes, I was going to receive an invoice for the purchase.
Q. You're having difficulty answering my question. I'll give you another chance. It did not surprise you that Ms Bird wrote to you in this email, "We will get back to you shortly with a written agreement to confirm that the work will remain in one piece"?
A. It didn't surprise me that I was in a negotiation period with Cassandra to purchase the painting.
HIS HONOUR:
Mr Vass, you're being asked about particular words used there, and specifically about the reference to the agreement to confirm something. Please answer yes or no, or I don't remember; or ask counsel to ask the question again.
SIBTAIN:
Q. It didn't surprise you when you read in this email from Ms Bird, "We will get back to you shortly with a written agreement to confirm that he work will remain in one piece"?
A. I don't recall.
There were two other particular features of Mr Vass' evidence which were unsatisfactory. One was a tendency to respond to questions by saying "okay" so that it was unclear whether the answer to the question was "yes" or "no". The other was a tendency, when faced with a simple "yes/no" proposition, to answer "possibly yes" with the result that the answer appeared to be a qualified one.
In his closing argument, counsel for Mr Vass submitted that his manner of giving evidence did not necessarily make the substance of that evidence unworthy of credit. Counsel pointed out that most witnesses are not used to the formality of giving evidence in court. Some take to the process and some do not. Counsel submitted that I should allow for the possibility that the difficulties in the way Mr Vass gave evidence were idiosyncrasies which he simply could not control. I should also allow for a lack of understanding of the questions and difficulties of recollection. In counsel's submission, Mr Vass simply wanted to tell his story but was incapable of following the proper procedure for doing so; that did not make the story necessarily false or incredible.
There is some theoretical force in these submissions, but they cannot be pressed too far. Responding "okay" to questions might be a nervous reaction but constant qualification of affirmative answers by introducing the word "possibly" is more difficult to explain on that basis. The same comment applies to resiling from earlier evidence and the failure to make appropriate concessions. Overall, and making allowances for Mr Vass' unfamiliarity with the process, I still considered that his evidence was full of prevarication.
There are also some specific matters which reflect adversely on the credit of Mr Vass. The first was his refusal to accept that he was aggressive towards Ms Melas and suggested that she not produce documents pursuant to the subpoena. As already noted, this is what Ms Melas said in her evidence, and she was not challenged. I accept her evidence, and it follows that Mr Vass' evidence to the contrary in cross-examination was incorrect.
Mr Vass may have forgotten, or put out of his mind, what he said to Ms Melas during that conversation. But he did not say that he could not remember one way or the other. He denied her version of events and that, I am satisfied, was false.
Second, Mr Vass' evidence about his dealings with Mr Nasteski was very unimpressive. It was full of inherent improbabilities and a suspicious lack of verifiable detail. For an art collector, he seemed surprisingly uninterested in acquisitions of pieces worth hundreds of thousands of dollars.
Next, I was unimpressed by Mr Vass' failure to produce relevant documents in answer to interrogatories and an order for discovery, and his evidence about this. His failure to produce all of the documents was never adequately explained and the last-minute mention of a cyber-attack in December 2019 (which was after Mr Vass had answered the interrogatories) only raised more unanswered questions.
Fourth, one of the two planks in support of Mr Vass' case was that he was never bound by the contractual obligations in the terms of settlement. As will be seen, counsel for Mr Vass did not press this contention in final submissions. But it still has important consequences for Mr Vass' credibility.
It is possible to identify in the pre-trial statements, and in his trial testimony, at least three different ways in which Mr Vass put his case on this point. He started by telling Mr McDonald in May 2015 that he had been out of the office. What he failed to mention was that he remained in telephone contact, giving instructions to his brother who had access to his email.
Next, Mr Vass suggested in his answers to interrogatories that although he received Ms Bird's email annexing the terms of settlement, he did not authorise any response. In fact he had expressly authorised Mr Vasales to sign the document.
