Charan v Nationwide News Pty Ltd
[2019] VSCA 36
•6 March 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0044
| ATKINSON PRAKASH CHARAN | Applicant |
| v | |
| NATIONWIDE NEWS PTY LTD (ACN 008 438 828) | Respondent |
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| JUDGES: | BEACH, NIALL and ASHLEY JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 15 February 2019 |
| DATE OF JUDGMENT: | 6 March 2019 |
| MEDIUM NEUTRAL CITATION: | [2019] VSCA 36 |
| JUDGMENT APPEALED FROM: | [2018] VSC 3 (J Forrest J) |
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TORTS – Defamation – Publication of article in print and online – Defamatory meanings pleaded – Meanings denied – Alternative defence of justification – Finding by trial judge, sitting without jury, that publication conveyed defamatory meanings variant from those pleaded by plaintiff – Finding that justification defence established – Whether defamatory meanings found by judge were permissible variants of meanings pleaded by plaintiff – Whether, in any event, justification defence met meanings found by judge – No error by trial judge – Leave to appeal granted on one ground only, but appeal dismissed.
COSTS – Defamation – Unsuccessful plaintiff – Offer to settle by defendant – Offer requiring substantial capitulation by plaintiff – s 40(2)(3) Defamation Act 2005 – Order by trial judge that plaintiff pay indemnity costs from date of expiry of offer – Whether judge misconstrued or misapplied provisions of Defamation Act – Whether judge mistook the facts – Whether judge failed to take relevant circumstances into account – Errors alleged not reasonably arguable – Leave to appeal refused.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr N J Young QC with Ms G L Schoff QC and Mr T J Mullen | Stephens Lawyers & Consultants |
| For the Respondent | Dr M J Collins QC with Ms R L Enbom | M&K Lawyers Group Pty Ltd |
BEACH JA
NIALL JA
ASHLEY JA:
Atkinson Prakash Charan (‘the plaintiff’) brought a proceeding for defamation against Nationwide News Pty Ltd (‘the defendant’), publisher of print and online editions of The Australian newspaper. The proceeding was commenced by writ filed on or about 22 December 2015. The plaintiff alleged that he had been defamed in an article published in the print and online editions of the newspaper on 20 November that year.
The proceeding came to trial in February 2017. It was heard by a judge of the Trial Division sitting without a jury. In all, the hearing occupied 34 days in the period February to September 2017. The plaintiff gave evidence on 13 of those days.
The judge published reasons (‘Trial Reasons’ or simply ‘TR’) on 25 January 2018.[1] He found that the plaintiff had established two defamatory imputations, but that the defendant had established the substantial truth of those imputations. He said also that, if he was wrong in holding that the defendant had justified the imputations, then he thought it was not possible to find that the plaintiff had an entitlement to an award of damages for vindication of his reputation or to provide reparation for injury.
[1]Charan v Nationwide News Ply Ltd [2018] VSC 3.
There followed a contest as to what costs order should be made. The defendant relied upon a series of offers of a Calderbank[2] kind. In reasons published on 1 March 2018 (‘Costs Reasons’ or simply ’CR’) the judge found that one of those offers was a ‘genuine’ offer of compromise, notwithstanding that it was an offer inviting the plaintiff to capitulate;[3] and he found that the plaintiff had unreasonably refused to accept it. He decided that the plaintiff should pay costs on the standard basis up until the time that the particular offer expired, and thereafter on an indemnity basis.
[2]Calderbank v Calderbank [1975] 3 All ER 333; see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (2005) 13 VR 435.
[3]Charan v Nationwide News Pty Ltd [2018] VSC 89.
On 1 March 2018, the judge made orders in accordance with the Trial Reasons and Costs Reasons.
The plaintiff now seeks leave to appeal against the orders made in consequence of the principal judgment, the costs judgment, and several interlocutory orders.[4] The last-mentioned concern the circumstances in which the defendant was granted leave to amend its defence to raise the justification plea, and the rejection of a subsequent application by the defendant to strike out that defence.
[4]And, if leave is granted, that the appeal be allowed and relief of one kind or another granted.
In our opinion, for the reasons which follow, the plaintiff should have leave to appeal on ground 1, but the appeal should be dismissed. Leave to appeal should otherwise be refused.
The imputations as pleaded and as found. The grounds of the application
Broadly speaking, the article, the content of which was the same but with a different heading in the print and online editions,[5] concerned non-government provision of Vocational Education and Training (‘VET’). It referred to unscrupulous practices by private providers. It referred to a company with which the plaintiff had previously been involved — Australian Careers Network Ltd (‘ACN’) — being under investigation. It stated that Phoenix Institute (‘Phoenix’), a company acquired by ACN in January 2015, was to be taken to court in connection with alleged improprieties. It mentioned the plaintiff by name. It referred to the plaintiff having made a lot of money out of the float of ACN. Annexures A and B to these reasons are respectively the print and online editions of the article.
[5]And so we will call it simply ‘the article’.
The article was admittedly wrong in one respect. It stated ACN was ‘headed’ by the plaintiff and a Mr Brown. In fact, the plaintiff had been, but was not at the time of publication, a director of and major shareholder in that company. Pausing, the plaintiff’s position before and at trial was that he had never ‘headed’ ACN. The defendant’s position was that he had done so, because he had headed companies in what was called the CTI Group. Of this dispute, more later.
The online edition corrected the error and offered an apology on the afternoon or evening of the day of publication. The print edition corrected the error the next day. It did not offer an apology.
The writ was filed, as we have said, on or about 22 December 2015.[6]
[6]A concerns notice had been sent to the defendant on 27 November. It evidently failed to evoke a response satisfactory to the plaintiff.
The plaintiff, by paragraph [5] of the statement of claim, pleaded that in their natural and ordinary meaning, the print and online articles were defamatory of him and meant and were understood to mean that:
(a)The Plaintiff as head of Australian Careers Network (ACN), has amassed a fortune by engaging in unscrupulous business practices that take advantage of vulnerable consumers and government funding schemes in the education and training sector.
(b)There are reasonable grounds to suspect that the Plaintiff, as head of ACN, has amassed a fortune by engaging in unscrupulous business practices that take advantage of vulnerable consumers and government funding schemes in the education and training sector.
(c)The Plaintiff, as head of ACN, has been marketing education and training courses to vulnerable consumers in a manner that constitutes misleading and deceptive and unconscionable conduct in breach of the law.
(d)There are reasonable grounds to suspect that the Plaintiff, as head of ACN, has been marketing education and training courses to vulnerable consumers in a manner that constitutes misleading and deceptive and unconscionable conduct in breach of the law.
(e)The Plaintiff, as head of ACN, has been carrying on business in a manner that involves unscrupulous door-to-door marketing practices in relation to vulnerable consumers in the training and education sector.
(f)There are reasonable grounds to suspect that the Plaintiff, as head of ACN, has been carrying on business in a manner that involves unscrupulous door-to-door marketing practices in relation to vulnerable consumers in the training and education sector.
(g)The Plaintiff, as head of ACN, has been carrying on business in a manner that involves significant non-compliance with the quality standards required from providers of vocational educational services.
(h)There are reasonable grounds to suspect that the Plaintiff, as head of ACN, has been carrying on business in a manner that involves significant non-compliance with the quality standards required from providers of vocational educational services.
Thus, in substance, the plaintiff pleaded four pairs of imputations, in each instance pleading that the meaning of the article was that the plaintiff had acted in a particular way; or that there were reasonable grounds to suspect that he had so acted.
By its defence filed 21 March 2016, the defendant denied that the article conveyed any of the pleaded imputations.
By paragraph [5A] of the defence, as amended pursuant to leave granted by an Associate Judge on 5 October 2016, the defendant alternatively sought to justify imputations 5(a)–(b) and (g)–(h).
The judge found that none of imputations (c), (d), (e) and (f) had been made out.[7] That finding is not now challenged.
[7]Trial Reasons [56]–[65].
It was common ground at trial that, with respect to each pair of imputations, only one meaning could be found by the judge.[8] That is, if the judge found that the meaning of the article was that the plaintiff had engaged in particular conduct, it could not also be found that the meaning of the article was that there was a reasonable suspicion that the plaintiff had acted in that way.
[8]Ibid [34].
In the event, the judge found that the article conveyed imputations that –
(1)the plaintiff managed a VET organisation which engaged in unscrupulous business practices that took advantage of vulnerable consumers and, as a result of which, he made a large amount of money;[9] and
(2)the plaintiff managed a VET organisation that was significantly non-compliant with quality standards.[10]
[9]Ibid [52] and [762].
[10]Ibid [71] and [762].
The two imputations which the judge found to have been conveyed were not identical with imputations (a) and (g) as pleaded by the plaintiff. In each instance, the imputations found by the judge excluded the words ‘as head of Australian Careers Network (ACN)’.[11] It might also have been said that the effect of imputation (a) — and possibly (g) — was that the plaintiff had personally engaged in disreputable conduct, whilst the imputations found by the judge were that the plaintiff had managed a VET company which engaged in disreputable conduct. But, as will be seen, neither party ultimately submitted in this Court that the meaning of the imputations as pleaded and as found differed in that way.
[11]For convenience, we use hereafter the words and acronym ‘as head of ACN’.
Proposed ground[12] 1 reads as follows:
[12]In what follows, we will refer, for simplicity, to a ‘ground’ rather than a ‘proposed ground’.
The trial judge erred in finding that, in its ordinary and natural meaning, the Article was capable of conveying, and in fact conveyed, the following imputations of and concerning the applicant:
(a)at [53] and [762(b)(1)], that he managed a VET organisation which engaged in unscrupulous business practices that took advantage of vulnerable consumers and as a result of which he made a large amount of money; and
(b)at [71] and [762(b)(2)], that he managed a VET organisation that was significantly non-compliant with quality standards,
being imputations that were not confined to the applicant’s management of ACN and Phoenix after ACN had acquired Phoenix in January 2015 (at [52] and [86]).
The gist of ground 1 is that the judge erred in finding imputations which were ‘not confined to the applicant’s management of ACN and Phoenix after ACN had acquired Phoenix in January 2015’.
Next, we refer to ground 2 which reads as follows:
As a consequence of the errors identified in proposed ground 1, the trial judge erred at [86] in rejecting the applicant’s objection that the defence and particulars of justification raised false issues, going beyond:
(a)any meaning that the Article was capable of conveying; and
(b)the applicant’s role as head, or as a director or manager of, ACN in the period after it acquired Phoenix in January 2015.
It is apparent that ground 2 is closely allied to ground 1. The gist of ground 2 is that the justification defence was irrelevant because the sting of imputations (a) and (g) as pleaded by the plaintiff confined allegations of misconduct on the plaintiff’s part to his asserted role as head of ACN after its acquisition of Phoenix in January 2015.
It is a notable feature of grounds 1 and 2 that they highlight the acquisition of Phoenix by ACN in January 2015. The plaintiff’s imputations (a) and (g) made no mention of Phoenix, its acquisition by ACN, or the year 2015; but the plaintiff submitted that these limitations upon subject-matter and time were imported into the imputations. This is a matter to which we must return.
We next refer to ground 2A. This is what it says:
2A.The Court erred in law in:
(a)permitting the defendant to amend its defence at a late stage of the proceeding to plead a justification defence that concerned conduct that had no connection with the operation of ACN or Phoenix in 2015, particularly where the defence was not properly particularised;
(b)refusing to strike out the justification defence pleaded by the defendant on the ground that it failed to properly particularise the applicant’s knowing involvement in the alleged unscrupulous business practices of CTT;
(c)permitting the defendant to rely upon a document entitled Consolidated Particulars of Truth, and subsequently a further document entitled Second Consolidated Particulars of Truth, in support of its justification defence; and/or
(d)permitting the defendant in the course of the trial to rely upon new allegations and evidence of alleged misconduct in 2014 or earlier by the applicant, or by companies with which he had a connection, that had not formed part of the First or Second Consolidated Particulars of Truth.
