Bond v John Fairfax Publications Pty Ltd - [2002] WASC 130

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BOND -v- JOHN FAIRFAX PUBLICATIONS PTY LTD & ANOR [2002] WASC 130

CORAM: HASLUCK J

HEARD: 14 MAY 2002

DELIVERED : 5 JUNE 2002

FILE NO/S: CIV 1650 of 2000

BETWEEN: ALAN BOND
Plaintiff
AND
JOHN FAIRFAX PUBLICATIONS PTY LTD (ACN 003 357 720)
First Defendant
MARK DRUMMOND
Second Defendant

Catchwords:

Defamation - Application to strike out defence - Polly Peck defence - Particulars of justification - Turns on own facts

Legislation:

Companies (Western Australia) Code, s 229(1)(b)

Criminal Code, s 371

Rules of the Supreme Court, O 20 r 19

Result:

Application to strike out allowed
Application to amend dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr S J Lemonis
First Defendant             :     Mr R L Le Miere QC
Second Defendant         :     Mr R L Le Miere QC

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Freehills
Second Defendant         :     Freehills

Case(s) referred to in judgment(s):

Bond v John Fairfax Publications Pty Ltd & Anor [2001] WASC 336
Clark v Richards & Anor [2002] WASC 49
Templeton v Jones [1984] 1 NZLR 448

Case(s) also cited:

Bryce v R (1955) 40 Cr App Rep 62
Gaston v United Newspapers Ltd (1915) 32 TLR 143
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Ilich v The Queen (1987) 162 CLR 110
Inkhorn Pty Ltd v Herbert [2000] WASCA 333
Jones v Skelton [1964] NSWR 485
Karsales (Harrow) Ltd v Wallis [1956] 2 All ER 866
Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986
Lever Bros Ltd v Bell [1931] 1 KB 557
Millington v Loring (1880) 6 QBD 190
Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472
Speidel v Plato Films Ltd [1961] AC 1090
Sutherland v Stopes [1925] AC 47
Sydney City Council v Ke-Su Investments Pty Ltd (1985) 1 NSWLR 246
TWT Ltd v Moore (1991) 105 FLR 350