Mr Vass' third line of defence, as set out in his affidavit in these proceedings, was that he did not understand the nature of the document. The cross-examination on the terms of Ms Bird's text message to him destroyed that defence also. His attempts to resile from his earlier evidence only made things worse. Obviously Mr Vass was buying all five panels of the work together. But it was ludicrous to say that that was all he understood from what he was told by Ms Bird.
Mr Vass' failed defence on this point thus involved one falsehood after another. These falsehoods were propounded not just in correspondence (which would be bad enough), but also in sworn answers to interrogatories and sworn testimony.
By the end of the evidence I thought Mr Vass' credit was in tatters. It would not be safe to accept his evidence on any disputed issue of fact unless it was corroborated or was contrary to his interest.
When Mr Vasales gave evidence, there were similar difficulties in getting straight answers to questions. Indeed, in some respects he was an even worse witness than Mr Vass. There were particular problems when Mr Vasales was asked to recount conversations. Despite clear and repeated explanations of how to give evidence in proper form he would slip instantly back into conclusory assertions.
The submission by counsel for Mr Vass about witnesses who are unfamiliar with the procedure for giving evidence applies with more force to Mr Vasales than it does to Mr Vass. Mr Vasales did appear at times to be simply incapable of giving his evidence in the conventional way. But even if Mr Vasales could not help himself, and his failures were not deliberate, the result was still evidence which was unreliable. And as with Mr Vass, Mr Vasales had surprisingly little recollection of any of the details of the art dealings referred to in the evidence, even though he seems to have had an interest in them, or at least some of them. As with Mr Vass, I think it would be unsafe to rely on Mr Vasales' evidence on disputed questions of fact.
Failure to call Mr Nasteski: Counsel for NWN contended that the Court should draw a Jones v Dunkel inference against Mr Vass because of his failure to call Mr Nasteski as a witness. Counsel for Mr Vass accepted that, on the evidence, Mr Nasteski was a close personal friend of Mr Vass at the time of the relevant events in 2014 and 2015. But counsel suggested that this was no longer the case, and therefore no adverse inference could be drawn.
In fact the evidence shows that Mr Nasteski was not just a close friend of Mr Vass. The article was published on 3 May 2015 and the concerns notice was issued by Mr Vass' solicitors on 8 May. The annotated bank printout produced by Mr Nasteski bore the date 25 May (see [94] above). When the dispute first arose, Mr Nasteski was actively helping Mr Vass by providing documentary support for his case.
While there is independent evidence from Mr Vasales and Ms de la Croix of some sort of row between Mr Vass and Mr Nasteski at some point after the publication of the article, the evidence of a permanent rift is unimpressive. Clearly the publication of the article itself did not result in an immediate falling-out, because Mr Nasteski was helping Mr Vass at that point. Mr Vass never gave any clear explanation of exactly what the row was about. This was in circumstances where he had never clearly explained the nature of his dealings with Mr Nasteski in the first place. Another difficulty for Mr Vass on this point was the evidence which emerged in his cross-examination that Mr Nasteski was still helping him in April 2018, by providing him with Ms Melas' contact details (see [115] above).
Counsel for Mr Vass pointed out that Mr Nasteski is apparently still a player in the art market. Counsel submitted that I could infer that Mr Nasteski would have been unwilling to give evidence for Mr Vass because of the obloquy which would have descended upon him as a result of his role in splitting up the DKB work. But this was speculative (and contested). I did not find it persuasive when there was no evidence that Mr Vass' solicitors had even asked Mr Nasteski to testify.
For these reasons, if the onus lay on Mr Vass to explain Mr Nasteski's absence, then I do not think it was discharged. But there is some uncertainty about the onus in a case such as this. On one hand, it seems from the Court of Appeal decision in Payne v Parker [1976] 1 NSWLR 191 that in principle it is up to the party seeking to have the inference drawn to establish that the witness in question is in the opposing party's camp (see at 197E-G per Hutley JA, 201F-202C per Glass JA, and 208G-209B per Mahoney JA). If that is so, then arguably if an issue arises before trial about whether the witness remains in the opposing party's camp, the onus for the purpose of that issue should remain on the party seeking to have the inference drawn. On the other hand, the learned author of the Australian edition of Cross on Evidence (11th ed, 2017, LexisNexis Butterworths) at p 40 states that "it seems" that once the witness is found to be in the opposing party's camp, the opposing party bears the onus of explaining the witness' absence.