Ground 2A(a) attacks the order of the Associate Judge made on 5 October 2016. It continues the theme set by grounds 1 and 2. Its gist is that the justification defence ought not to have been permitted because it had no connection with the operation of ACN or Phoenix in 2015.
Ground 2A(b) raises a complaint that the judge erred when, on 14 December 2016, he refused to strike out the justification defence. The gist of that application, as noted by his Honour in reasons delivered on 14 December 2016, was that the plaintiff argued that there had been such a failure to provide particulars of the justification defence, contrary to orders earlier made by the Associate Judge, that the defence in its entirety, should be struck out.
Ground 2A(c) complains that the judge erred because he permitted the defendant to rely upon a document entitled ‘Consolidated Particulars of Truth’, later redelivered in supplemented form, in support of its justification defence. At its heart lies the same notion: that particulars were irrelevant which travelled beyond the plaintiff’s role as head of ACN in 2015 with respect to the activities of Phoenix.
Ground 2A(d) raises a complaint that the defendant was permitted to put in evidence travelling beyond matters set out in either version of the Consolidated Particulars of Truth.
We turn to ground 2B. Thus:
2BIn the course of addressing the defendant’s justification defence, the trial judge erred in finding that in 2014 or earlier the plaintiff personally participated in, or knew and approved of, the falsification of student records (at [669] and [673]) and/or the offering of incentives to VET students (at [717]) by organisations other than ACN and Phoenix, in circumstances where those findings:
(a)had no connection with the operations of ACN and Phoenix in 2015 that were the subject of the Article; and
(b)depended on the following factual findings that did not support those conclusions:
(i)findings at [332]–[351] that the applicant maintained a significant involvement in the administration of the CTI companies until mid-December 2014;
(ii)findings at [532], [536], [554] and [568]–[570] that the applicant had attended a mass enrolment session in September or October 2014 and, while it did not proceed to a conclusion, this showed that the applicant was aware of a practice of endeavouring to enrol students regardless of their suitability for courses;
(iii)the finding at [515]–[516] that there was a necessity to increase enrolments in 2014 in preparation for the listing of ACN and that this provided a motive to engage in unscrupulous conduct;
(iv)the finding at [596] that the applicant had requested Ebejer to sign record of contact documents, although his Honour acknowledged that the applicant was not cross-examined as to his denial of any such request;
(v)the finding at [610] that Cage had observed CTI employees completing documentation on behalf of students; and
(vi)the acceptance at [667] of the evidence of Ebejer, Ottery and Cage as to the falsification of student records by CTI employees or agents in 2014, and the evidence of the students Ali and Maartens as to the falsification of the contents of their student files in 2014.
There are two distinct aspects to this ground. The gist of sub-ground (a) is that the judge erred by making findings at all with respect to the plaintiff’s alleged misconduct when such conduct was unrelated to the operations of ACN and Phoenix in 2015. It thus continues the scheme of grounds 1, 2 and 2A(a).
Ground 2B(b) is of a different character. It attacks findings made by the judge that the plaintiff participated in, or knew and approved of, misconduct by entities other than ACN and Phoenix. The basis of the attack is that the judge’s findings as to the plaintiff’s involvement were unsupported by six identified evidentiary findings.
With respect to ground 2B(b) we immediately note that the six findings are not themselves put in issue. That is so despite, in some instances, the plaintiff having given evidence opposed to the six findings; and despite his evidence that he knew nothing of the misconduct.
The course which the plaintiff has taken is readily understandable. In finding that the plaintiff had personally participated in, or knew and approved of the falsification of records and the offering of incentives to students by VET organisations, the judge concluded that:[13]
Mr Charan was an entirely unreliable witness, not only on this issue but as to all matters relevant to his claim against Nationwide. For reasons I will now set out, I am satisfied that on issues central to the case he gave many untruthful answers and, in the main, dissembled, prevaricated or lied in an effort to advance his response to the justification defence. In particular, his evidence as to his lack of involvement in the management of CTI and associated companies was discredited by contemporaneous documentation and internal inconsistencies in his own evidence.
[13]Trial Reasons [111].
The judge provided many instances of what he concluded were untruthful answers, dissembling and prevarication.
The plaintiff does not seek to challenge the judge’s assessment of his unreliability as a witness.
We need not set out ground 3. It proposes only that proof of one or more of the errors earlier identified would mean that the judge erred by finding the justification defence made out.
Grounds 4 to 7 attack the judge’s order with respect to costs — specifically, that he ordered the plaintiff to pay indemnity costs from 7 February 2017 onwards. There are two distinct aspects to these grounds. Grounds 4, 6 and 7 attack findings made by the judge, in the case of paragraph 7 insofar as he failed to take into account certain allegedly relevant considerations. Ground 5, on the other hand, contends that the judge erred in his interpretation of s 40(3) of the Defamation Act 2005 (‘the Act’), or else misapplied the statutory test. We will set out those grounds later in these reasons.
The private VET sector
Although the sting of the article had to be determined in accordance with the principles which the judge correctly set out at [31]–[36] of the Trial Reasons, the contest between the parties, and particularly the justification defence, cannot be understood without both an understanding of the private VET sector at relevant times, and of what was variously called the ‘CTI Group’ and the ‘ACN Group’.
For many years now, vocational education and training has been provided by both government and private institutions. The former are exemplified by TAFE colleges. The latter involve bodies approved as Registered Training Organisations (‘RTOs’) by either or both of the Commonwealth and a State educational body.
In Victoria, at relevant times, the relevant authority was the Department of Education and Training (‘DET’). An institution, if approved as an RTO, could hope to enter into a contract for the provision of services to students. Such contracts, again speaking of Victoria,[14] at relevant times required a provider to act in a carefully structured way in enrolling students, in having them undertake courses, and in the submission to the Department of claims for payment. A provider was required to undertake and document steps designed to ensure that students were suitable for enrolment at all, were suitable for enrolment in particular courses, and had undertaken necessary work in those courses.
[14]Victoria being particularly relevant to the justification defence.
Speaking again of the Victorian situation, a provider raised claims for payment in respect of enrolled students who had undertaken necessary studies by uploading details onto a Department website. It appears that, subject to any red flags that the system might generate, payments would then be made in accordance with the claim raised. The only physical intervention was if, as it was entitled to do, the Department arranged for an audit of a provider’s enrolments and work undertaken by students; or more broadly, had the performance of a funding contract reviewed to ensure that the provider had complied with its contractual obligations.
Whilst students received vocational education and training free of charge in the first instance, they faced the prospect of repaying the cost of the courses undertaken if, in employment, their earnings reached a certain threshold.
There was no legitimate point in enrolling students who were unable to understand or read English. For that reason, in the Victorian context, a prospective student was required to complete what was called a Language, Literacy and Numeracy (‘LLN’) form. To be clear, this was required by the funding contract struck between the Department and a VET provider.
The funding contract also required that there be a Pre-training Review (‘PTR’). Such a review was required to be carried out before a student commenced training. It was another layer of ensuring that a student was capable of, and thus could usefully undertake, a training course.
At both the Commonwealth and State level, there were regulatory authorities whose purpose it was to ensure that registered training organisations provided courses of suitable quality. There was the Australian Skills and Quality Authority (‘ASQA’), to which we have already referred, and the Victorian Skills and Quality Authority (‘VSQA’).
We mentioned earlier the computerised program by which a producer made claims for payment. The program was known as the Skills Victoria Training System (‘SVTS’). Under this program, a provider would report what training had been provided to a student. It did so by uploading what was called a NAT file. This was a file required to be maintained by the provider with respect to the particular student.
We also mentioned earlier that the Victorian Department could require an audit of a provider’s records. Once again, acronyms were to the fore. An ‘EOE audit’[15] might be required. This was an audit as to the existence of a student’s eligibility to participate in a program. Then there was an ‘EOP audit’.[16] This was an audit whether a particular student had undertaken studies.
[15]EOE was an acronym for ‘Evidence of Eligibility’.
[16]EOP was an acronym for ‘Eligibility of Participation’.
We have described the role of registered training organisations. It is clear that, at relevant times, such providers actively sought to identify and enrol students and then have them participate in training. The more students enrolled, and the more students undertaking training, the greater the income flowing to the provider.
There was also a kind of entity which, though not itself a registered training organisation, would canvass for students, and then, by an ‘auspicing’ arrangement with one or more TAFE colleges, provide relevant vocational and education training.
The plaintiff’s involvement in the private VET sector
The plaintiff, according to the judge, began work in the sector in 2010, marketing for an RTO. He met Ivan Brown, who worked as a trainer and in sales and marketing.[17]
[17]Trial Reasons [8].
In 2012, a company entitled Community Training Initiatives Ltd (‘CTI’) was incorporated. Each of the plaintiff and Brown held 50 per cent of the shares in that company, the plaintiff through Sapra Enterprises Pty Ltd, of which he was the sole director and shareholder.
The plaintiff was a director of CTI from 7 September 2013 to 30 September 2014. Up until the end of November 2014, he described himself as the ‘managing director’ of CTI.
CTI was not itself a registered training organisation. It was, the judge said, ‘spectacularly successful, obtaining contracts with a number of TAFEs for the delivery of training courses’.[18] This was done by entering into ‘partnerships or auspicing arrangements with TAFE colleges, in particular Kangan and Chisholm Institute’.[19] That is, CTI was a body of the kind described at [50] above.
[18]Ibid [9].
[19]Ibid.
On 1 July 2013, a company named Consider This Training Pty Ltd (‘CTT’) was acquired, in substance by the plaintiff and Brown. The purchaser was Health Training Services Pty Ltd. Through Sapra, the plaintiff held a 50 per cent interest in Health Training Services.
An advantage of CTT was that, at the time of its acquisition, it had a funding contract with the Victorian Department.
From the date of its purchase, Brown became a director of CTT. Ms Celona, the previous owner of CTT, remained managing director of that company until December 2013. She left the company altogether in February 2014.[20]
[20]Ibid [95].
No later than February 2014, the plaintiff and Brown formed the idea of incorporating a body which would gather under its wing the existing entities which they controlled. The idea also involved the acquisition of other entities operating in the VET private sector, which entities would also be brought under the wing of the new company. Then the new company would be floated. The more entities in the group, the greater would be its income, its profitability (by intent), and so its attractiveness in the initial public offering.
So it was that, on 17 March 2014, ACN was incorporated.
The plaintiff and Brown were, for practical purposes, the only shareholders in ACN at the time of its incorporation. They both became directors of ACN. A senior employee of CTI was also a director, but resigned her position on 30 September 2014.[21]
[21]Ibid [99].
On 3 June 2014, the plaintiff and Brown purchased another RTO, Thoan Pty Ltd, from a Mr Stephenson. Thoan traded as Australian Management Academy (‘AMA’). It operated in Queensland, New South Wales and Victoria. At the time of purchase, it also had a funding contract with the Victorian Department. This was an instance of the implementation of the plan described at [58] above.
From the time of its acquisition until 30 September 2014, the plaintiff was the sole director of Thoan. He then resigned that position. He remained company secretary until 21 October 2014.[22]
[22]Ibid [98].
We have referred to the date 30 September 2014 on a number of occasions. It was on that date that ACN acquired all the shares in CTI, CTT, Thoan and other entities in what had hitherto been ‘the CTI group’. ACN then became the ‘holding company’ for entities in the group. The plaintiff and Brown were each allocated a little less than 25 million shares in ACN.
As part of the new arrangements, the plaintiff resigned as a director of ACN, CTI and Thoan. It appears that his then intention was to largely exit the group at the time of the float, by selling down his shareholding.
Although in different ownership, the companies in the group continued to function after 30 September as they had done before that date. Entities such as CTT and Thoan had funding contracts. It was the performance of those companies which dictated the apparent income and profitability of the holding company.
A prospectus referable to the float of ACN issued in November 2014. It stated that, in addition to CTT and AMA, a number of other entities of the group — Cove, Heron Access and Smart — had government funding contracts. Three other entities which were stated to be part of the group — Haley College, Loka and ITC — were not said to have funding contracts at the time.[23]
[23]Ibid [100].