HASLUCK J: The plaintiff, Alan Bond, has applied to strike out certain paragraphs of the amended defence filed on behalf of the first defendant, John Fairfax Publications Pty Ltd, and the second defendant, Mark Drummond, who is an employee of John Fairfax Publications. The defendants brought on for hearing simultaneously an application for leave to further amend the amended defence. In essence, the matter in controversy at the hearing before me concerned the adequacy of par 5 as pleaded in the defendants' minute of proposed further amended defence. However, in order to understand the matters in issue it is necessary to look briefly at the events leading up to these applications.
The plaintiff complains of an article published in the Australian Financial Review on Friday, 26 May 2000 which included the following passage:
"Who would have figured on Bell Resources being a stellar share market performer after Alan Bond had been convicted of stealing more than $1 billion in cash from the company in Australia's biggest corporate heist?"
The plaintiff's statement of claim contained a plea in par 5 that the matter complained of meant and was understood to mean in its ordinary and natural meaning that the plaintiff had been convicted of stealing $1 billion in cash from the Bell Resources Corporation. The plaintiff was said to have been injured in his credit and reputation as a consequence of the publication of the words complained of.
The defendants filed and served a statement of defence denying liability. They pleaded in par 4 that the matter complained of was meant and understood to mean that the plaintiff had been convicted of failing to act honestly and with intent to defraud in his capacity as a company director by participating in the transfer of $1 billion from Bell Resources Ltd (or its subsidiaries) to companies in which the plaintiff had a personal interest, which funds were never repaid. This meaning was said to be true in substance and in fact and certain particulars were provided in support of the plea.
In addition, in par 5 of the defence, the defendants pleaded, in the alternative, that the matter complained of in its natural and ordinary meaning meant and was understood to mean that the plaintiff stole $1 billion from Bell Resources Ltd which meaning was said to be true in substance and in fact. In support of this plea, the defendants purported to rely upon certain "particulars of truth", namely, "the facts set out in the schedule hereto and which have been admitted by the plaintiff constitute the fraudulent conversion by the plaintiff of approximately $1 billion, the property of Bell Resources Ltd (or its subsidiaries) to the use of Bond Corporation Holdings Ltd."
The facts set out in the schedule take the form of a lengthy statement of facts comprising 51 paragraphs. It was common ground at the hearing before me that this schedule or statement of facts was prepared and submitted to the Supreme Court for sentencing purposes at the time the plaintiff was convicted of two offences of contravening s 229(1)(b) of the Companies (Western Australia) Code because he, as a director of Freefold Pty Ltd, with intent to defraud that company and its shareholders, failed to act honestly by causing Freefold to enter an arrangement whereby it granted a loan facility of $700,000,000 to Bond Corporation Holdings Ltd and then extended that facility to an amount of $1 billion. The schedule sets out in narrative form a description of various inter‑company transactions of considerable complexity which led eventually to the plaintiff being convicted of the offences just mentioned.
It was against this background that the plaintiff applied to strike out par 4 and par 5 of the original statement of defence. The application in question was brought on for hearing before McLure J. Her Honour's rulings upon the various matters in issue are reflected in Bond v John Fairfax Publications Pty Ltd & Anor [2001] WASC 336.
Her Honour held that the plaintiff's challenge to par 4 of the statement of defence failed. She noted that par 5 of the defence was to be regarded as a Polly Peck plea, that is to say, the defendants were asserting their entitlement to plead an imputation somewhat different to the imputation said by the plaintiff to arise from the words complained of with a view to justifying the imputation or meaning contended for by the defendants.
On my reading of her Honour's ruling in regard to this issue she held that it was at least arguable that a statement that a person was convicted of stealing carried the imputation that the person was guilty of stealing and that the concept of stealing, to an ordinary reasonable reader, was wide enough to embrace a fraudulent conversion to the benefit of a third party. However, her Honour held that par 5 of the defence should be struck out as embarrassing because it was unfair and potentially prejudicial for the defendants simply to provide a narrative history of various transactions with the result that the reader (and thus the opposing party) was left to speculate as to what acts and matters in particular were said to support the allegation of stealing or fraudulent conversion. The defendants were allowed leave to replead.
The first attempt at repleading was reflected in the defendants' minute of amended defence which contained (in the alternative) discrete Polly Peck pleas in a re‑worked par 5 and an entirely new par 5A. In regard to both these paragraphs the defendants responded to the rulings of McLure J by identifying particular paragraphs of the statement of facts which they proposed to rely upon and by referring explicitly to certain transactions lying within the overall transactions which were described as the "Freefold facility". It is important to understand, however, that the defendants thereby continued to place reliance upon the statement of facts which had been prepared for a purpose not related to the matters in issue in these defamation proceedings.
The plaintiff then proceeded to bring the application to strike out which is presently before me. The application was directed to par 5 and par 5A of the amended defence. However, as matters developed, the defendants abandoned par 5A and have now brought an application for leave to amend in terms of a minute of proposed further amended defence which seeks to improve upon the repleading of par 5. It therefore emerges, as I noted at the outset, that the matter in controversy is whether the defendants should be allowed leave to amend in terms of the proposed par 5 of the repleaded statement of defence. The plaintiff objects to the proposed plea on the grounds that it does not disclose a reasonable ground of defence and is embarrassing.
The plaintiff submits that the so‑called 'particulars of truth' do not arguably substantiate the imputation pleaded. In particular, the particulars do not arguably establish fraudulent conversion.
The proposed par 5 is in these terms:
"5.Further and alternatively, the matter complained of in its natural and ordinary meaning meant and was understood to mean that the Plaintiff stole 1 billion dollars from Bell Resources Ltd in which meaning it is true in substance and in fact.
Particulars of Truth
(a)The facts set out in the paragraphs numbered 1, 15, 21‑25, 27, 28, 30, 33‑39, 45, 46, 49 and 50 of the Schedule hereto, in the context of all of the facts set out in the Schedule, and which have been admitted by the Plaintiff, constitute the fraudulent conversion by the Plaintiff of approximately 1 billion dollars the property of Bell Resources Ltd (or its subsidiaries) to the use of Bond Corporation Holdings Ltd in what is referred to as the "Freefold facility" transactions in the Schedule referred to.
(b)Further or alternatively, the facts set out in the paragraphs numbered 1, 15, 21‑25, 27, 28, 30, 33‑39, 45, 46, 49 and 50 of the Schedule hereto, in the context of all of the facts set out in the Schedule, and which have been admitted by the Plaintiff, constitute the dishonest transfer of approximately 1 billion dollars the property of Bell Resources Ltd (or its subsidiaries) to the use of Bond Corporation Holdings Ltd, in what is referred to as the "Freefold facility" transactions in the Schedule referred to."
Before turning to the plaintiff's challenge to the newly formulated par 5 of the statement of defence I must remind myself that pursuant to O 20 r 19 of the Rules of the Supreme Court the Court may strike out any pleading on the ground that it discloses no reasonable defence or may prejudice, embarrass or delay the fair trial of the action. On an application of this kind the facts alleged must be accepted as true. The rule concerning whether a reasonable defence has been disclosed is intended to apply only to cases which are untenable or really not arguable.