I have not found any authority which directly considers this question. The complexity of the question is enhanced by at least two considerations. First, the majority judges in Payne v Parker (Hutley JA and Mahoney JA) expressed the applicable principle differently and Glass JA dissented on the inferences which could be drawn in applying the principle to the facts. Second, the same evidence may be relevant both to whether a witness is in the opposing party's camp and to whether the witness' absence has been explained (a point made by Gorton J in Cayford v Let Danny Do It Pty Ltd [2021] VSC 707 at [47]).
On the view I take below, an affirmative Jones v Dunkel inference is not necessary to decide the case. I therefore do not propose to consider the issue any further.
Conclusions: As already noted, the factual issues about the nature of the arrangement between Mr Vass and the Gallery ultimately went only to credit. The sole substantive factual issue for determination is whether Mr Vass' representation that he sold the work to Mr Nasteski was fraudulent.
The first hurdle for Mr Vass is that for his defence to work, the agreement with Mr Nasteski had to have been made before the sale of the single panel to Ms Melas on Thursday, 28 August. And it is important to emphasise that some sort of loose arrangement to buy the painting afterwards if it proved unsuitable would not have been enough. What Mr Vass contends for, as he must, is an unconditional and immediate undertaking by Mr Nasteski to purchase the DKB work, albeit on the basis that payment was to be deferred.
The case propounded in Mr Vass' testimony in these proceedings was that the agreement was made before he made any commitment to buy the work from the Gallery. It is worth spelling out the chronological implications of such a case. First, Mr Vass, having withdrawn from negotiations to buy the work on 17 August and having returned to Sydney, must have decided that he wanted to buy it after all. Next, he showed a picture of the work both to Mr Vasales and Ms de la Croix, receiving their negative reaction. Then he was persuaded by Mr Nasteski to buy the work on Mr Nasteski's undertaking to pay for it in six months' time. Next Mr Vass went back to Mr Vasales and obtained his agreement to the purchase on the basis that he and Mr Vasales would not be out of pocket. Then he proceeded to negotiate the purchase.
In my view the whole story is inherently very unlikely. In effect Mr Vass was buying as nominee or trustee for Mr Nasteski. If Mr Nasteski was the real purchaser, why did he not buy the work himself? The only explanation would have been a lack of available funds. This was the submission from counsel for Mr Vass. Counsel emphasised that it was readily understandable that a perceived bargain could have needed to be snapped up urgently.
But this was all nothing more than speculation. In any event, I find it implausible to think that, when the work's list price was $280,000 and the Gallery was prepared to sell it for $250,000, it was a sufficiently outstanding acquisition to be worth paying $460,000 for it in six months' time, or that cheaper short-term finance could not have been obtained.
Furthermore, it is hard to see how Mr Vass' case squares with the sale of one of the panels. The only plausible reason for doing so was to defray part of the cost. Why then would Mr Nasteski, if he was short of money, go to the trouble of raising $95,000 from the sale of one of the panels, only to have the purchaser pay that money to Mr Vass? There is no evidence of any other current or contemplated dealings between Mr Nasteski and Mr Vass at the time.
I have set out above the sequence of events according to Mr Vass' case. The purchase price was not ultimately agreed, and payment made, until the afternoon of Tuesday, 26 August. But for practical purposes the alleged agreement with Mr Nasteski must have been made and consented to by Mr Vasales before Mr Vass approached the Gallery with a fresh offer in his email of 4:39 pm on Monday, 25 August.