The prospectus further stated that the plaintiff would sell down his shareholding by 21.5 million shares. At the issue price of $1.70 per share, he would receive about $36.55 million. The balance of his shareholding, about 4 per cent, would be held in escrow. He was to be required to execute a non-compete restraint deed.[24]
[24]Ibid [17]–[18].
ACN listed on 14 December 2014. The plaintiff received $35 million for the sale of his 21.5 million shares.[25] Two matters complete the tale.
[25]Ibid [18].
First, the judge made extensive findings — in the face of evidence of the plaintiff to the contrary — that the plaintiff had a continuing and wide-ranging role in the conduct of businesses in what had hitherto been the CTI group up until ACN was floated in mid-December 2014. His role was both managerial and hands-on. It was no different after 30 September 2014 to what it had been before that date. Further, what the plaintiff did involved knowledge of, encouragement of, and participation in what may compendiously be called improper practices.
Second, the ACN group soon failed. ACN was put into voluntary administration on 22 March 2016.
Ground 1
Plaintiff’s submissions
It was submitted in writing for the plaintiff that:
(1)The imputations found by the judge ‘went far beyond the scope of the imputations that the article was capable of conveying’.[26]
(2)The imputations found by the judge were inconsistent with findings which he made in the course of his reasons.
(3)The reasoning relied upon by the judge did not support the width of the first imputation found.
(4)The judge applied a wrong test in holding that a reasonable reader would attach little or no importance to the reference to ACN in the article. The issue of meaning was not resolved by asking what an ordinary reasonable reader might consider significant, but what an ordinary reasonable reader would understand the article to mean.
(5)The first imputation found by the judge, insofar as it related to unspecified VET companies, was the product of a strained and unreasonable interpretation of the article. The article was not legally capable of conveying, and did not in fact convey, any imputation that was broad enough to include any VET organisation other than ACN.
(6)The first imputation found by the judge also had a temporal breadth which the article was legally incapable of conveying and did not in fact convey. Whilst the article contained a sentence about the listing of ACN, it did not state that the listing occurred in December 2014. The article was relevantly confined to the conduct of Phoenix after it was acquired by ACN in January 2015.
(7)The judge’s reasoning in relation to the second imputation was also flawed. The judge himself had recognised that there was an unequivocal imputation that Phoenix was an ACN company of which the plaintiff was a director. The critical limitation on the meaning of the article was not affected by the judge’s observation that a reader would not focus on ACN.
(8)The judge should have found that the article was incapable of conveying any imputations going wider than imputations that the plaintiff had, as head of ACN, after it acquired Phoenix in January 2015, managed Phoenix when it engaged in unscrupulous business practices and significant non-compliance with quality standards.
(9)The imputations found by the judge were not a permissible variant of the plaintiff’s pleaded imputations.
[26]Plaintiff’s Amended Written Case [2].
The oral submissions of senior counsel for the plaintiff mainly emphasised these matters:
(1) The trial miscarried badly. It became a roving investigation into a series of false issues, in which the defendant was permitted to justify meanings which were unpleaded and disconnected from the article in every respect. This was, for the reason explained by Brennan CJ and McHugh J in Chakravarti v Advertiser Newspapers Limited,[27] outrageous.
[27](1998) 193 CLR 519, 529 [11] (‘Chakravarti’).
(2) The defendant did not plead alternative meanings. That was wrong, and it confused the trial. David Syme & Co Ltd v Hore-Lacy[28] requires a defendant to plead an alternative meaning alleged. Here, the defendant sought to justify a radically different (unpleaded) alternative to the meaning pleaded by the plaintiff. If Hore-Lacy and Setka v Abbott[29] permitted such a thing, those decisions should be reviewed.[30]
[28](2000) 1 VR 667, 669 [3], 674–6 [20]-[21], [24] (Ormiston JA); 687–8 [56], [58]-[59] (Charles JA) (‘Hore-Lacy’).
[29](2014) 44 VR 352 (‘Setka’).
[30]Counsel then submitted that there was a lot to be said for the conclusion of Basten JA (at 127 [210]–[211]) and Macfarlan JA (at 133 [235]), McColl JA dissenting, in Bateman (citation at n 36 below), that no pleading of an alternative meaning is necessary. Those observations were made in the context of the Uniform Civil Procedure Rules 2005 (NSW).
(3) What the judge described as permissible variants of imputations (a) and (g), omitting reference to ACN, removed the link in the article between the plaintiff, ACN, Phoenix and 2015.[31] The critical link with the plaintiff was the assertion in the article that at the time of misconduct by Phoenix, he headed ACN, which controlled Phoenix.
[31]What his Honour did was akin, counsel submitted, to the defective justification pleading considered in Advertiser-News Weekend Publishing Co Ltd v Manock (2005) 91 SASR 206, 209 [13]–[14], 218–219 [72]–[74], 220 [79]–[81] (Doyle CJ) (‘Manock’).
(4) Context must be given to the plaintiff’s reference to ACN in the pleaded imputations. This was permissible. Thereby, the imputations were confined to the plaintiff’s alleged wrongdoing, via ACN, in the activities of Phoenix in 2015. In this connection, counsel referred and relied upon ss 8 and 25 of the Act, passages in Setka,[32] Chakravarti,[33] Herald & Weekly Times Ltd v Popovic,[34] Habib v Nationwide News Pty Ltd,[35] Fairfax Media Publications Pty Ltd v Bateman,[36] Greek Herald Pty Ltd v Nikolopoulos,[37] and Defamation Law in Australia.[38]
[32](2014) 44 VR 352, 367 [47]–[50] and 380 [106]–[107] (Warren CJ and Ashley JA).
[33](1998) 193 CLR 519, 545 [58] (Gaudron and Gummow JJ).
[34](2003) 9 VR 1, 62–3 [303]–[306] (Gillard AJA) (‘Popovic’).
[35][2010] NSWCA 34 [291]–[293] (‘Habib’).
[36](2015) 90 NSWLR 79, 115–116 [169]–[170] (Basten JA) (‘Bateman’).
[37](2002) 54 NSWLR 165, 173 [26] (Mason P) (‘Greek Herald’).
[38]Patrick George, Defamation Law in Australia, (LexisNexis Butterworths, 3rd ed, 2017) paras 180, 181, 183 and 186.
(5) The judge’s reasoning relevantly began at TR [38]. There, the judge set out what a reader would take from the article. The focus was on Phoenix as a subsidiary of ACN, and thereby the plaintiff. This was to be contrasted with the imputations found.
(6) The judge had erred at TR [38(f)] in referring to ‘2014’ not ‘2015’. This was not a mere typographical mistake. It had fed into the judge’s erroneous conclusion with respect to imputations conveyed by the article.
(7) The judge had also erred, at TR [38(j)], in that he had not tied the plaintiff’s acquisition of a fortune to the misconduct of Phoenix. That link was made at TR [46].
(8) With these exceptions, what the judge said at TR [38]–[46] was embraced.
(9) Trial Reasons [46], [47] (although this paragraph did not refer to Phoenix by name), [48] and [49] followed on from TR [38] and focussed upon Phoenix.
(10) Trial Reasons [52] could not be reconciled with TR [46].
(11) Trial Reasons [52] and [53] inexplicably and impermissibly broke the link between ACN, Phoenix and the plaintiff.
(12) Trial Reasons [51] showed that imputation (a) was to be understood as meaning that the plaintiff, as manager of an RTO, had been ‘knowingly involved’ in its unscrupulous practices. This was the plaintiff’s personal involvement. Thus there was a link with the practices of Phoenix.
(13) With respect to imputation (g), the judge was correct at TR [68], but impermissibly parted from this correct analysis at TR [70]-[71].
(12)The plaintiff had always submitted that the imputations were confined to ACN, Phoenix and 2015. Plaintiff’s counsel had made the point when the defendant sought leave to plead the justification defence. At trial, senior counsel for the plaintiff had made the point when opening; likewise in closing address. The judge indeed, had said as much at TR [86].
Defendant’s submissions
It was submitted in writing for the defendant that:
(1)The plaintiff could have pleaded imputations with a high degree of specificity, limited both in terms of subject matter and time. But the imputations had been pleaded at a higher level of generality.
(2)The pleading decision made by the plaintiff determined the evidence which could be adduced in support of a justification defence.
(3)The effect of the Hore-Lacy line of authorities[39] is that a plaintiff is only entitled to a verdict if he or she establishes that the impugned publication carried a pleaded imputation, or an imputation that was not more serious than, and not substantially different in meaning from, a pleaded imputation.[40]
(4)The plaintiff’s submission that the judge should have found that the article was incapable of conveying any imputations wider than imputations that the plaintiff had, as head of ACN after it acquired Phoenix in January 2015, managed Phoenix when it engaged in unscrupulous business practices and in significant non-compliance with quality standards — called by the defendant ‘the new imputation’ — were not the imputations pleaded. Further, the plaintiff did not submit at trial that the pleaded imputations were to be so understood.
(5)Moreover, the new imputation set new contextual and temporal elements.
(6)Again, whereas the pleaded imputations concerned conduct said to have been engaged in by the plaintiff himself, the plaintiff now contended for an imputation which asserted only that the plaintiff managed Phoenix when it engaged in disreputable conduct.
(7)The plaintiff could not have sought a verdict at trial on the new imputation because it was substantially different from the pleaded imputations in the three respects. But if the imputations which he did plead were not capable of being conveyed because they were wider than any imputation in fact conveyed by the article, then there should have been judgment for the defendant on that basis.
(8)The new imputation was an impermissible attempt to depart from the way in which the plaintiff’s case was pleaded and prosecuted at trial.
(9)The imputations found by the judge were clearly permissible variants of the imputations pleaded by the plaintiff. They followed closely the language of the pleaded imputations, save for the reference to ACN. The judge explained why the difference was immaterial.
(10)Whether an imputation is a permissible variant of a pleaded imputation is determined by comparing the imputations. The plaintiff was incorrect to compare the imputation with the impugned article.
[39] The submissions referred to Hore-Lacy (2000) 1 VR 667 and Setka (2014) 44 VR 352.
[40]Hore-Lacy (2000) 1 VR 667, 675-6 [22]–[24] (Ormiston JA), 688-9 [58]–[63] (Charles JA).
Orally, senior counsel for the defendant emphasised these submissions:
(1)The plaintiff went to trial on the pleaded imputations. He was entitled to succeed if the judge found that those imputations or permissible variants were established. The defendant had denied that the article conveyed the pleaded imputations or permissible variants. It had alternatively pleaded the substantial truth of the pleaded imputations or any permissible variants. This was not a Hore-Lacy defence.
(2) The defendant had always said that ACN was the embodiment of companies in the CTI group. Trial Reasons [88]–[102] showed that this was in fact the situation, and how it came to be so. The plaintiff had ‘headed’ ACN from its incorporation in March 2014, doing so as the head of companies in the CTI Group. This was clearer still from 30 September 2014.
(3) The justification defence engaged, as it must have done, with ‘the imputations carried by the matter of which the plaintiff complains’.[41]
[41] Emphasis added; see s 25 of the Act. Counsel did not submit, contrary to what was said by Warren CJ and Ashley JA in Setka, that ‘imputations’ in s 25 did not extend to permissible variants of pleaded imputations. His point was that the limitations for which the plaintiff was now contending could not constitute, converted into an imputation, a permissible variant to which the justification defence must respond.
(4) If the narrow meaning of the article, set out (though incompletely) in paragraph 14 of the plaintiff’s written case, had been pleaded, the defence would necessarily have been very different. A plea of justification could not have been raised. Consideration would have to have been given to pleading contextual truth, mitigation of damage, and perhaps partial justification. This demonstrated that what the plaintiff now claimed was the meaning of the imputations was not a permissible variant of what had actually been pleaded. Counsel cited passages in the judgments of Ormiston JA and Charles JA in Hore-Lacy[42] in support of this submission.
