Clark v Ibrahim

[2015] VSC 301

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST

S CI 2013 05470

LEIGHTON MOORE CLARK and HARMONIOUS BLEND BUILDING CORPORATION PTY LTD	Plaintiffs
v
MICHAEL IBRAHIM and BETHANY ADAMS	Defendants

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JUDGE:	DIXON J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	24 APRIL 2015
DATE OF JUDGMENT:	24 JUNE 2015
CASE MAY BE CITED AS:	CLARK v IBRAHIM
MEDIUM NEUTRAL CITATION:	[2015] VSC 301

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PRACTICE AND PROCEDURE - Amendment of pleading - Plaintiff claimed reputational damage and loss of business from conduct of defendants that was misleading or deceptive - Fifteen separate statements posted on product review website by defendants - Pleading makes claims about publications separately and as a composite group - Whether inferential circumstances of internet publication adequately pleaded - Whether adequate causal nexus alleged between reliance and the type of loss pleaded - Whether loss adequately pleaded - Whether composite claim against publications adequately pleaded - Adequacy of particulars - s 236(1)(a) of the Australian Consumer Law.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Castelan with Ms L Papaelia	Bruce Caldwell & Associates
For the Defendant	Mr A Strahan with Ms E Nikou	Minter Ellison

HIS HONOUR:

1. In this proceeding, the plaintiffs seek leave to amend their proposed further amended statement of claim. The allegations in this proceeding are broadly similar to those being advanced in a related proceeding (see Harmonious Blend Building Corporation Pty Ltd v Keene and Anor (No. 2)[1]) in which the second plaintiff (whom I will refer by its trading name ‘Clark New Homes’) in this proceeding is the plaintiff. The first plaintiff in this proceeding (Mr Clark) alleges that he is the owner and principal of the second plaintiff.

1. The application is opposed by the defendants.

1. The plaintiffs allege 15 separate publications by the defendants in the form of internet posts. The posts were made on a product review website. The authors of the posts commented on the services provided by Clark New Homes. A sample publication reads as follows:[2]

Yes we have just finished building with Clark New Homes. I do not recommend them to my worst enemy they are worst building company I have come across, quality of building is also sub-standard and very rude management.

The other fourteen publications are of a similar nature and published under various aliases or usernames.

1. A number of causes of action were alleged. Both Mr Clark and Clark New Homes alleged they were defamed by the first and second publications causing injury to their reputations and standing. Secondly, each of these publications was malicious and constituted an injurious falsehood calculated to cause financial damage to Clark New Homes. Thirdly, Clark New Homes suffered loss by reason of conduct in trade or commerce that was misleading or deceptive under s 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (‘ACL’). In respect of the allegations of injurious falsehood, the plaintiffs alleged that Clark New Homes had been ‘greatly injured in its trade and lost profits’, referring to an annexure to the pleading that set out the names of potential customers who ‘had discussed the comments on the internet’ and with whom it lost the chance to contract for profitable building work, and the names of potential customers who ‘otherwise dropped out unexpectedly.’ No particulars of loss and damage were provided in respect of the causes of action in defamation and misleading and deceptive conduct.

1. The allegations of injurious falsehood and misleading and deceptive conduct were repeated for publications three to fifteen. There was no personal claim in defamation by Mr Clark in respect of these publications. In respect of all causes of action, the plaintiffs claimed damages, special damages, aggravated damages, injunctions and other relief.

1. Some amendments to the statement of claim are not opposed. The plaintiffs’ proposed pleading no longer alleges any cause of action for injurious falsehood and the defendants do not oppose discontinuance of those causes of action. I will grant leave for those causes of action to be deleted as marked on the proposed pleading. Consequently, the plaintiffs have not maintained the annexure to the pleading. Mr Clark added his own misleading and deceptive conduct claim in respect of all publications. Amendments have been made to the allegations of causation and loss.

1. The defendants object to the plaintiffs allegation, by paragraph 2A, that Clark New Homes has developed a valuable reputation ‘among the building industry’, contending that the plaintiffs do not allege that any member of the ‘building industry’ either downloaded any post or relied on it. This objection turns on an unrealistically narrow concept of valuable reputation ‘among the building industry’. That expression is readily understood to include potential proprietors seeking a reputable builder to carry out building works. I will allow that allegation in the proposed pleading to remain.