This sequence of events does not mesh very well with the evidence of Mr Vasales and Ms de la Croix. On Ms de la Croix's account, Mr Vass had already agreed to buy the work when he showed her a picture of it. This is consistent with Mr Vasales' recollection that he was shown the picture on Tuesday, 26 August. It is also consistent with Mr Vasales having told Mr Vass to "cancel the sale", although the cross-examination of Mr Vasales muddied the waters on this point (see [104] and [122] above).
Mr Vass in his affidavit also stated that Mr Vasales told him to "cancel the sale". It was only in his oral evidence that Mr Vass made it completely clear that the relevant conversations took place before he made any commitment to buy the work. But that was not consistent with what he had said earlier.
In his statement in answer to interrogatories, Mr Vass placed the agreement as having been made on 2 September. In his affidavit in these proceedings, he sought to correct this. His attempt to do so on the basis that the supporting documents had improved his recollection (see [108] above) was however far too glib.
The account given by Mr Vass in answer to the interrogatories was based on the conversation with Mr Nasteski having occurred after the purchase. Indeed on the terms of the conversation recounted by Mr Vass, it must have occurred after the work had been delivered to Mr Vass' parents' home, where it was supposedly found to be too large. A conversation in those terms cannot have happened during the preceding week, when Mr Vass' purchase had not gone through and the work was still in the Gallery.
Mr Nasteski may well have encouraged Mr Vass in the purchase of the work. He was definitely involved in the sale of the panel. That may also have been his idea. This could be why Mr Vass apparently now blames him for what happened. But all the documents show is Mr Nasteski acting as a broker on the sale of the panel for Mr Vass.
In the absence of evidence from Mr Nasteski, all I have is Mr Vass' account. Given its implausibilities, and the twists and turns in what Mr Vass has said, and his general lack of credit, I disbelieve it. Indeed, I am affirmatively satisfied that there was no oral agreement with Mr Nasteski before Mr Vass sold one of the panels to Ms Melas. Even if the supporting documents relied upon by Mr Vass in his particulars and answers to interrogatories are valid, they date only from 2 September 2014. My conclusion that no oral agreement was made the week before is enough to defeat Mr Vass' defence.
Nevertheless, I will consider the genuineness of the supporting documents produced by Mr Vass. I turn first to the form of the documents themselves. I think there are three features which are worthy of note.
The first is that by 2 September 2014, one of the panels had been sold to Ms Melas, yet the documents went out of their way to say expressly that the sale was of all five panels. This means that, to the knowledge of the parties, Mr Vass was selling Mr Nasteski a panel which he did not own. That makes no sense, except as a retrospective attempt to cover Mr Vass' tracks.
The second feature relates to the record of receipt on the invoice. After some prevarication Mr Vass accepted that the signature was his, even though he did not normally deal with accounting matters. No explanation for departure from the usual practice was identified.
Thirdly, and most importantly, is the figure of $483,000. There was no explanation of how Mr Vass and Mr Nasteski supposedly settled on this particular figure in early September 2014. There is no apparent mathematical relationship between it and the $252,000 which had been paid by Mr Vass. As I have said, the profit seems far too large to have any sensible commercial explanation.
In my view these circumstances themselves lead compellingly to the inference that the figure was selected afterwards so as to match the $283,000 receipt for the sale of a Gormley sculpture on 13 February the following year. That inference is supported by the narrative which appears on Mr Nasteski's bank statement. In his absence, there is simply no evidence to support some other hypothesis.
On any view, the fourth of the supporting documents, Mr Nasteski's remittance advice, was backdated by three months. It supposedly related to a payment made by Mr Nasteski on 13 February but was not produced before 25 May. Why should this have been so? The obvious answer is that the article had been published in the meantime and Mr Vass had issued his concerns notice; the document was supplied by Mr Nasteski at Mr Vass' request to support Mr Vass' story.