[42](2000) 1 VR 667, 676 [24] (Ormiston JA); 684–6 [47]–[52] (Charles JA). Counsel also relied upon passages in the judgments of Brennan CJ and McHugh J in Chakravarti (1998) 193 CLR 519, 532 [19] and of Gaudron and Gummow JJ at 546 [60].
(5) The ‘context’ submission, as deployed in this Court to argue that the pleaded imputations imported limitations of content and time, was not advanced at trial. A number of the imputations pleaded were inconsistent with that submission,[43] as was the plaintiff’s conduct of the trial.
[43]Counsel instanced imputations (e) and (f).
(6) The judge was correct to conclude, as he evidently did, that the words ‘as head of ACN’ were not part of the sting of the imputations. But even if those words had been retained, invocation of ‘context’ would not permit the plaintiff to import limitations of time and content.
(7) The judge was correct in stating, at TR [37], that the article was both general and specific. It conveyed broad imputations, as his Honour noted at TR [38(i), (j) and (k)], to none of which plaintiff’s counsel had referred.
(8) The article was capable of the broad imputations found by the judge, by reason, inter alia, of the references to a ‘sector wide crackdown’, ‘unscrupulous ... practices’, and a ‘broader investigation into a number of colleges and their agents following complaints about behaviour in the training and education sector that affects consumers, particularly the vulnerable’. Further, the article had highlighted conduct of ACN other than in connection with Phoenix.
(9) The reference in plaintiff’s imputation (a) to the plaintiff ‘engaging in unscrupulous business practices’ was to be understood as a reference to his knowing involvement in those practices. See TR [51]. There was no difference between what was pleaded and the variant meaning of imputation (a) found by the judge — relevantly, that the plaintiff managed an organisation which engaged in unscrupulous business practices.
The judge’s reasons
The judge’s full analysis with respect to the imputations was as follows:
In my opinion, the reasonable reader would have noted that the article was both general and specific: it refers to problematic issues in the VET sector as a whole and also singles out two companies: Phoenix and Unique — who have been the subject of investigation or prosecution by the ACCC. Of significance, the only persons mentioned are Mr Brown and Mr Charan.
With this in mind, I think the reader would have taken the following matters out of the article (including the headline) relevant to Mr Charan:
(a)That the relevant regulatory authorities (including the ACCC) were cracking down on VET organisations, and Phoenix was one of these organisations;
(b)That there were numerous allegations made about the conduct of a number of organisations in the VET sector;
(c)That ACN was one of those companies under investigation by the ACCC in relation to the conduct of its subsidiary, Phoenix;
(d)That ACN’s director, Mr Brown, was comfortable with Phoenix’s conduct;
(e)That Mr Charan with Mr Brown ‘headed’ the management of ACN at the time of the publication of the article;
(f)That, under Mr Charan and Mr Brown’s watch, ACN had acquired Phoenix, which had during 2014 received over $100 million worth of government-backed loans;
(g)That Phoenix, whilst under the control of ACN, had grown enrolments significantly;
(h)That Phoenix, an ACN company, had pressured students into enrolling; had not complied with quality standards; and was in the process of being deregistered by ASQA;
(i)That the ACCC was investigating training colleges which engaged in behaviour that affected vulnerable consumers;
(j)That Mr Brown and Mr Charan made ‘fortunes’ as a result of the listing of ACN, which received significant government subsidies; and
(k)ACN, controlled by Mr Charan and Mr Brown, was under investigation.
There are three matters I should mention before I go to the individual imputations.
First, counsel for Mr Charan submitted that common to each imputation was the proposition that Mr Charan engaged in these practices in his capacity as a director of ACN.[44] It was then said that any broader imputation raised a false issue — namely that given the limited nature of the suggested imputation then the defence of justification could only be tenable if Mr Charan had engaged in such conduct as a director of ACN — which he never was. I do not accept this. In my view, when the article is viewed as a whole, the imputation is that Mr Charan personally, as a director of an RTO, was involved in the impugned conduct. A reasonable reader (even a sophisticated reader of the business section of The Australian) would attach little or no importance to the reference to ACN. Rather he or she would focus on the role of Mr Charan as the manager of an RTO which was said to be implicated in unscrupulous practices involving vulnerable consumers.[45]
Second, as I mentioned earlier, notwithstanding the headline of both versions, the substance of the article is concerned not only with the activities of Phoenix and Unique but also their conduct in the VET sector generally.[46]
[44]Mr Charan’s closing submissions [150]–[151] (citations in original).
[45]Although irrelevant to this consideration — namely the perception of the reasonable reader of the article, it is of some interest that Mr Charan’s concern was that he was linked to a company being investigated by the ACCC (citations in original).
[46]Trial Reasons [37]–[41].
The judge then considered six arguments advanced by the defendant in opposition to the meaning which the plaintiff contended for by imputations (a) and (b). His Honour noted those contentions and then answered each of them:
Nationwide contends that these imputations are strained as an ordinary, reasonable reader:
(a)will not have understood any allegations made by the ACCC against ACN to be proven facts, a matter which is fatal to imputation (a);
(b)will not have understood the article to be imputing that the ACCC’s allegations against ACN were of misleading, deceptive or unconscionable conduct—the article expressly states that they were the allegations made in the previous month by the ACCC against Unique;
(c)will have observed that the ACCC’s allegations against ACN are nowhere specified in the article—while, therefore, they might have wondered about whether there was any connection between the ACCC’s announcement ‘last month’ and its separate announcement concerning ACN, it would involve an excessive degree of loose thinking or avidity for scandal to conflate the allegations against Unique with the allegations against ACN;
(d)will also have observed that the only reference to ‘vulnerable’ people in the article appears in paragraph 8, in connection with Unique, not ACN;
(e)will not have understood the article to be imputing that Mr Charan amassed a fortune as a result of unscrupulous business practices—the article expressly states that the amassing of fortunes was the result of the listing of ACN (and identifies, in paragraph 2, that the government funding apparently of concern to the ACCC had occurred ‘this year’); and
(f)will not have understood the article to be imputing that Mr Charan had personally engaged in, or was personally suspected of engaging in, unscrupulous business practices—at highest, the article imputes that Mr Charan was the head of a very big company that was the subject of allegations by the ACCC.
For the following reasons, I do not accept any of these arguments.
As to (a), when the article is read as a whole and not dissected minutely, it is evident the article means more than the making of allegations, and conveys, indeed not too subtly, the following meaning: Phoenix, managed by a company controlled by Mr Charan, has in fact engaged in disreputable conduct and failed to comply with the regulator’s quality standards. This has led to Mr Charan making a lot of money. I reject the proposition that the reader would conclude that these were allegations rather than assertions of fact.
As to (b), for reasons I set out subsequently, I accept that the article does not convey that ACN engaged in specific ‘misleading and deceptive conduct’. However that does not resolve the matter. The article as a whole implies that a company under Mr Charan’s control engaged in unscrupulous business practices that took advantage of vulnerable consumers. I also reject the proposition that the reader would confine that assumption to the conduct of Unique.
As to (c), whilst it is correct that there is no detail as to the ACCC allegations against ACN, there are specific allegations concerning Phoenix, which I have set out. The imputation does not result from loose thinking (which is permissible in any event provided it can be properly inferred from the article)—in the context of the reasonable reader trying to make sense of the article as a whole. Indeed I suspect that ‘loose thinking’ for a vigilant defamation lawyer may be exactly what the reasonable reader may legitimately take out of an article as the true meaning.
As to (d), it is correct that there is no specific reference to the conduct of Phoenix in dealing with vulnerable consumers. But the context of the reference to Phoenix sending sales staff into housing commission estates to pressure potential students is directly followed by a reference to a ‘broader investigation’ into colleges that ‘affects consumers, particularly the vulnerable’. This means, I think, that a reader would conclude that Phoenix (and therefore Mr Charan) had engaged in such conduct.
As to (e), if this proposition is to be accepted, one might well question why there was any reference in the article to the listing of the company (ACN) and the fortunes realised by Mr Charan and Mr Brown. To any sensible reader the link is obvious—these men made a lot of money out of the listing that was facilitated by the use of unscrupulous business practices.
As to (f), whilst it is correct that Mr Charan was the head of the company, taken as a whole and particularly in light of the reference to the money made by Mr Charan out of the listing, it is patent that the imputation is that Mr Charan was knowingly involved in the unscrupulous practices of the companies.[47]
[47]Trial Reasons [44]–[51].
His Honour’s summation with respect to imputation (a) as pleaded was as follows:
I repeat what I said previously: the imputation is not confined to Mr Charan’s management of ACN. I do not think that a reader would take any real notice of the company name ACN; rather, he or she would identify Mr Charan as the manager of a VET organisation from which he made a lot of money when it floated in December 2014, and that he had been involved in its management prior to that date and, further, that he was still managing that company at the time Phoenix’s conduct was detailed in the article.
As I see it, the relevant meaning is a permissible variant[48] of imputation (a): Mr Charan managed a VET organisation which engaged in unscrupulous business practices that took advantage of vulnerable consumers and, as a result of which, he made a large amount of money.[49]
[48]Hore-Lacy v Cleary (2007) 18 VR 562 [27] (citation in original).
[49]Trial Reasons [52]–[53].
With respect to pleaded imputations (g) and (h), the judge set out two arguments raised by the defendant in support of a submission that the article did not convey either such imputation:
Nationwide disputes that this meaning is conveyed and says that:
(a)Ordinary, reasonable readers of the article will not have understood the article to convey that Mr Charan was responsible for carrying on business in a manner that involves, or is reasonably suspected of involving, significant non-compliance with the quality standards required from providers of vocational educational services; and
(b)At highest, the article imputes that Mr Charan was the head of a very big company that had carried on, or was reasonably suspected of having carried on, business in that manner. [50]
[50]Ibid 66.
His Honour said this about the first argument:
The article refers to action being taken against Phoenix, and when combined with the reference to ASQA’s findings in relation to significant non-compliance with quality standards and deregistration of that company, the imputation is unequivocal. Phoenix is an ACN company and the article nominates Mr Charan as a director of ACN.[51]
[51]Ibid 68.
His Honour rejected the second argument, saying:
The reference to deregistration combined with non-compliance means far more than an investigation into practices. It readily implies that a company managed by Mr Charan was, in fact, non-compliant with the quality standards. The article conveys far more than ‘reasonable suspicion’. It says positively that, as a fact, it is being deregistered because of significant non-compliance with quality standards.[52]
[52]Ibid 69.
His Honour’s conclusions were as follows:
I repeat what I said at [40] in relation to the nature of the imputations. I think a reader would not focus on ACN but rather that Mr Charan was in a managerial/ownership role of a VET organisation.
Accordingly, I think the relevant meaning conveyed by the article, which is a slight variant of the pleaded imputation, is as follows: Mr Charan managed a VET organisation that was significantly non‑compliant with quality standards.[53]
[53]Ibid [70]–[71].
Analysis
The Pleadings
We address first the question of pleadings. The plaintiff has contended at various times that the defendant was required to plead a Hore-Lacy defence. Failure by the defendant to articulate an alternative meaning[54] explained, so it was argued for the plaintiff in this Court, why false issues infected the trial.
[54]For simplicity, we will refer to ‘alternative meaning’ rather than ‘alternative meaning or meanings’.
It is instructive to see the way in which the plaintiff developed its position. The defendant delivered a proposed amended defence together with its solicitors’ letter of 23 September 2016. The proposed justification defence read this way:
5AFurther or alternatively, if (which is denied) the Print Article and the Web Article are defamatory of the Plaintiff in the meanings alleged in sub-paragraphs 5(a)–(b) and 5(g)(h) of the SFSOC, or any permissible variant thereof, then in those meanings the Print Article and the Web Article are substantially true and accordingly the Defendant has a defence in respect of the publication of those meanings both at common law and pursuant to section 25 of the Defamation Act 2005 (Vic), and the equivalent provision in the other States and Territories of Australia.