I remind myself also that a defendant who wants to plead justification can do so in one of two ways. The first way is to plead that one or more of the imputations which the plaintiff says arise from the words complained of are true in substance and in fact. The facts relied on to prove truth must be set out in full in the pleading and be proved a trial.
However, if a defendant takes the view that the imputations pleaded by the plaintiff do not arise from the words complained of and that they are not in the position to justify the plaintiff's imputations, there is another course open to them. That course is known as a Polly Peck defence, that is to say, a defendant can plead the imputations which he says arise from the words complained of and then justify those imputations.
A defendant wishing to rely on a Polly Peck defence must plead the imputations which they say arise from the words complained of, plead that those imputations are true in substance and in fact, and give full particulars of the facts relied on to support the plea of truth.
It is clear, however, that the Polly Peck defence must be narrowly confined to imputations and meanings similar to the imputations contended for by the plaintiff, bearing in mind, that the plaintiff is at liberty to complain only of certain passages or aspects of the publication in question. Templeton v Jones [1984] 1 NZLR 448.
In Clark v Richards & Anor [2002] WASC 49 McLure J observed at par 16 that there are a number of technical limitations on the pleading of a Polly Peck defence.
The first limitation is that the imputations must relate to a distinct charge arising from the words complained of. The second limitation is that a Polly Peck imputation cannot be more injurious or damaging than the plaintiff's imputations. The third limitation is that the scope of what can be pleaded in a Polly Peck defence is affected by the extent to which the tribunal of fact may depart from the imputations pleaded by the plaintiff and yet still find in the plaintiff's favour.
I have already noted that the schedule or statement of facts to which reference is made in the defendants' proposed par 5 of the statement of defence is complex and lengthy, comprising 51 paragraphs in all. In seeking to convey in comparatively simple terms what is meant by the reference to the Freefold facility, I am assisted by a document prepared by counsel for the plaintiff described as a summary of transactions reflected in the schedule or statement of facts. It is said that the defendants' schedule or statement of facts sets up five separate sets of transactions which are as follows:
"1.A number of "back to back" loans from Bond Brewing Holdings Group ("BBH") through Markland House to Bond Corporation Holdings Limited ("BCHL") - see paragraphs 4 - 8 of the Schedule.
2.The takeover by BCHL of The Bell Group Limited ("TBGL") - see paragraphs 9 - 14 of the Schedule.
3.A number of "back to back" loans from Bell Resources Limited ("BRL") through Markland House to BCHL totalling $672.7 million - see paragraphs 15 - 21 and 32 of the Schedule.
4.The creation and use of the Freefold Facility the effect of which was to reverse the back to back loans made from BRL to BCHL by Markland House - see paragraphs 22 -31 and 33 - 39 of the Schedule.
5.The entry into of an agreement for Manchar Holdings Pty Ltd to purchase BCHL's brewing interests - paragraphs 34 and 40 - 51 of the Schedule."
It is apparent from this summary that in repleading par 5 of the defence an attempt has now been made to single out those portions of the lengthy statement of facts that the defendants rely upon in support of the plea that the meaning they contend for in par 5 is true in substance and in fact. To my mind, however, this does not cure the embarrassment previously identified by McLure J. A plea in narrative form is not sufficient to identify what material facts are being relied upon, especially when the facts are said to bear upon the intention with which the plaintiff did certain acts. It is apparent from the narrative reflected in the schedule or statement of facts that the plaintiff was working in concert with various colleagues and it is difficult to discern, for present purposes, what actions are being attributed to him in particular.
One can see that a document of this kind may be sufficient for sentencing purposes in that it is sufficient to characterise the conduct of the plaintiff in general terms. However, in the context of a defamation claim in which the defendants seek to advance a plea of justification, the opposing party needs to know with precision what facts and matters the defendants intend to rely upon in order to justify the assertion that the plaintiff stole certain funds or was involved in a fraudulent conversion of the same.
The defendants submitted that it is at least arguable that the facts set out in those paragraphs of the schedule specified in par 5, satisfy each of the elements of fraudulent conversion within the meaning of the relevant provisions of the Criminal Code. However, it seems to me that the paragraphs relied upon by the defendants are so broadly expressed that it cannot be said that the defendants have identified the material facts on which they rely in order to prove fraudulent conversion. It was apparent to McLure J that the embarrassment created by the defendants pleading was essentially referrable to the fact that the schedule or statement of facts was prepared for a purpose extraneous to the purpose for which it is now being used, that is, to defend a claim in defamation. The proposed amendment continues to be embarrassing for the same reason. The generality of the particulars provided are accentuated when reference is made to certain paragraphs "in the context of all of the facts set out in the Schedule."
The difficulties created by the generality of the proposed par 5 are highlighted when one turns to a number of specific matters raised by counsel for the plaintiff.
The imputation contended for by the defendants in par 5 pursuant to the Polly Peck approach is that the plaintiff stole $1 billion from Bell Resources. It is clear from par 5(a) of the particulars that the defendants seek to equate stealing and fraudulent conversation. A basis for this contention is to be found in s 371 of the Criminal Code where it is said that a person who fraudulently converts to his own use or to the use of any other person is said to steal that thing or that property. It is apparent from related provisions, however, that the intention of the converter is a crucial factor.
It is said in the clause 5(a) particulars that the conversion referred to was a conversion "by the plaintiff" of approximately $1 billion to the use of Bond Corporation. The necessary elements of fraudulent conversion are that money is entrusted to a person, it is entrusted for a particular purpose, and it is ultimately used for some other purpose. To my mind, however, the paragraphs of the statement of facts relied on in their present general form do not arguably establish that the sum in question was entrusted to the plaintiff or was at his disposition for a particular purpose and was used by him for some other purpose, that misuse being fraudulent or dishonest.
Reference is made to the activities of the Group directors to which the plaintiff belonged but, as the pleading presently stands, it is difficult to discern precisely what wrongful intention is being attributed to the plaintiff. It may be that an improper intention can be inferred from the various events mentioned in the statement of facts but for pleading purposes, it is necessary to set out with some precision the nature of the case the defendants will seek to establish at trial. Put shortly, the defendants do not clearly identify the basis for equating fraudulent conversion with stealing in the circumstances of the present case.
It is true that by their written submissions the defendants sought to single out from the narrative certain events which arguably amounted to fraudulent conversion but this is not sufficient. The defendants' case must be clearly reflected in the pleading.
It follows from these observations that, in my view, the defendants' proposed par 5(a) must be struck out as failing to disclose a reasonable ground of defence and as being embarrassing. The difficulties with the pleading in its present form clearly arises from the defendants' persistent attempt to frame its case by reference to the statement of facts. It seems, however, that upon the basis that leave to replead will be granted, the defendants must now prepare a pleading which is specifically confined to the requirements of the claim in defamation advanced against them. I have already indicated that continued reliance on extraneous matters in the statement of facts is embarrassing.
Similar observations apply with I turn to par 5(b) of the proposed defence. In this case, there is a reference not to fraudulent conversion but to a dishonest transfer of the funds in question. Unlike par 5(a) however, the transfer is not said explicitly to have been occasioned or brought about by the plaintiff.