It is a short step to inferring that the other three documents were created at the same time. The correspondence between NWN and Mr Vass' lawyers which took place only a few days before 25 May would have brought to Mr Vass' attention the need in due course to have documentary evidence to support his claims (indeed, if NWN was prepared to accept Mr Vass' settlement proposal, such documents would have needed to be provided on short notice so as to comply with the undertaking given by Mr Vass' solicitors in their letter of 22 May: see [84] above).
I have already referred to Mr Vass' failure to give a convincing explanation of the background to the alleged transaction, and the inconsistency in his different accounts. These circumstances also support an inference that his testimony was false. So too does his behaviour towards Ms Melas when he found out that she was speaking to NWN.
As against this, counsel for Mr Vass pointed to two pieces of evidence. One was Ms de la Croix's testimony that she witnessed the execution of the typewritten contractual document at some point in early September. The other was the testimony from Mr Vasales that he advised Mr Vass to document the transaction at around that time. Neither piece of evidence was directly contradicted, although it must be said that Ms de la Croix's evidence only emerged in re-examination.
With great respect to Ms de la Croix, I think her evidence is difficult to accept at face value. She said that she did not know what the document which she witnessed said, and that signing documents was a frequent occurrence in the office. On her own account, she would therefore appear to have lacked any point of reference for her witnessing of the document. She may remember Mr Nasteski coming to the office, and perhaps even signing some document or other, in around September 2014, but even if that is correct it would not be precise enough for present purposes.
It is also difficult to accept Mr Vasales' evidence at face value. None of the other transactions with Mr Nasteski appear to have been documented. It is not easy to see why Mr Vasales would have advised that this particular one should be any different. Mr Vasales did not give any reason in his evidence.
Acknowledging that these two pieces of evidence were not contradicted, I still think they are insufficient to displace the inference that the supporting documents post-date Mr Nasestki's payment of $463,000 in February 2015. I am satisfied that the dating of the agreement supposedly recorded in the documents is not accurate and they were not contemporaneous.
[7]
Rescission of settlement agreement
As recorded at [82] above, in his correspondence with NWN and in the particulars of his claim provided to NWN, Mr Vass denied that the Gallery's terms of sale were binding on him. He further alleged that he sold the whole DKB work to a third party (later identified as Mr Nasteski). In support of its rescission claim NWN alleged that these statements were fraudulent and induced it to make the settlement offer of May 2017.
This claim gave rise to a potential issue about reliance. It was common ground in the defamation proceedings that the paper's story was damaging to Mr Vass. NWN was relying on truth as an affirmative defence. Even if what Mr Vass said was in fact false, NWN would fail unless that could be proved.
Ms Alick and the NWN executives with whom she was dealing were well aware that they only had Mr Vass' word that the imputations were untrue. NWN apparently preferred to settle rather than put the issue to the test. In these circumstances it might have been asked whether NWN truly relied on the truth of Mr Vass' allegations in making the offer.
There was an alternative means of putting the rescission claim which did not depend upon this question of reliance. It is well established that an agreement to compromise a legal claim where the party making the claim has no genuine belief in its validity is not effective as a contract: Callisher v Bischoffsheim (1870) LR 5 QB 449. Apparently this is because the giving up of a claim known by the claimant to be false is not valid consideration: J D Heydon, Heydon on Contract: The General Part (5th ed, 2019, Lawbook Co.) at [5.380].
If Mr Vass knew that the imputations in the article were in fact true, the rule in Callisher v Bischoffsheim would apply to the settlement. The settlement would on this view be unenforceable whether or not NWN had relied on the truth of what Mr Vass said. In the course of the proceedings, NWN amended its statement of cross-claim so as to advance this as an alternative basis for obtaining a declaration that the settlement agreement resulting from the May 2017 offer was not binding.
But in the end, it was not necessary to consider this alternative contention. Counsel for Mr Vass did not cross-examine Ms Alick and conceded in final submissions that the truthfulness of Mr Vass' allegations was at least a contributing factor in NWN's decision to make the May 2017 settlement offer. Thus, the only issue was whether those allegations were in fact fraudulent.