1. The next amendment, by paragraph 6A repeated throughout the pleading for other publications, alleged that the first publication was downloaded and read by potential customers. This allegation forms part of the plaintiffs’ allegations of causation in respect of their claims for defamation in respect of the first two publications, and for misleading and deceptive conduct in respect of all fifteen publications. In respect of the third to fifteenth publications there is a further allegation of a particular response by potential customers in reliance on the publication. The plaintiffs seek leave to amend on the basis that a like template allegation of causation as is made in respect of publications three to fifteen will be included in respect of the first and second publications. First, I will address the defendants’ objections to the publication allegation, and then later consider the causation allegation on the basis that the same template allegation is made in respect of all fifteen publications.

1. At paragraph 6A, no particulars are provided of a single instance when the first publication was downloaded and read by a potential customer, or by any person. Rather the allegations of downloading and reading by a potential customer are said to be inferred from four matters. First, that the publication was generally accessible on the internet, which I would accept as capable of being established at trial. The remaining three matters are references to what is described as ‘common practice’, and as what ‘ordinarily’ occurs. In this sense, the allegations are, strictly, neither of material facts nor of inferences open on stated material facts.

1. First, it was common practice for potential customers to search on the ‘Google’ search engine for the name of the builder, Clark New Homes, before entering into a contract. The particulars do not reveal how this practice is to be established, particularly following the deletion of the identified list of potential customers.

1. Secondly, ordinarily the product review website was one of the top 5 sites identified by the Google search. Assuming this can be established by evidence, there being no evidence presently before the court in support of this application that permits that conclusion, the defendants are expected to assume the third step in this reasoning, which is that potential customers are Google searchers who will pick the product review website out of the top 5 sites identified as relevant, or search all of them. Then the Google searcher will ordinarily download the hyperlink to the product review website, and then download the material about Clark New Homes, which presumably is the act of publication alleged, and then read the impugned publication.

1. The plaintiffs contend that these inferences follow as a matter of common sense and should be a matter for trial. Although it is common to allege and prove that a particular person downloaded and read the material, publication can be proved by inference that it must have occurred without direct evidence of a particular act of downloading and reading.

1. In Creative Resins International Ltd v Glassam Europe Ltd,[3] the court held that establishing that material was posted and accessible on the internet does not inferentially prove publication of that material. In Nationwide News Ltd v University of Newlands,[4] the New Zealand Court of Appeal was not prepared to assume publication by inference from the fact that an internet search inquiry would show a link to the relevant material. In that case there was no evidence that anyone, other than a plaintiff, had viewed the material. On the other hand, in Gregg v O’Gara,[5] the court considered that a jury could readily infer that articles were published when they were immediately accessible to anyone who fed the key words, which were a matter of continuing interest in the community, into a standard search engine.[6]   In Steinberg v Pritchard Englefield,[7] an inference of substantial publication was held to be ‘irresistible’ because it was accessible by anyone who fed the claimant’s name into a standard search engine or who accessed the defendant’s website.

1. Each case will depend on its own facts.[8] That material was posted on the internet and accessible is not all that these particulars allege. Stepping out the process by which an internet user might find, download and read material posted on the internet does not lead to the inference that anyone did so. The significant additional fact alleged is that the internet user was a potential customer, a user with an interest in Clark New Homes. It is open to a tribunal of fact to infer that at least one potential customer used an internet search engine seeking information before commencing or concluding negotiations for a transaction. Whether publication to any significantly compensable degree is being alleged is a matter for trial but I accept that it is not fanciful, as matters presently stand, to seek from a trial court an inference of publication to a person who as a potential customer was motivated to search the name Clark New Homes.

1. The particulars are not too vague or general to sufficiently identify how the allegation is to be made out so as to inform the defendants of the nature of the publication being alleged by the plaintiffs. The particulars are not embarrassing and leave to serve a pleading that particularises publication in that manner will be allowed. The extent of publication is another matter that, although a matter for submission on the evidence at trial, may require specific interlocutory directions in due course to further the overarching purpose.

