Cornwell v Channel Seven Sydney Pty Ltd

[2016] NSWCA 255

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Cornwell v Channel Seven Sydney Pty Ltd [2016] NSWCA 255

Hearing dates:

10 August 2016

Decision date:

07 September 2016

Before:

McColl JA at [1]
Macfarlan JA at [2]
Gleeson JA at [3]

Decision:

(1)   Grant leave to appeal.

 

(2)   Direct the applicant to file a notice of appeal in the form of the draft contained in the White Book within ten (10) days.

 

(3)   Appeal dismissed with costs.

 (4)   Cross-summons seeking leave to cross-appeal be dismissed with costs.

Catchwords:

DEFAMATION – defence – contextual truth – Defamation Act 2005 (NSW) s 26 – appeal from primary judge’s refusal to strike out contextual imputation “the plaintiff is dishonest” – news item broadcast about plaintiff’s links to illegal investment schemes – reference to plaintiff as casualty of ICAC inquiry into Liberal Party finances – whether contextual imputation unarguably bad – whether general contextual imputation carried “in addition to” other specific imputations complained of – whether primary judge misunderstood the effect of Fairfax Media Publications v Zeccola [2015] NSWCA 329 –whether general imputation of dishonesty at least arguably capable of arising

PROCEDURE – judgments and orders – interlocutory judgment – appeal against primary judge’s ruling on strike-out application relating to contextual imputation – distinction between strike-out application under UCPR 14.28(1)(a) and determination of a separate question under UCPR r 28.1 – whether correct test applied by primary judge

Legislation Cited:

Defamation Act 2005 (NSW) ss 25, 26
Defamation Act 1974 (NSW) s 16
Supreme Court Act 1970 (NSW) s 101
Uniform Civil Procedure Rules 2005 (NSW) rr 14.28, 14.31, 14.33

Cases Cited:

Abou-Lokmeh v Harbour Radio Pty Ltd [2016] NSWCA 228
Bookbinder v Tebit [1989] 1 WLR 64
Corby v Allen & Unwin Pty Ltd [2014] NSWCA 227
Corby v Allen & Unwin Pty Ltd [2013] NSWSC 308
Cornwell v Channel Seven Sydney Pty Ltd [2015] NSWSC 1673
Dank v Rothfield [2015] NSWCA 193
Dank v Cronulla Sutherland District Rugby Football Club Ltd [2014] NSWCA 288
Fairfax Media Publications v Zeccola [2015] NSWCA 329
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69
Re the Will of Gilbert (1946) 46 SR (NSW) 318
John Fairfax Publications Pty Limited v Jones [2004] NSWCA 205
Love v Mirror Newspapers Ltd [1980] 2 NSWLR 112
Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274
State of New South Wales v Deren [1999] NSWCA 22
State of New South Wales v Williams [2014] NSWCA 177
Younan v Nationwide News Pty Ltd [2013] NSWCA 335

Category:

Principal judgment

Parties:

Andrew Cornwell (Applicant)
Channel Seven Sydney Pty Ltd (First Respondent)
Seven Network (Operations) Limited (Second Respondent)
Yahoo! Pty Limited (Third Respondent)
James Thomas (Fourth Respondent)

Representation:

Counsel:
KP Smark SC/ST Chrysanthou (Applicant)
ATS Dawson/M Rabsch (Respondents)

  Solicitors:
Kalantzis Lawyers (Applicant)
Addisons Lawyers (Respondents)

File Number(s):

2015/361907

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Defamation List

Citation:

[2015] NSWSC 1673

Date of Decision:

13 November 2015

Before:

McCallum J

File Number(s):

2015/150544

HEADNOTE

[This headnote is not to be read as part of the judgment]

On 6 August 2014, the first respondent, Channel Seven Sydney Pty Ltd, broadcast an edition of ‘Channel Seven News’, featuring the news item the subject of these proceedings and later that day published it on the website of the third respondent, ‘Yahoo!7’. The news item concerned the links of the appellant, Mr Cornwell, a Member of New South Wales Parliament, to illegal investment schemes and his conduct in his capacity as a director of two companies referred to in the broadcast as “Newcastle Palais Holdings” and “Newcastle CBD Developments”. The broadcast showed clips of Mr Cornwell denying involvement in the schemes (shut down by ASIC and the Courts) with clips of other people contradicting Mr Cornwell’s statements, and contrasted the illegal schemes against his moral political stance as a Member of Parliament, also describing him a “casualty” of an ICAC inquiry into Liberal Party finances.