PARTICULARS
(A)On or about 24 June 2013, the Plaintiff, together with Mr Ivan Brown, registered a company called The Community Initiatives Group Pty Ltd (ACN 164 432 053) (CIG). The Plaintiff and Mr Brown were the founding shareholders, with each holding half of the shares. The Plaintiff held his shares through a company called Sapra Enterprises Pty Ltd (ACN 130 980 817) (Sapra), of which he is the sole director and shareholder.
(B)On or about 29 November 2013, the Plaintiff, together with Mr Brown, acquired an interest in a second company called Consider this Training Pty Ltd (ACN 144 662 868) (CTT), through the purchase of all of its shares by a company called Health Training Services Pty Ltd (ACN 164 821 185) (HTS). The Plaintiff (through Sapra) owned half of the shares in HTS until 1 October 2014. Mr Brown owned the other half of the shares in HTS.
(C)On or about 17 March 2014, the Plaintiff, together with Mr Brown and others, registered a third company called Australian Careers Network Ltd (ACN 168 592 434) (ACN). The Plaintiff was a founding director, and until on or about 11 December 2014 he held 33% of the shares in ACN.
(D)On or about 3 June 2014, CIG purchased all of the shares in a fourth company called Thoan Pty Ltd (ACN 009 983 993) (Thoan). At the same time, the Plaintiff became the sole director of Thoan. The Plaintiff remained the sole director of Thoan until 30 September 2014. Thoan operated under the business name ‘Australian Management Academy’.
(E)In the course of 2014, CTT and Thoan operated as private vocational education and training (VET) providers. They each had a ‘VET Funding Contract’ with the State of Victoria, pursuant to which the State made payments to them for the provision of education and training services.
(F)On 30 September 2014, ACN purchased all of the shares in CTT and Thoan (by purchasing all of the shares in CIG). ACN was then the holding company of the ’ACN Group’, which included CTT and Thoan. At the same time, the Plaintiff ceased being a director of ACN, and on or about 11 December 2014 ceased being a major shareholder of ACN.
(G)On or about 24 November 2014, following widespread allegations of misconduct by VET providers, the Senate referred the operation, regulation and funding of VET providers to the Education and Employment References Committee for inquiry and report.
(H)In early to mid-2015, the Victorian Department of Education and Training (Department) appointed auditors to review student enrolments at both Thoan and CTT (Auditors).
(I)The Auditors reviewed student enrolments at Thoan and CTT for the 2014 period, being the period when the Plaintiff was the sole director of Thoan and owned half of the shares in CTT.
(J)The reviews identified material breaches by both CTT and Thoan of their VET Funding Contracts with the State, which resulted in the State suspending, and then terminating, the contracts.
(K)In respect of CTT, it had made claims for, and received, funds from the State under its VET Funding Contract for the delivery of training services in 2014 that it did not provide.
(L)Further, the Department reasonably believed that CTT’s conduct was fraudulent on the basis that a significant number of students had informed the auditors that they had not enrolled or participated in courses contrary to data reported by CTT.
(M)In respect of Thoan, it breached clauses 4.6 and 4.10 of Schedule I to its VET Funding Contract in respect of all students enrolled in the Certificate IV in Building and Construction in 2014. Those clauses required it to conduct a Pre-Training Review of current competencies prior to accepting enrolments from students, and to document the review.
(N)It can be inferred from the following matters that the Plaintiff was knowingly involved in the conduct of CTT and Thoan:
(i)the particulars in paragraphs (A)-{F) and (I) above;
(ii)the Plaintiff, together with Mr Brown, was the founder of CTT and Thoan, as VET providers;
(iii)the Plaintiff, together with Mr Brown, was the ‘driving force’ behind the ACN Group at all material times;
(iv)as at 26 November 2014, the Plaintiffs shares in ACN were valued at approximately $36.55 million;
(v)as at 26 November 2014, the Plaintiff had such intimate knowledge of the operations of the ACN Group (which included the operations of CTT and Thoan) that he entered into the restraint referred to in paragraph 6(aa) below, which was to have effect from the sale of his majority shareholding in ACN.
(O)Contrary to the express representation that the Plaintiff instructed his solicitors to make to the Defendant in his Concerns Notice dated 27 November 2015 (page 5), the Plaintiff had been ‘the subject of investigations by government regulatory authorities’, and, further, serious findings had been made resulting in the termination of his companies’ VET Funding Contracts, as set out in the above particulars.
(P)The Plaintiff received significant funds through the operations of CTT and Thoan. The Plaintiff, together with Mr Brown, are listed in the 2014 Edition of the ‘BRW Young Rich List’ as having wealth of $177 million.
The plaintiff’s solicitors responded by letter dated 26 September. Relevantly, the letter in reply said this:
The imputations which your client now seeks to justify are focused upon the plaintiff’s unscrupulous business conduct and his significant non-compliance with quality standards as the head of ACN. The particulars provided under paragraph 5A are entirely inadequate and are not capable of justifying those imputations.
The writer referred to certain particulars of paragraph 5A, and, in one case, questioned how described conduct could be sheeted home to the plaintiff, in another case referred to an apparent conflict internal to the particulars, and in a third case referred to an assertion that the plaintiff had been the subject of investigations by regulatory authorities when he knew nothing of such a thing.
Given that the letter was not exhaustive in describing the imputations which the plaintiff then pleaded, we note that there was no reference either to Phoenix or to 2015.
Next, we refer to written submissions made for the plaintiff on the application by the defendant for leave to plead the justification defence. The submissions, in part, said this:
In their present form, the particulars of justification in the proposed Amended Defence are not capable of justifying any of the imputations pleaded by the plaintiff in the Further Amended Statement of Claim, because inter alia they do not relate to his conduct as ‘head of ACN’. This is not altogether surprising, as even the defendant appears to accept that he was not the head of ACN [at] the relevant times.
Given the particulars do not squarely meet the plaintiff’s imputations, the plaintiff is left to guess whether the real purpose of paragraph 5A of the proposed Amended Defence is to justify ‘any permissible variant’ of the imputations pleaded in paragraphs 5(a)–(b) and 5(g)–(h) of the FASOC, which is pleaded as an alternative in paragraph 5A. If that is the case, the defendant must have taken the view (in accordance with the NSW authority of Fairfax Media Publications Pty Ltd v Bateman [2015] NSWCA 154) that a defendant need not actually plead alternative Hore Lacy imputations/meanings in its Defence.
The plaintiff submits that an Associate Judge of this Court could not accept such a proposition, in light of the binding precedent in this jurisdiction endorsing that ‘rule’ or ‘practice’: see eg Setka v Abbott & Anor [2014] VSCA 287; 44 VR 352; David Syme & Co Ltd v Hore-Lacy [2000] 1 VR 667.
However, it does not wish to argue the merits of respective the pleading practices of NSW and Victoria, as even if it may be permissible not to positively plead an alternative meaning that is sought to be justified, this does not abrogate the obvious and ‘unexceptionable principle’ which continues to be referred to in relevant NSW authorities following the decision in Bateman, ‘that a defendant, by its pleading and particulars, must put the plaintiff on notice of the case he or she is required to meet (they should “furnish a statement of the case sufficiently clear to allow the other party to fair opportunity to meet it”: Dare v Pulham (1982) 148 CLR 658 at 664.2)’.
It is next convenient to refer to some of what was said by senior counsel for the defendant and counsel for the plaintiff on the hearing of the application to plead the justification defence.
Senior counsel for the defendant said this:
Imputation (a)[55] is the plaintiff as head of ACN has amassed a fortune by engaging in unscrupulous business practices that take advantage of vulnerable consumers and government funding schemes in the education and training sector. Then (b) which [was] put in the alternative we infer. There are reasonable grounds to suspect that the plaintiff has so amassed a fortune.
[55]The transcript used capital letters to describe the various imputations. We have corrected these inapt references.
And
Our friends as we read the only point of substance is whether we ought be denied from running a defence of justification because of the inclusion of the words, ‘As head of Australian Careers Network’ in imputations (a) and (b). We note the same point about imputations (g) and (h).
And:
If one leaves aside the words, ‘As head of ACN,’ in our submission the documents we’ve taken Your Honour to provide a responsible basis for asserting that those imputations are matters of substantial truth. Now in our submission there is nothing in the point that there is significance to the inclusion of the words ‘As head of ACN’ in the imputations.
The difference is immaterial or at best is a matter to go to the tribunal of fact on the basis of all the evidence. The reason for that is it is trite law that to succeed in a defence or justification the defendant needs to prove only that the imputations is substantially true.
And:
Now here the sting of the alleged [libel] relevantly is that the plaintiff has amassed a fortune as a result of his involvement in businesses that have or are reasonably suspected of having engaged in unscrupulous business practices or of having not complied with quality standards.
HIS HONOUR: What you’re suggesting is that if those words, ‘As head of ACN,’ were not included in the statement of claim or in the imputations pleaded it would really make no difference.
Make no difference.
And:
The sting here is an involvement in unscrupulous business practices and non-compliance with government contracts.
Next, we refer to some of what plaintiff’s counsel submitted on that occasion.
Referring to the particulars of justification, counsel said this:
I don’t submit that they’re hopeless. I have not submitted that if these allegations were made at an earlier stage of the proceedings that they may not be arguable. What I submit is that at this stage of the proceedings, only one month out from trial the plaintiff was required to and as we understand it has put on a broad outline of all the evidence it has to support the allegations. That will not make good the claims. Most of it will not be admissible.
And:
Today is the first time we know what the imputations or the meanings are that the defendant would attempt to justify at the trial. It’s plain that they do not intend to justify the plaintiff’s imputations.
And:
Now we accept that an alternative meaning to both parties pleadings can be found by the judge. But in this case it’s clear that our friends do not intend to justify the plaintiff’s imputations as they are stated. They intend to justify what they say is a permissible variant of it.
HER HONOUR: What I thought the defendant is attempting to do is justify an imputation that would in effect be the same as what you have pleaded in relation to the ones that they seek to address. But as if the words, ‘As head of ACN’ were not there.
COUNSEL: Well Your Honour that’s what has been stated from the Bar table today, that’s not what is pleaded.
And:
[Defendant’s counsel] may say that the matters which he submits the defendant would be seeking to justify are clearly within the range of permissible variants. But with respect he should put those matters in a pleading.
And:
If I may just go through some of the matters made in oral submissions by my friend. The point which seemed to be made was that we’re taking a technical position that the plaintiff was not the head of ACN. That is not the position which is being adopted. The position which is being adopted is that he was not involved in any of this conduct. He had no knowledge of it and he was not involved in it.
It seems to us to be clear that, despite what senior counsel for the defendant had submitted, the plaintiff’s understanding was that the defendant was not seeking to justify the pleaded imputations, but was in the territory of alleging some different imputations which it would then seek to justify.
In reply, senior counsel for the defendant said this:
We don’t seek to advance what’s become known as a permissible variant defence which derives from a decision of the Court of Appeal in a case called David Syme v Hore-Lacy. We are seeking to adduce a simple defence of truth [simpliciter] at common law and pursuant to the statute … We say it’s a matter for the tribunal of fact ultimate[ly] to decide whether the evidence which is adduced in support of that defence amounts to a proof of substantial truth or not. Now the Court might say it’s not close enough it’s not substantial enough. But as our friend concedes or we understood him to concede the defence is at least arguable.
A defence of truth simpliciter is a defence to the imputation(s) pleaded and any permissible variant. If such a defence is pleaded, it is always open to a plaintiff to seek to have the defence struck out on the grounds that, for one reason or another, it is unarguable. That is what the plaintiff might have sought to do on this occasion.[56] The solicitors’ letter of 26 September 2014 and the first paragraph of the written submissions of plaintiff’s counsel anticipated such an argument. But instead, on the hearing of the application on 5 October 2014, plaintiff’s counsel focussed upon the idea that the defendant was not seeking to justify the pleaded imputations (and any permissible variants) but was instead setting up other imputations and seeking to justify them.
[56]And see [108] below.