1. For the purposes of the following objections, the misleading and deceptive claim in relation to the first publication can considered as representative of the other fourteen publications although they are individually pleaded. There are some nuances in each claim for each separate publication, but these nuances are not presently relevant. The plaintiffs also plead that collectively all fifteen publications constitute conduct that was misleading and deceptive, and that collective allegation calls for separate consideration that may be put to one side until later in these reasons. 

1. The first publication read as follows:

“Greatbatch” writes:

“This is a disgrace there were over 40 negative comments in regards to this cowboy builder and they have all been taken down be warned this builder is a crook and a thief and a lying ... he does not take responsibility for his dodge workmanship and has destroyed many hard working families lives. STAY AWAY.”

1. The defendants object that no particulars are given of the allegations that representations were made in trade or commerce. The defendants denied the allegation, but neither the defence nor argument on this application revealed whether the denial is simply based on putting the plaintiffs to their proofs. The plaintiffs’ submit that the issue is one for a request for particulars and should not be considered as a ground to refuse leave to amend. I accept the plaintiff’s submission that no basis is shown to refuse the amendment, but I see no need to require the defendants to make a formal request for particulars for the following reasons.

1. In Concrete Constructions (NSW) Pty Ltd v Nelson,[9] the High Court concluded that the phrase ‘in trade or commerce’ was to be construed as restricted to conduct towards a person with whom the defendant has or may have dealings in the course of its trading or commercial activities or transactions which, of their nature, bear a trading or commercial character. The circumstances of the impugned publications as alleged in the pleading do not immediately reveal why the conduct bore a trading or commercial character or concerned dealings in the course of the defendants’ trading or commercial activities and was in trade or commerce.

1. In Murphy v State of Victoria,[10] the distinction in issue was between conduct of a commercial character and conduct that was purely a governmental function. The court emphasised that conduct may be characterised in more than one way. The court said:[11]

It will be a question for the judge, on the basis of all of the facts and circumstances of the case once they have been determined, whether that is sufficient to take the matter out of the realm of purely governmental or regulatory activity into the ambit of carrying on business.

Dealing specifically with the question of the factual basis for determining the issue of in trade or commerce, the court said:[12]

Under ground 26 it is contended that the judge erred in holding ‘that the Authority’s activities are the functions of government, rather than trade or commerce, when the two areas of activity are not mutually exclusive’. It is doubtful that the judge proceeded on any such basis.  In fact, he expressly disavowed any proposition that because conduct can be described as ‘political’ it necessarily lacks a commercial character to constitute trade or commerce.  In any event, the issue whether particular conduct had ‘the necessary commercial character to constitute trade or commerce’, notwithstanding that it was ‘political’ or ‘governmental’ or mandated by statute will all need to be addressed when the matter is remitted.

1. Bearing in mind the objects of, and my powers under, the Civil Procedure Act (2010), it will be a condition of leave that the plaintiffs, who may choose to maintain the allegation in the amended pleading, particularise the material facts that define that evidentiary inquiry into how it is put that the representations about each plaintiff severally were made by the defendants in trade or commerce.

1. The falsity of the defendants’ representations is pleaded as follows:

15. The first representations were false and misleading in that :

a)the first plaintiff is not a cowboy builder

b)the first plaintiff is not a crook;

…

g) the representation at subparagraphs 13(a)-(f) were not the honestly held opinions of its author.

Again, this form of pleading is used as a template for the claim in respect of each individual publication, enabling the defendants’ objection to a number of paragraphs to be considered collectively.

1. First, the defendants contend that by alleging positively the good character of Mr Clark, as opposed to merely denying the allegations, the positive allegations that are made should be particularised. I do not read the allegations of the falsity of the representations as any more than a denial of the sting of the representation. The structure of the response takes the statement in the form in which it is alleged and denies it by adding the word ‘not’. I do not accept this objection to the proposed pleading.