It will be recalled that Mr Vass had denied that he was bound by the terms of sale. But this was not pressed by counsel for Mr Vass in final submissions, no doubt because of the evidence that the terms of sale were signed by Mr Vasales on Mr Vass' instructions.
The remaining issue centred on Mr Vass' dealings with the DKB work. Counsel for Mr Vass framed the issue as whether NWN had proved that the purported sale to Mr Nasteski of the five-panel work was bogus.
It seems to me that this formulation is too favourable to Mr Vass. The fact is that Mr Vass sold a single panel of the work to Ms Melas and received payment from her. Whether he did so as nominee or trustee for Mr Nasteski is immaterial.
The sale of the panel happened before Mr Vass formally accepted the terms of sale, but at a time when he knew that he would not be able to complete the transaction without undertaking to keep the work together. Furthermore, his agents took delivery of the work after he had bound himself to the terms of sale. The panel can only have been delivered to Ms Melas thereafter if he authorised its release to her (either directly or via Mr Nasteski). This is sufficient to sustain the imputations against Mr Vass and to falsify the representations he made to NWN prior to the making of the May 2017 settlement offer.
In any event, on my findings there was no agreement with Mr Nasteski before the sale of the panel. The case against Mr Vass therefore succeeds even if the issue is framed as counsel has framed it. Mr Vass was in fact responsible for breaking up the work and his denial of that imputation was fraudulent. NWN has sustained its claim and any agreement resulting from Mr Vass' acceptance of the May 2017 offer is not binding.
[8]
Entitlement to specific performance
Given my conclusion, no separate issue arises as to Mr Vass' entitlement to specific performance. But the issue was fully argued and I will therefore say something about the parties' submissions.
The critical question was whether, if a binding settlement contract arose from acceptance of the May 2017 offer, the Court would enforce the agreement by making an order in the nature of specific performance. In particular, would the Court make a mandatory order requiring NWN to publish an apology in the terms set out in its offer?
Such a question was raised in Summertime Holdings Pty Ltd v Environmental Defender's Office (1998) 45 NSWLR 291. That case, like this one, was a claim for specific performance of an agreement to settle a defamation dispute. The dispute arose out of a radio broadcast. The agreement provided for the broadcaster to publish an apology. The apology was to be broadcast and published in local newspapers nominated by the plaintiffs.
Young J noted that there had been cases, albeit it in quite different circumstances, of courts granting a mandatory injunction which required the defendant to publish a statement in specified terms. Nor was there a difficulty with mutuality, or with supervising the making of the apology.
But his Honour said:
Even though there is no Australian law which governs freedom of speech in the same way as the Constitution of the United States of America, I consider that it needs to be an exceptional case before the courts should exercise their discretion to grant an order like specific performance to compel a person to give an apology. I appreciate that in the instant case the form of the apology had, with slight exception, been settled, and that the first three defendants were contractually obliged to give it, but it still seems to me that I should not, in the absence of some special reason, compel the defendants to utter the words.
His Honour added:
I believe the approach I have taken is reinforced by the fact that the common law court does not compel apologies but merely takes the matter of whether an apology is offered or not into account when assessing damages.
Counsel for Mr Vass submitted that this reasoning is no longer applicable because of later developments in the Defamation Act. Counsel pointed to two particular developments.
The first was the introduction of s 20 of the 2005 Act. That section provides that an apology is not an admission of fault or liability and is not relevant to determination of fault or liability. Counsel submitted that the evident purpose of the provision was to encourage the making of apologies, and in particular to do so in the context of settlement.
The second development was the widening of provisions for resolution of defamation disputes without litigation, and in particular provision for the making of an "offer of amends" in response to a claimant's concerns notice. An offer of amends may include an apology: s 15(1A)(a).
In fact, counsel pointed out that, contrary to the absolute language of Young J, an offer of amends procedure existed at the time his Honour made the Summertime decision. However, the important point is that the offer of amends procedure has been significantly strengthened in the 2005 Act.