Other than that, it is notable that, whilst plaintiff’s counsel focussed upon the words ‘as head of ACN’, this flowing from what defendant’s counsel had earlier submitted, he made no reference either to Phoenix or to 2015.[57]
[57]Although in his written outline he had referred to the defendant accepting that the plaintiff had not been head of ACN at the relevant times. See [87] above. That was said, however, in the context of a submission that the proposed justification defence did not relate to the plaintiff’s conduct as head of ACN.
We have already referred to ground 2A(b), which complains that the judge erred when, on 14 December 2016, he refused to strike out the justification defence. It is apparent from his Honour’s reasons that he was not asked to do so either because the justification defence was incapable of meeting the plaintiff’s pleaded imputations or any permissible variant thereof; or because, consistently with the plaintiff’s earlier stated position, it was necessary for the defendant to plead a Hore-Lacy defence.
By this time, we note, the defendant had provided Further and Better Particulars of Defence[58] and had delivered its first version of Consolidated Particulars of Truth.[59] It is convenient to set out the text of the latter, which developed and expanded the matters upon which the defendant relied:
[58]Dated 28 October 2016.
[59]Dated 12 December 2016. They were superseded by the Second Consolidated Particulars of Truth dated 13 February 2017.
Creation of the ACN Group for listing on the ASX
1.In 2012 the Plaintiff and his business partner, Mr Ivan Brown founded Community Training Initiatives Pty Ltd (CTI). CTI was involved in the educational and training sector.
2.On or about 24 June 2013, the Plaintiff, together with Mr Ivan Brown, registered a company called The Community Initiatives Group Pty Ltd (ACN 164 432 053) (CIG). The Plaintiff and Mr Brown were the founding shareholders, with each holding half of the shares. The Plaintiff held his shares through a company called Sapra Enterprises Pty Ltd (ACN 130 980 817) (Sapra), of which he is the sole director and shareholder.
3.On or about 29 November 2013, the Plaintiff, together with Mr Brown, acquired an interest in a company called Consider this Training Pty Ltd (ACN 144 662 868) (CTT), through the purchase of all of its shares by a company called Health Training Services Pty Ltd (ACN 164 821 185) (HTS). The Plaintiff (through Sapra) owned half of the shares in HTS until 1 October 2014. Mr Brown owned the other half of the shares in HTS.
4.At the time, CTT was the legal entity operating a training organisation (RTO) registered with the Victorian Registration and Qualifications Authority (VRQA) (registration number 21883).
5.After having acquired all of the shares in CTT, on 17 February 2014, the Plaintiff and Mr Brown sent a letter, signed by each of them, to the VRQA informing the VRQA that they were the ‘new Directors and Owners of’ CTT. The Plaintiff signed a ‘Fit and Proper Person Requirements declaration’ in which he described himself as a ‘Director’ of CTT, and he enclosed the declaration in the letter to the VRQA. He also signed, and enclosed in the letter, a statutory declaration. By his signed statutory declaration, the Plaintiff declared that he:
(i)understood the requirements of the Education and Training Reform Act 2006 and had sought legal advice to clarify any aspect that he did not understand; and
(ii)agreed to comply with the Act, the Australian Quality Training Framework Essential Standards for Registration and all guidelines approved by the VRQA.
6.Accordingly, from around late 2013 to early 2014, the Plaintiff and Mr Brown acquired CTT and commenced operating the RTO and were the driving forces behind it. They appointed a new Chief Executive Officer, Mr Michael Moffat, who reported to them. They made changes to the scope of registration by removing and adding courses.
7.By late 2013 to early 2014. the Plaintiff and Mr Brown had devised of ‘Project Standard’. The ultimate objective was to establish a group of companies. With Australian Careers Network Ltd (ACN) as the holding company, and then have the group listed on the Australian Securities Exchange (ASX). The size of the operations of each of the companies that were to form part of the group would drive the value of the shares on the public listing.
8.On or about 17 March 2014, the Plaintiff, together with Mr Brown and others, registered ACN. The Plaintiff was a founding director and until on or about 15 December 2014 he held 33% of the shares in ACN.
9.On or about 3 June 2014, CIG purchased all of the shares in a fourth company called Thoan Pty Ltd (ACN 009 983 993) (Thoan). At the same time, the Plaintiff became the sole director of Thoan. The Plaintiff remained the sole director of Thoan until 30 September 2014. Thoan operated under the business name ‘Australian Management Academy’.
10.At the time of the purchase, Thoan was the legal entity operating AMA, which was a training organisation registered with the Australian Skills Quality Authority (ASQA) (registration number 21621).
11.After having acquired all of the shares, on 6 June 2014, the ASQA was notified, in writing, of material changes to the management of AMA. A ‘Notification of material change or event’ form was submitted, in which the Plaintiff was described as the new Chief Executive Officer of AMA. It was accompanied by a statutory declaration signed by the Plaintiff in which he described himself as ‘CEO’ (after crossing out ‘Man’, being ‘Managing Director’ or ‘Manager’). By his statutory declaration, the Plaintiff declared that he:
(i)had read and understood the VET Quality Framework; and
(ii)accepted responsibility for ensuring that AMA complied with the VET Quality Framework and the conditions of registration.
12.On 20 July 2014, the ASQA was notified, in writing, of material changes to the management of AMA. The ASQA was notified that the Plaintiff was the ‘Managing Director’ of AMA. The Defendant refers to the following documents provided to the ASQA:
(i)an organisational chart for AMA, which shows the Plaintiff and Mr Brown as the two senior managers at AMA. The Plaintiff is described as the ‘Managing Director’ and Mr Brown as the ‘Chief Executive Officer’;
(ii)a ‘Fit and Proper Person Requirements declaration’ signed by the Plaintiff in which he describes himself as a ‘Director’ of AMA; and
(iii)a ‘Notification of material change or event’ form in which the Plaintiff is described as the ‘executive officer/high managerial agent’ of AMA.
13.Accordingly, from early June 2014, the Plaintiff and Mr Brown acquired Thoan and commenced operating AMA and were the driving forces behind it. Changes were made to the scope of registration by adding courses.
14.In the course of 2014, CTT and Thoan operated as private vocational education and training (VET) providers. They each had a ‘VET Funding Contract’ with the State of Victoria, pursuant to which the State made payments to them for the provision of education and training services.
15.On 30 September 2014, ACN purchased all of the shares in CTT and Thoan (by purchasing all of the shares in CIG). ACN was then the holding company of the ‘ACN Group’, which included CTT and Thoan. At the same time, the Plaintiff ceased being a director of ACN.
At CR [21], his Honour said this:
There was no question that the offers made by Nationwide were sufficiently clear and spelt out to Mr Charan the consequences of a failure to accept the compromise of his claim.
The judge readily concluded that the first offer, made soon after the article was published, was inadequate. At that time, there had been a clear defamatory imputation and there was no suggestion of a justification defence.
At CR [24]–[29], his Honour came to the conclusion that another five of the offers made by the defendant were not genuine offers to settle the case. It necessarily followed, as we apprehend his Honour’s reasoning, that the plaintiff’s failure to accept those offers was not unreasonable. With respect to four of the offers, the judge said this:
[A]n offer that requires a lay person (notwithstanding the best of legal advice) to withdraw his or her claim and, in the case of the last four offers, make a significant payment of money where he or she has been clearly defamed needs careful consideration. Offers 6, 7, 8 and 9 not only required payment of large sums of money (increasing virtually by the day) by Mr Charan, but also gave him only a very short period of time in which to decide whether to accept or reject the offer. …[105]
[105]Costs Reasons [25].
Respecting offer 2, a walkaway offer made on 23 September 2016, the judge observed that:
It only permitted Mr Charan three business days for a decision and was made prior to Nationwide being granted leave to rely upon the justification defence.[106]
[106]Ibid [25].
His Honour next made it clear that one matter to be considered in determining whether it is unreasonable to reject an offer of compromise is the period of time for which the offer is left open. He observed that, when offers 6, 7 and 8 were made, the plaintiff was in the throes of trial preparation; whilst offer 9 was made when the trial was proceeding. In the case of each of those four offers, very short time limits for acceptance were set. His Honour said this:
I think that the imposition of such stringent time limits reflects the lack of any genuine intention on the part of Nationwide to settle the case. I conclude by reference to the nature of the increasing amounts (in the case of the last four offers), and the limited time for acceptance (in the case of all the offers), that it is far more likely offers 2, 6, 7, 8 and 9 were motivated by Nationwide’s desire to protect its position on costs, rather than to settle the case.[107]
[107]Ibid [28].
Then his Honour said this, addressing offer 4:
I therefore conclude that offers 2, 6, 7, 8 and 9 were not genuine offers to settle the case, substantially because of the very tight time limits. I would also have held that offer 4 with a time limit of three business days, fell into the same category; however, that offer unlike the others, generated a response from Mr Charan within the stipulated period. That, it seems to me, indicates that Mr Charan was in a position to consider the offer and points to the time limit alone not being determinative of whether the offer was a genuine attempt to settle the case.[108]
[108]Ibid [29].
Essentially, what his Honour was saying was that the plaintiff’s speedy response to offer 4 showed that he was able to comprehend, consider and respond to that offer in the time allowed. What might otherwise have been characterised as an offer which was not genuine should not be so characterised in the events which occurred. The judge did not make the point, but it is the fact, as we have earlier noted, that the offer was made on a Friday, was left open until the following Wednesday, and that the plaintiff rejected it and made an offer of his own on the Monday.
Putting the time limit for acceptance to one side, his Honour then addressed the content of the letter which conveyed offer 4. He stated that:
[T]he contents of the letter identified much of the material relied upon in the judgment to uphold the justification defence.[109]
The letter, wildly optimistically as it turns out, identified a 15-day hearing and estimated that, by the end of the hearing, Nationwide’s costs would be close to $1 million.[110]
[109]For example, [2018] VSC 3 [371]–[450] (in relation to the audit reports); [622]–[643] (in relation to the three student ‘witnesses’); [266]–[271], [522]–[559], [579]–[596] (in relation to Ms Ebejer); [273]–[275], [562]–[567], [602]–[613] (in relation to Mr Cage) (citation in original).
[110]Costs Reasons [32]-[33].
His Honour then explained why it was that offer 4 should be considered a ‘genuine offer of settlement’. He said this:
Importantly, in light of my other findings, even though the time allowed for acceptance of the offer was tight and the offer required the payment of a sum of money, it was nevertheless able to be considered and responded to by Mr Charan. As I mentioned earlier, this demonstrates that Mr Charan treated this offer seriously notwithstanding his rejection of it.
Equally as importantly, the contents of Nationwide’s letter put Mr Charan squarely on notice that there was a large body of material available to it (much of which ultimately was adduced at trial) which went to the heart of the justification defence.[111]
[111]Ibid [37]-[38].
Next, his Honour turned to the question whether it was unreasonable for the plaintiff to have rejected the offer. His Honour identified two issues for resolution:
(a)whether the offer, which required the payment of $100,000 by Mr Charan and withdrawal of his claim, should have been considered by him; and
(b)if so, whether it was unreasonable for Mr Charan to reject the offer, which involved a payment of money to Nationwide, albeit that he was the plaintiff and had been defamed.[112]
[112]Ibid [40].
Addressing the first issue, his Honour said this:
[I] am satisfied that, in the scheme of things, this was an offer that merited reasonable consideration. True it is, that Mr Charan was the plaintiff in the proceeding and he had, on any view, been defamed by the publication. That said, once the justification defence was alive, the question of whether Mr Charan could succeed in the claim was very much in play. By February, as Nationwide’s letter of 3 February 2017 pointed out, there was a large amount of information available to Mr Charan which needed to be processed by him. The case had got stronger by the day, if not by the week. I am satisfied that, by 6 February 2017, an offer to pay a contribution to Nationwide’s costs but leaving it to meet a substantial part of its own costs required serious consideration. This is particularly so, given that it was abundantly clear that this was going to be a no holds barred trial, where both parties would expend hundreds of thousands of dollars in addition to having already incurred a significant amount of pre-trial costs.[113]
[113]Ibid [41].