1. Secondly, the defendants contend that the allegation in sub-paragraph (g) is of a state of mind and particulars must be provided. I agree. Rule 13.10(3)(b) requires that such an allegation shall be particularised. I would not refuse leave on the basis that no particulars have been provided in the proposed pleading and am not disposed to the plaintiffs’ suggestion that the defendants can later make a request for those particulars. It will be a condition of leave that the plaintiffs, who may maintain the allegation in the amended pleading, particularise the material facts that found the state of mind alleged. That will require the plaintiffs to address how it will be put in evidence that each of the defendants did not honestly hold the opinion that Mr Clark was a ‘cowboy builder’, or a crook or a thief and so on.

1. When pleading the publication of the second representation, the plaintiffs use the phrase ‘when read in conjunction with the first publication’ and allege that the representations made by the second publication were made of and concerning the plaintiffs. There is no allegation that any person read both publications. In any event, the text of the second publication does not support the representations alleged in sub-paragraphs (a) – (e) as it does not link the ‘gyppo5’ comment to the ‘graetbatch’ comment that is the subject of the first publication. I would refuse leave for a further amended pleading in which sub-paragraphs 27(a) – 27(e) remained.

1. The proposed pleading alleges that, by reason of the misleading and deceptive conduct, the first plaintiff suffered hurt and offence and the second plaintiff suffered damage to its commercial reputation. These allegations are repeated for each of the fifteen publications. Although it is unnecessary in defamation proceedings for an individual plaintiff to plead and particularise that the plaintiff suffered hurt and offence as it is an aspect of an award of general damages, the cause of action being pleaded is for compensation under s 236(1)(a) of the ACL and damages are the gist of the action.

1. I note in passing that it is unclear how Mr Clark would suffer hurt and offence. Clark New Homes is the trustee of a trading trust. Mr Clark is a director of the trustee and, possibly, a beneficiary either directly or indirectly of that trust. It has not been particularised exactly how Mr Clark’s hurt and offence, which is the only loss alleged by him, was caused by the misrepresentations regarding the business of the trustee.  It will be a condition of leave that the plaintiffs, who may choose to maintain the allegation in the amended pleading, particularise the material facts that demonstrate how it is put that deceptive and misleading conduct in trade or commerce caused Mr Clark to suffer hurt and offence.

1. Turning to the third publication for the allegation of reliance that will be added in respect of all publications, the plaintiffs allege that when potential customers downloaded and read the publications, in reliance on the each publication those potential customers of Clark New Homes thought less of both Mr Clark and Clark New Homes and did not enter into contracts with Clark New Homes. The particulars of reliance are substantially the same as those pleaded in the related proceeding brought by Harmonious Blend against Keene and Killen.[13] The defendants contended that the court could not infer reliance on the misleading and deceptive publication in the absence of evidence of actual reliance by a potential customer, which was no longer being alleged now that the Annexure that identified the names of potential customers is deleted from the proposed amended pleading.

1. This application was argued together with the application by the defendants in the Harmonious Blend proceeding that the plaintiff be refused leave to amend its statement of claim. Counsel for the defendants in this proceeding adopted what was said by counsel for the defendants in that proceeding in respect of common objections. It is convenient that I refer to what I said in my judgment[14] in the Harmonious Blend proceeding and apply my reasoning from that judgment as if it was here set out.

1. I accept that Clark New Homes can allege reliance on the conduct of the defendants  resulting in damage to its commercial reputation, without direct evidence of a person acting in reliance on a misrepresentation, for the reasons that I gave in my judgment in the Harmonious Blend proceeding. What I would not allow is the allegation that reliance, as it is to be inferred according to the particulars given in the Harmonious Blend proceeding, caused Clark New Homes to suffer lost business profits. However, curiously, the plaintiffs do not make that allegation of loss in this proceeding in respect of any individual publication, although they do so in respect of the composite claim against the fifteen publications.   

1. The plaintiff pleads loss in respect of the third publication, which is used as the template for the pleading of loss for all publications, as follows:

As a result of the defendants’ contravention of section 18 of the ACL referred to in paragraph 41 above the second plaintiffs have has suffered loss and damage

Particulars

The first plaintiff suffered hurt and offence

The second plaintiff suffered damage to its commercial reputation

1. This pleading of loss is in an acceptable form, although the particulars are inadequate. For the reasons already stated, in this proceeding particulars ought to be given, and leave to amend will be conditional on proper particulars being included.