Failure to accept a valid offer of amends is now a defence to proceedings. This is achieved by s 18(1) of the 2005 Act, which provides:
Effect of failure to accept reasonable offer to make amends
(1) If an offer to make amends is made in relation to the matter in question but is not accepted, it is a defence to an action for defamation against the publisher in relation to the matter if -
(a) the publisher made the offer as soon as reasonably practicable after the publisher was given a concerns notice in respect of the matter (and, in any event, within the applicable period for an offer to make amends), and
(b) the publisher was ready and willing, on acceptance of the offer by the aggrieved person, to carry out the terms of the offer, and
(c) in all the circumstances the offer was reasonable.
As counsel pointed out, the effect of s 18(1) is draconian. Offers of compromise under the Rules (and informal Calderbank offers) operate by imposing costs penalties, but do not deprive the parties of their substantive rights. In contrast, a plaintiff who fails to accept a valid offer of amends is deprived of any damages for the defamation in question.
Counsel submitted that in these circumstances it cannot have been intended that an offer of amends could be made including an apology, which put Mr Vass at risk of forfeiting his cause of action, if, having accepted the offer, he could not fully enforce it. The Act should instead be interpreted as contemplating that such an offer can be enforced despite the effect on "free speech".
This is an attractive argument. It may derive further support from s 18(1)(b), which speaks of the publisher being "ready, willing and able" to perform the terms of an offer of amends. This is the language of a specifically performable obligation.
But the argument assumes that the ordinary principles of specific performance apply to an agreement arising from the acceptance of an offer of amends under the Act. That assumption was common ground between the parties in this case (and, it seems, before Young J). But there may be room for argument about whether it is necessarily correct.
In the appeal judgment McColl JA said ([2018] NSWCA 259 at [104] and [108]):
The amends provisions are a creature of statute. While they use expressions common to the general law of contract such as "offer" and "accept", that is not a necessary indication that the legislature intended that the general law of contract to apply to their interpretation.
…
… such provisions indicate that an agreement formed in accordance with the amends provisions "is not a contract in the sense of creating contractual rights and obligations, because it contains express provisions as to what should or should not happen next and the Court retains a role."
On this view, the legal consequences of acceptance of an offer of amends, and in particular the Court's power to enforce it, is solely a matter of statute. General law principles applicable to contracts of settlement do not apply.
That approach is arguably consistent with the provisions of the 1974 Act. Section 45 provided:
Limited effect of agreement
An agreement arising by the acceptance of an offer made pursuant to this Division does not have any effect in law except as specified in this Division and except so far as a contrary intention appears by the agreement.
Section 39 gave the court a statutory enforcement power:
Determination of questions
(1) Where an offer of amends made pursuant to this Division is accepted, the court may, on application by a party to the offer, determine any question as to the steps to be taken in performance of the agreement arising by acceptance of the offer.
(2) An appeal does not lie from a determination under this section.
On the face of it, this power would have allowed the Court to determine that an agreed-upon apology was one of the "steps to be taken" as a consequence of an offer being accepted. But there is no equivalent to s 39 in the 2005 Act.
The provision in the 2005 Act that deals with the effect of acceptance is s 17, which provides:
Effect of acceptance of offer to make amends
(1) If the publisher carries out the terms of an offer to make amends (including payment of any compensation under the offer) that is accepted, the aggrieved person cannot assert, continue or enforce an action for defamation against the publisher in relation to the matter in question even if the offer was limited to any particular defamatory imputations.
(2) A court may (but need not) -
(a) order the publisher to pay the aggrieved person the expenses reasonably incurred by the aggrieved person as a result of accepting the offer, and
(b) order any costs incurred by the aggrieved person that form part of those expenses to be assessed on an indemnity basis.