Then his Honour turned to the question whether it was unreasonable for the plaintiff to reject the offer. This is what he said:
I accept the submission made by counsel for Mr Charan that the lawyers were still endeavouring to piece together, exactly, the case that they had to meet at trial. Numerous documents and witness statements had been supplied and needed to be considered. The second consolidated particulars of truth had not yet been filed, although they merely inserted details into the existing particulars which were apparent from the material which had been provided by Nationwide. I accept counsel’s submission that, even at the time of the opening of Nationwide’s case, counsel did not have a complete handle on the case that had to be met. To some extent, this was of their client’s own making, as Mr Charan declined the opportunity to adjourn the case.
Notwithstanding the lack of complete knowledge on the part of his lawyers as to the intricacies of the defence, I think that there is merit in Nationwide’s submission that the person who must have known the real force of the allegations contained in the letter of 3 February 2017, was Mr Charan. The terms of the letter spelt out the material Nationwide proposed to adduce and the difficulties facing Mr Charan in responding to Nationwide’s justification defence. The substance of the matters contained in the letter (which were ultimately established at trial and underpinned much of the defence of Nationwide) had to be within Mr Charan’s knowledge. They are carefully identified and, as the documents show and to use the words of his former partner, Mr Brown, any investigation of the workings of the company and its documentation would demonstrate that Mr Charan’s ‘fingerprints are all over everything’.
Nationwide’s letter spelt out, in clear terms, the material that it proposed to rely upon at trial and then gave Mr Charan the opportunity to get out of the case, albeit by paying a premium, but in the scheme of things a very small one given the combined costs that would be incurred if the trial went to verdict. It is to be borne in mind that Nationwide also offered to bear its own costs in relation to one of Mr Charan’s interlocutory applications, in which Nationwide was represented by senior counsel. When this is taken into account I think a reasonable person in Mr Charan’s position, armed with his own unique knowledge of the ‘dodgy’ practices at CTI and the prospective duration of the trial (even if only estimated at fifteen days), would have accepted the offer and finalised the litigation. Mr Charan did the opposite: he considered the offer, rejected it and provided a counter offer.
I am conscious that, in reaching this decision, it is unusual for a court to treat an offer to capitulate and pay money as being genuine and to hold that a party acts unreasonably in rejecting such an offer. But this case is highly unusual, as I hope my reasons for judgment demonstrate.
In summary, this was a genuine opportunity for Mr Charan to settle the case and avoid being liable for the massive costs order which would have inevitably followed the success of the justification defence. It was unreasonable for him to reject the offer, notwithstanding that it was an offer to capitulate. I think that Nationwide is entitled to indemnity costs: the remaining question being when should they run from.
Prima facie, section 40 would require payment of indemnity costs from the time of the initiation of the proceeding. However, that would be contrary to the interests of justice. Mr Charan’s liability for indemnity costs should commence on 6 February 2017—when he elected to reject the offer from Nationwide. To hold him liable for indemnity costs prior to that date would be unfair, because of the moving feast of Nationwide’s defence and the provision of material substantiating it. As I have said, it is the contents of the letter of 3 February 2017 which he considered and rejected that triggers the liability for indemnity costs.[114]
[114]Ibid [42]-[47].
Grounds
The grounds of appeal referable to costs are as follows:
4.When considering the question of costs, the trial judge erred in finding that:
(a)at [41], offer 4 would have required the respondent to still ‘meet a substantial part of its own costs’;
(b)at [32], [38] and [44], offer 4 ‘spelt out, in clear terms, the material that [the respondent] intended to rely upon at trial’ and put the applicant ‘squarely on notice’ of much of the material ultimately relied on in the judgment to uphold the justification defence; and
(c)at [42], the second consolidated particulars of truth merely inserted details into the existing particulars which were apparent from the material which had been provided by the respondent by 3 February 2017.
5.In relation to the trial judge’s consideration of whether offer 4 was a ‘genuine offer of settlement’ [23]–[39]:
(a)the trial judge erred in his interpretation of s 40(3) of the Defamation Act by failing to consider whether ‘offer 4’ was a ‘reasonable offer at the time it was made’, and by substituting for that test a different test that considered whether the offer was a ‘genuine offer to settle the case’ [20], [29], [39], [48];
(b)further or alternatively, the trial judge misapplied the statutory test in s 40(3) of the Defamation Act.
6.The trial judge erred at [44] and [46], in finding that the applicant ‘unreasonable failed to accept a settlement offer made by the defendant’ within the meaning of s 40(2)(b) of the Defamation Act.
7.Further or alternatively to paragraph 6, the trial judge erred in law in making the finding referred to in paragraph 6, in that his Honour failed to take into account relevant considerations, including the stage of proceedings, the time allowed to the applicant to consider the offer, the extent of the compromise offered, the respondent’s prospects of success assessed as at the date of the offer and the lack of clarity of the terms of the offer.
Costs appeals
Grounds 4 to 7 challenge a discretionary decision respecting costs. Such a challenge can only succeed if the decision is infected with House v The King[115] error. This and other appellate courts have often restated the ‘exceptional’ nature of an appeal against a costs order.[116]
[115](1936) 55 CLR 499.
[116]See, eg, Velissaris v Fitzgerald[2008] VSCA 152 [8] (Maxwell P, Mandie AJA agreeing); 24 Hour Fitness Pty Ltd v W&B Investment Group Pty Ltd[2015] VSCA 216 [53] (Hansen, Ferguson and McLeish JJA); Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd[2018] VSCA 32 [18] (Ferguson CJ, Whelan and McLeish JJA). See also Mitchison v Bullock (1886) 12 VLR 512, 520; McCauley v McCauley (1910) 10 CLR 434, 455; Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496; Wightman v Johnston [1995] 2 VR 637, 639–40.
The test which an appellant must meet in order to obtain leave to appeal against a costs order was expressed this way by Maxwell P in Velissaris v Fitzgerald:[117]
Where leave is required to appeal against an order, the applicant for leave must show first that the order is wrong or at least attended with sufficient doubt to warrant its being reconsidered on appeal and, secondly, that the applicant would suffer substantial injustice if the order were allowed to stand. As the decision to order a party to pay costs in a particular way is a discretionary decision, the task of showing that the decision is wrong or attended with doubt involves showing that the exercise of the discretion has miscarried in one of the ways described in House v R. When reviewing the exercise of a judge’s discretion, it is not enough that this Court considers that it might have made a different decision if it had been in the judge’s position. It must be shown that the judge below made an error in the sense of acting on a wrong principle, taking irrelevant matters into account, making a mistake as to the facts or failing to take a material consideration into account.
[117][2008] VSCA 152 [9] (citations omitted).
Ground 4 contends that the judge erred in making certain findings. It is said that his Honour mistook the facts. Grounds 5 and 6 are related, and focus upon use by the judge of the adjective ‘genuine’ in respect of offer 4. Ground 7 is a variant of ground 4, it being contended that, in finding that the plaintiff unreasonably failed to accept a settlement offer made by the defendant, the judge failed to take into account relevant considerations. To make out that contention, the plaintiff must show not only that the judge failed to take the particular matters into account, but that they were considerations which he was bound to take into account.
We turn to ground 4. Sub-ground (a) contends that the judge erred in finding that offer 4 would have required the defendant to still meet a substantial part of its own costs.
Submissions — ground 4(a)
According to the plaintiff’s argument, the letter of offer did not specify what costs the defendant had actually incurred, and did not refer to the costs order made in the plaintiff’s favour on 5 October 2016. So, it was submitted, if offer 4 required the plaintiff to forego his entitlement to costs under the 5 October order, payment of $100,000 to the defendant was likely to be a request to pay most, if not all, of the defendant’s recoverable costs.
The defendant submitted that it was no more than speculation that $100,000 was likely to be not so much a contribution, but rather a request to pay most, if not all, of its costs. The defendant pointed out that the sum sought was described in the letter of offer as a ‘contribution’ to its costs to date; and that it described costs so far incurred by the defendant as being ‘substantial’.
Analysis — ground 4(a)
In our opinion, there is nothing to this sub-ground. The judge was seized not only with the text of the letter of offer, but also with the circumstances of the matter. They included the provision by the defendant of a considerable number of witness statements, the large mutual discovery that had been made by the parties, the large number of documents that had been produced in answer to subpoenas, and the fact that there had been preparation and presentation of the application for leave to plead the justification defence and the strike out application brought by the plaintiff.
In the event, his Honour was well equipped to determine whether the defendant was correct in describing $100,000 as a contribution to its costs to date. There was no reason for him to think that the defendant’s solicitors had misstated the position in describing $100,000 as being a contribution to costs already incurred. Certainly, his Honour was better equipped to decide whether that description was apt than is this Court. We do not consider that the position is any different in the event that — which we consider to be the case — the offer contemplated that the parties should bear their own costs of the application made on 5 October 2016. That appears to be the plain intent of paragraphs [2] and [3] of the offer when considered together.
Submissions — ground 4(b)
We turn to the contention, made by ground 4(b), that the judge erred in finding that the offer ‘spelt out, in clear terms, the material that the defendant intended to rely upon at trial’, so as to put the plaintiff ‘squarely on notice’ of much of the material ultimately relied upon in the Trial Reasons.
The plaintiff submitted that the judge provided examples from the Trial Reasons to support those findings. It was said that examples which he gave demonstrated that his Honour misunderstood the facts concerning the procedural history. So, it was submitted — (1) not all of the audit reports had been produced by the date of offer 4, and most of the related documents were not produced until a later time; (2) no outline of evidence was filed for any Department of Training witness; (3) the judge had required the defendant to provide more detailed outlines of the statements of ‘student’ witnesses by January 2017. Outlines had been provided in late January in respect of two of the students. But their evidence at trial differed from those outlines. Further, the defendant did not serve an amended outline of evidence with respect to the third ‘student’ until 22 February 2017; (4) the outline of Ms Ebejer’s evidence, filed on 1 December 2016, was vague and did not relate to any particular justification. Her viva voce evidence went further: (5) Peter Cage was not on any witness list prior to the expiry of the offer. His outline of evidence was served on 8 February 2017 — that is, subsequent to the expiry of the time for acceptance of offer 4; and (6), many of the documents ultimately relied upon by the defendant at trial had not been discovered or subpoenaed when the offer was open for acceptance, and were only made available after the offer expired.
The defendant submitted that the trial judge’s comments were correct. This was apparent from a comparison of the contents of the offer and the particulars of the justification defence as at that date.
The defendant particularly emphasised the judge’s observation that the plaintiff was armed with his own unique knowledge of the ‘dodgy’ practices of CTI. He was uniquely in a position to know whether the imputations which the justification defence engaged were matters of substantial truth.
Ground 4(b) — analysis
In our opinion, this sub-ground lacks force. The judge used a variety of language to express the state of the material at the time when offer 4 was made. He stated that the contents of the letter of offer ‘identified much of the material relied upon in the judgment’.[118] He said that the letter put the plaintiff ‘squarely on notice that there was a large body of material available to it, much of which ultimately was adduced at trial’.[119] He said also that the letter ‘spelt out in clear terms the material that it relied upon at trial’.[120] It is quite unrealistic, and opposed to principle, to parse the judge’s language as if it was a statute. It is the fact that the defendant had put on a large body of material to support its justification defence. It is also the fact that the plaintiff was uniquely well-equipped, as the Trial Reasons reveal, to know the substance and strength of what was being alleged against him. Accepting as we do that a footnote to the Costs Reasons may fairly be criticised, we are not at all persuaded that the judge mistook the facts in any relevant or material sense.
[118]Costs Reasons [32].
[119]Ibid [38].
[120]Ibid [44].
Ground 4(c) — submissions
Ground 4(c) contends that the judge erred by finding that the Second Consolidated Particulars of Truth merely inserted details into the existing particulars which were apparent from the material that the defendant had provided by the time when offer 4 was made.