The various paragraphs of the statement of facts relied on do not refer affirmatively to an improper intention on the part of the plaintiff although such an intention is arguably to be inferred from certain passages. For example, in par 15 of the statement a description of certain events concludes with an assertion "accordingly failure by Bond to act honestly as a director of Freefold with intent to defraud had the necessary effect of defrauding the shareholders and creditors of BRL and Weeks." In par 30, par 39 and par 50 it is said that with intent to defraud Freefold and its shareholders, Bond failed to act honestly in the exercise of his powers and in the discharge of his duties as a director of Freefold.
It is material to note, however, that although the "Freefold facility" is defined in par 24 of the statement it is not entirely clear whether the term "Freefold facility transactions" used in par 5(b) of the proposed defence is intended to apply both to the creation of the Freefold facility and to the use of that facility to unwind the back to back loans. Thus, as matters stand, there is a degree of ambiguity as to exactly what intention is being ascribed to the plaintiff in answer to the defamation claim.
Further, the pleading at par 5(b) of the proposed defence does not establish stealing on the part of the plaintiff by reference to either the definition of that offence in the Criminal Code or by reference to the ordinary use of the word, that is to say, "to take away or take away dishonestly or wrongfully" as appears in the Macquarie Dictionary.
It follows that, in my view, par 5(b) should be struck out also as failing to disclose a reasonable defence and as embarrassing, but with leave to replead.
In summary, then, I am persuaded that grounds exist for striking out par 5 in the proposed form. The corollary is that the defendants should not be allowed leave to amend in terms of the minute of proposed amendment. I will, however, give directions allowing the defendants to replead and to apply for leave to amend within a prescribed time. I will hear from the parties as to whether any further orders and directions are required.