1. Finally, the plaintiffs allege a combined or composite claim that in publishing each of the first to fifteenth publications, the defendants made representations in trade or commerce that were false and misleading, contravening s 18 of the ACL. These representations were first, the substance of each of the first to fifteenth representations as earlier alleged, secondly, that each of the different usernames employed represented a different person, and thirdly, that more than two people had made complaints against the plaintiffs.

1. The plaintiffs then plead that in reliance on ‘one or more’ of these publications customers thought less of the plaintiffs, and did not enter into contracts with Clark New Homes. This claim is embarrassing. The pleader has previously alleged reliance on each of the publications. Why that allegation is repeated in this context is unclear and ambiguous. It fails to identify with sufficient precision the conduct on which the potential customer relied and offers multiple alternative possibilities. A significant negative impact on the prospect of an expeditious, proportionate trial of the proceeding can be expected. Further, the sting in the conduct alleged in the combined or composite allegation is that there were more dissatisfied customers of the plaintiffs that was actually the case. There is no allegation that any loss was caused by reason of that conduct. For these reasons, leave is refused for inclusion in the proposed pleading of the cause of action alleged in paragraphs 175 – 181.

1. One further observation about this composite publication cause of action is apposite. It is unclear whether in paragraph 181, which alleges loss, the phrase ‘the defendants contraventions of section 18 of the ACL’ refers to the allegation of the composite conduct in paragraph 178 or each of the fifteen prior allegations of a contraventions of section 18 of the ACL made earlier in the proposed pleading. It is likely that the reference is the narrow reference to the composite conduct alleged rather than the broad reference to all allegations made anywhere in the pleading, because loss and damage caused by the earlier allegations of a contravention of s 18 was contemporaneously pleaded with each separate allegation. However, the plaintiffs might at trial seek to exploit that ambiguity to claim general damages for loss of business and damages for loss of the opportunity to make a profit that is particularised under paragraph 181. In that sense, the paragraph is embarrassing and it cannot be permitted.

1. However, there is a further reason for not granting leave to amend for a pleading that includes these particulars. The particulars under paragraph 181 in relation to loss of business and loss of the opportunity to make a profit mirror the particulars of loss given in the Harmonious Blend proceeding. I remarked earlier in these reasons that it was curious that such losses were pursued in respect of individual publications in the Harmonious Blend proceeding but not in this proceeding.

1. I dealt at length in my reasons in Harmonious Blend Building Corporation v Keene & Anor (No. 2) [15] with particulars of loss in this form. I would also not grant leave for an amended pleading that included the particulars to paragraph 181 for the reasons that I expressed there. Those reasons apply with greater force where the conduct that is alleged to have caused the loss is the conduct alleged in paragraph 178, namely misrepresenting that there were more dissatisfied customers of the plaintiffs that was actually the case.  

1. The plaintiffs will have leave to file and serve a further amended statement of claim that complies with r 36.05(3)(b) and with these reasons. I will hear from counsel on costs.

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[1][2015] VSC 276.

[2]The ‘fourteenth publication’ by ‘Bosshog,’ - published on 7 November 2011 and removed 22 October 2012.

[3][2006] All ER (D) 178, [23].

[4][2005] NZCA 317.

[5][2008] EWHC 658 (QB).

[6]See also Applause Store Productions Ltd v Raphael [2008] EWHC 1781 (QB) [70].

[7][2005] EWCA Civ 288 [20-21].

[8]Many examples are collected in Collins, The Law of Defamation and the Internet, OUP, 3^rd Ed, [5.12]-[5.17].

[9](1990) 169 CLR 594.

[10][2014] VSCA 238.

[11]Ibid, [63].

[12]Ibid, [69].

[13]Harmonious Blend Building Corporation Pty Ltd v Keene & Anor (No.2) [2015] VSC 276.

[14]Ibid.

[15][2015] VSC 276, [44]-[51].