The plaintiff submitted that the Second Consolidated Particulars of Truth made entirely new, and significant, allegations. He submitted that:
(1) The concept of ‘scribes’, although it had been raised in an outline of evidence, had not been referred to in the first iteration of the Consolidated Particulars of Truth. Further, the concept was much developed in the outline of the witness Peter Cage, which was not provided to the defendant until after offer 4 had expired. Mr Cage’s outline of evidence expanded the allegation of scribing so as to allege that the plaintiff was both aware of and participated in an illegitimate form of scribing.
(2) Whilst a mass enrolment allegation had been referred to in the outline of evidence of Ms Ebejer, it had not been referred to in the first iteration of the Consolidated Particulars of Truth. In December 2016, on the strike-out application, the judge had said that the plaintiff was entitled to ignore it when considering the justification defence.
(3) Whilst two emails had been produced before February 2017 referable to ‘incentives’, they were two emails amongst very many.
(4) Allegations relating to the plaintiff’s involvement in disreputable activities remained a matter of inference only until the Second Consolidated Particulars of Truth were delivered.
The defendant submitted that the attack mounted by ground 4(c) lacked substance. It submitted that a number of the issues fastened upon by the plaintiff had indeed been raised between the parties by the time that offer 4 was made. It drew attention to the judge’s ruling on the Second Amendment application where, at [31], reproduced at [214] above, the judge said that ‘the information contained in the particulars does not come as a total surprise to Mr Charan — witness statements have been filed and a number of the allegations now contained in the February particulars are within some of those witness statements’.
The defendant drew our attention to a schedule subjoined to the Second Amendment Ruling. Provided by the defendant’s solicitors, it cross-referenced matters newly raised in the Second Consolidated Particulars of Truth with the material of which the plaintiff had earlier been apprised, or of which he must have known.
Ground 4(c) — analysis
The cross-referencing just mentioned showed that, whilst some information pertaining to the new particulars was itself new, very much of the material upon which the defendant proposed to rely was, in one way or another, known to the plaintiff before the second offer was made.
Further, to the extent that there was new material in the Second Consolidated Particulars of Truth — we refer to allegations relating to the nature of the plaintiff’s involvement in discreditable conduct — the new particulars raised matters of which the plaintiff could not but have been aware.
In the event, we consider that ground 4(c) lacks substance. Very largely indeed, the impugned observation made by the judge reflected the fact of the matter.
Ground 5 — submissions
We turn to ground 5. As we have earlier noted, on a number of occasions the judge considered whether an offer made by the defendant was ‘genuine’. He characterised offer 4 as being genuine. According to the plaintiff’s submission, that was not in point when the judge was considering what costs should be awarded in the context of s 40 of the Act. In particular, s 40(2)(b) creates the prima facie position that an unsuccessful plaintiff will pay costs on an indemnity basis ‘if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer’. Then, by sub-s (3), a settlement offer, in short, must be ‘a reasonable offer at the time it was made’.
The plaintiff’s submissions recognised that the judge had determined that the plaintiff had unreasonably refused offer 4. But that finding, it was said, was not on point because his Honour had not found that the offer was reasonable at the time when it was made.
Further according to the plaintiff’s submission, offer 4 could not be considered to be a reasonable offer at the time when it was made because of the time limit imposed, the defendant’s failure to address the plaintiff’s arguments as to why the justification defence would fail, and the capitulation which the offer required.
The defendant argued that there was nothing to the plaintiff’s attempt to draw a distinction between a ‘genuine’ offer and a ‘reasonable’ offer. The judge had not misunderstood what the defendant must establish.[121] In determining whether an offer was genuine, his Honour was in fact investigating whether it was truly an offer of settlement or was advanced for a collateral purpose. Once his Honour determined that offer 4 was genuine, there was subsumed in that conclusion a finding that the offer was reasonable. His Honour’s subsequent finding that the plaintiff had unreasonably refused to accept the offer would be nonsensical unless it related to an offer which was reasonable. One could hardly fail to accept an offer which was itself unreasonable.
Ground 5 — analysis
[121]Reference was made to CR [15(c)], [16] and [18].
In our opinion, the defendant’s submissions were clearly correct. In determining that the offer was ‘genuine’, the judge considered the time at which it was made, the time allowed for acceptance, the state of the material then known to the plaintiff, the significance of the offer being an offer to capitulate,[122] these being matters which, according to the plaintiff’s submission, were relevant to demonstrating that offer 4 was not reasonable. In our opinion, the judge’s reasoning about these matters was persuasive. So, if in language the judge had substituted ‘a reasonable offer’ for ‘a genuine offer’, the analysis would have been the same and the outcome would have been the same.
[122]It was at least close to such an offer.
In any event, if the judge was wrong to enquire whether the offer was ‘genuine’ rather than ‘reasonable’ in the context of s 40 of the Act — this assumes that the plaintiff was correct in submitting that the two enquiries differed in substance — nothing ultimately turns on it. That is because, rather than ordering indemnity costs in respect of the whole of the proceeding — the prima facie position under s 40(2)(b) — the judge ordered that indemnity costs be paid only after expiry of offer 4. To do so was in conformity with the principles stated in Calderbank and in this Court’s decision in Hazeldene. Those principles relevantly require that the rejection of an offer be unreasonable.
Ground 6 — submissions and analysis
We go to ground 6. It attacks findings at CR [44] and [46] that the plaintiff unreasonably failed to accept a settlement offer made by the defendant within the meaning of s 40(2)(b) of the Act. The plaintiff submitted that the judge committed this error because he had not found beforehand that the offer was a reasonable one. This ground raises a narrow issue, and must be rejected in light of the conclusion we have reached with respect to ground 5.
Ground 7 — submissions
Ground 7 proposes that, further or alternatively to ground 6, the judge erred in law in finding that the plaintiff failed to accept, in the language s 40(3) of the Act, ‘a reasonable offer at the time was made’.
This ground particularises the matters — inclusively rather than exclusively — which, it is said, the judge failed to take into account:
(1)the stage of the proceedings;
(2)the time allowed to the plaintiff to consider the offer;
(3)the extent of the compromise offer;
(4)the defendant’s prospects of success assessed at the date of the offer; and
(5)the lack of clarity of the terms of the offer.
In written submissions, the plaintiff contended that the judge failed to have regard to earlier statements he had made that the defendant would be confined at trial to its particularised justification defence. To the contrary, it was argued, the judge’s interpretation of offer 4 adverted to numerous matters outside that particularised case. For that reason, it was not unreasonable for the plaintiff to take the view that they were irrelevant.
Then it was submitted that the plaintiff’s prospects of success had to be assessed at the date of the offer, and not with hindsight. There was a mistake in the article which associated the plaintiff with Phoenix. The article was found to be defamatory. The plaintiff was entitled to defend his reputation. His claim could not have been regarded as hopeless or conducted in bad faith. But the judge had not considered the plaintiff’s prospects of success on the case that was pleaded against him at the time. Rather, the judge appeared to have concluded that a reasonable person would have done whatever he could to avoid a damaging, risky and costly trial, regardless of the merits of the actual justification then pleaded against him.
Again, it was submitted that the judge failed to take into account that if offer 4 had been left open for a reasonable time, say 14 or 21 days, the plaintiff would have known that the justification defence had been or would be amended, and would have seen more of the evidence ultimately found by the Court to justify the article. He would also have known that the trial would take far longer and cost far more.
Finally, the plaintiff submitted that offer 4 was a true offer to capitulate. The judge ought not to have formed the view that it was unreasonable not to accept offer 4 unless the plaintiff’s case was patently hopeless or brought in bad faith. The trial judge made no such ruling.
The defendant submitted that pertinent both to whether the offer was reasonable and whether the plaintiff’s failure to accept it was unreasonable, were these circumstances:
(1)The offer was made about two weeks before trial, escalating costs were being incurred on both sides, and the value of any offer degraded with each passing day.
(2)The plaintiff was uniquely able to assess whether the imputations which were the subject of the justification defence were matters of substantial truth. By 3 February 2017, ‘the writing was on the wall. If [the plaintiff] believed he could succeed at trial, that belief could have been founded only on delusion, or a vain hope that Nationwide would fail to prove what [he] knew to be the truth’. In that context, the three day time limit to respond was adequate and the contribution that was sought towards the defendant’s costs was reasonable. An inference that the time limit was adequate could be comfortably drawn from, inter alia, the circumstance that the plaintiff was in fact able to respond to the offer before it expired.
(3)The plaintiff’s written case adopted an overly technical approach, purporting to assess the plaintiff’s prospects at trial as would a lawyer unarmed with the plaintiff’s unique knowledge of the true facts, sufficient notice of which had been given by the defendant’s particulars.
(4)Whilst offer 4 was less advantageous to the plaintiff than a walk-away, this was, as the judge observed, a highly unusual case.
(5)If, contrary to the foregoing submissions, the Court was of the view that the judge erred in his application of, or in the exercise of his discretion under s 40 of the Act, then it should exercise its general discretion as to costs as to achieve the same result. This was an extraordinary case. The Court should express its disapproval of the plaintiff’s conduct and make orders that did not leave the defendant significantly out of pocket as from the expiry of offer 4.
Ground 7 — analysis
We refer at the outset to the five matters which, according to ground 7 — see [272] above — the judge failed to take into account. The Costs Reasons amply demonstrate that his Honour, in terms, took into account matters 1, 2, 3 and 5 of those matters. He took into account matter 5 because he concluded that the terms of the offer were in fact clear. Further, it is implicit in what his Honour said at CR [41] — referable to matter (4) — that he considered that the justification defence had a very considerable prospect of success.
In the event, in the terms in which the ground was particularised, it must fail. It appears to us that the plaintiff’s real complaint is that the judge should have weighed the circumstances differently. But that is not House v The King error, unless it can be said that the miss-weighting was so great as to constitute a failure to properly bring matters to account at all. That is not this case, by a long stretch.
The effect of the conclusions already expressed impact upon the arguments which we have noted at [274], [275] and [276] above.
Further with respect to the argument noted at [274] above, the judge was not obliged to conclude that the plaintiff’s prospect of success as at early February 2017 had to be considered on the footing that his claim was not hopeless — because he had been defamed, and because it could not be said that his claim had been brought in bad faith. The fact that the plaintiff had been defamed in some way said nothing about the prospect of the justification defence succeeding. Further, at the time when offer 4 was rejected, the plaintiff was asserting through his solicitors, that the defendant was raising ‘baseless allegations’ against him, when the allegations as he must have known were far from baseless; and he was requiring an apology which was at odds with material upon which the defendant proposed to rely. It seems to us, contrary to his counsel’s submission in this Court, that the stance which he adopted was not based upon the justification defence raising false issues, but rather addressed the substance of the allegations which had been raised.
The submission noted at [275] above lacks force. The question whether or not it was advanced at trial can be put to one side. The volume of material upon which the defendant intended to rely was expanding; but not the core of the justification defence. Further, the plaintiff, with his unique knowledge of the affairs of companies in the CTI group which ACN acquired, demonstrated, by his rejection of offer 4 on 6 February and the making of his own offer, that he had ample time to consider and respond to offer 4.
With respect to the argument noted at [276] above, it goes too far to say, as the plaintiff submitted, that the judge was precluded from concluding that failure to accept the offer was unreasonable unless the plaintiff’s case was patently hopeless or brought in bad faith.
As to the submission noted at [273] above, it was perfectly clear, as the judge well knew, that events had moved on since his ruling in December 2016 on the strike-out application. Orders made on that occasion had required the defendant to put on further evidence. Further material had been put on. It is unrealistic to imagine that the plaintiff could have laboured under the belief that the entirety of the material which the defendant had disclosed was not going to be incorporated into particulars on which the defendant would proceed at trial.
In the event, we consider that ground 7 lacks force.
Summary
In all, as we earlier foreshadowed, leave to appeal should be refused on grounds 4 to 7.
Conclusion
We will make orders in accordance with the disposition foreshadowed at [7] above.
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