(3) The powers conferred on a court by subsection (2) are exercisable -
(a) if the aggrieved person has brought proceedings against the publisher in any court for defamation in relation to the matter in question, by that court in those proceedings, and
(b) except as provided in paragraph (a), by the Supreme Court.
Subsection (1) provides for the extinction of the plaintiff's cause of action only where the "agreement" has been performed by the publisher. But s 17 does not expressly provide any mechanism for forcing the publisher to do. All subsection (2) gives the court is a power (but a purely discretionary one) to order the payment of expenses or award costs.
Because of the common assumption by the parties that general law principles applied, none of this was the subject of any argument before me. Nor was it fully canvassed in the appeal, where the issue was limited to whether the May 2017 offer had been validly accepted. And the other two members of the Court decided the case on a narrow basis, without reference to the statement of principle by McColl JA which I have quoted.
Whether a statutory offer of amends procedure excludes or displaces general law contractual principles, and how far it does so, is in the end a question of construction of the particular statutory provisions. Section 45 of the 1974 Act has no equivalent in the 2005 Act. I have already recounted the argument from counsel based on the Act's widening of the associated defence. And there is a jurisdictional consideration.
It needs to be borne in mind that the offer of amends procedure is designed to operate in the District Court as well as this Court. Leaving aside the effect of the Civil Procedure Act 2005 (NSW), s 73, the District Court has no jurisdiction to order specific performance. It may be one thing to say that the District Court's powers to enforce an offer of amends are purely statutory. It is another to say that this Court's equitable jurisdiction to enforce a settlement agreement, which exists outside the proceedings to which the agreement relates, has been excluded.
None of this needs to be dealt with in the present case. Indeed counsel for NWN did not rely on the Summertime principle. Instead, counsel advanced a narrower defence of unclean hands.
In Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060, Campbell J reviewed the principles upon which the defence of unclean hands operates. The plaintiff's wrongdoing must have "an immediate and necessary relation to the equity sued for". Instances of the defence include cases where specific performance has been refused on the ground that the contract in question was induced by the plaintiff's misrepresentation (see at [160]). Another instance is Kettles and Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 35 SR (NSW) 108, where the plaintiff manufacturer was falsely and deliberately claiming that the design of its products had patent and copyright protection. An injunction against the defendant for (innocently) passing itself off as the manufacturer of the products was refused because the grant of relief would have enlisted the court in promoting the plaintiff's campaign to deceive the public.
On my findings, both of these instances apply in the present case. NWN's settlement offer was induced by misrepresentation (in fact, a fraudulent misrepresentation). And to order NWN to publish the apology would involve the court in misleading the public about a matter of public interest. If there was otherwise an enforceable contract of settlement, specific performance would be refused.
[9]
Conclusions and orders
The parties have conducted these proceedings on the assumption that Mr Vass' acceptance of NWN's offer of May 2017 gave rise to a contract between the parties to settle the proceedings (subject to the Callisher v Bischoffscheim point). On my findings, any such contract was vitiated by fraud on the part of Mr Vass. His claim for enforcement must be dismissed. Even if there were an enforceable contract at law, specific performance would be refused because of unclean hands.
As I have noted, the assumption that there was a contract of settlement between the parties may be open to question. In these circumstances, although NWN has succeeded on its cross-claim, which was framed on that assumption, I do not propose to make a formal declaration that the "contract" is invalid. It is not necessary to do so. Dismissal of Mr Vass' claim is sufficient to dispose of the issues in the proceedings. I see no reason why costs should not follow the event.
I will therefore order that Mr Vass' claim be dismissed and that he pay NWN's costs of the proceedings (including the cross-claim). Any application for further or different orders may be made in accordance with the Rules.
My conclusion means that the Common Law Division proceedings have not been disposed of. The parties should consider what orders or directions are now to be made in those proceedings. For this purpose they are at liberty to approach my Associate.
The orders of the Court are:
1. Order that the plaintiff's claim be dismissed.
2. Order that the plaintiff pay the defendant's costs of the proceedings (including the cross-claim).
[10]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 23 December 2021