Mr Cornwell pleaded that 14 defamatory imputations were conveyed by the broadcast. The respondents pleaded four contextual imputations by way of a defence of contextual truth pursuant to s 26 of the Defamation Act 2005 (NSW) (Defamation Act). Mr Cornwell applied for these contextual imputations to be struck out from the respondents’ defence on the grounds they were incapable of arising from the broadcast and that contextual imputation (iii) did not fulfil the requirements of s 26.

The primary judge struck out contextual imputations (i) and (ii), and ruled that the other two should go to the jury. Mr Cornwell sought leave to appeal against her Honour’s ruling that one of those, contextual imputation (iii) (“the plaintiff is dishonest”), should go to the jury. The issues for determination on appeal were:

(i) whether the primary judge erred by adopting the wrong approach on the strike out application to the capacity question in s 26 of the Defamation Act; and

(ii)   whether the primary judge erred in exercising her discretion not to strike out contextual imputation (iii) from the respondents’ defence.

The Court (per Gleeson JA, McColl and Macfarlan JJA agreeing) granted leave to appeal and dismissed the appeal. The Court held:

In relation to (i)

1.   A pleading should only be struck out on the ground that it discloses no reasonable cause of action in plain and obvious cases. Here, the pleading of contextual imputation (iii) was not unarguably bad. Once it appears that there is a real issue regarding whether contextual imputation (iii) could reasonably be found by a jury, the court should not dismiss a defence raising such an issue: [40]-[41]

Referred to: Abou-Lokmeh v Harbour Radio Pty Ltd [2016] NSWCA 228; State of New South Wales v Williams [2014] NSWCA 177; Younan v Nationwide News Pty Ltd [2013] NSWCA 335; Love v Mirror Newspapers Ltd [1980] 2 NSWLR 112; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69

2.   The primary judge did not misread Zeccola as authority for dispensing with the requirement in s 26 of the Defamation Act that the contextual imputation be conveyed “in addition to” the “other” defamatory imputations of which the plaintiff complains. That her Honour correctly understood the test for the capacity question in s 26 of the Defamation Act is evident from the structure of her reasons: [43] – [45]

Referred to: Cornwell v Channel Seven Sydney Pty Ltd [2015] NSWSC 1673; Fairfax Media Publications v Zeccola [2015] NSWCA 329

In relation to (ii)

3.   In some cases, a single alleged instance of misconduct may be so serious that it may, at the same time, convey a general charge against the plaintiff. In other cases, the collection of instances of misconduct in the matter complained of will be capable of conveying a general imputation in addition to specific imputations. The question of whether a particular charge of wrongdoing carries a general charge may depend on the context in which the words are used and the gravity of the misconduct imputed in the particular charge: [60] – [63]

Referred to: Abou-Lokmeh v Harbour Radio Pty Ltd [2016] NSWCA 228; State of New South Wales v Deren [1999] NSWCA 22; John Fairfax Publications Pty Limited v Jones [2004] NSWCA 205; Bookbinder v Tebit [1989] 1 WLR 64

4.   The primary judge did not err in exercising her discretion not to strike out contextual imputation (iii). It is at least arguable that a jury could reasonably find that contextual imputation (iii) (“the plaintiff is dishonest”) is conveyed, in addition to the other imputations of which Mr Cornwell complains: [66]

Referred to: Dank v Cronulla Sutherland District Rugby Football Club Ltd [2014] NSWCA 288; Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274

Judgment

1. McCOLL JA: I agree with Gleeson JA’s reasons and the orders his Honour proposes.

2. MACFARLAN JA: I agree with Gleeson JA.

3. GLEESON JA: The applicant, Andrew Cornwell, seeks the payment of damages for defamation by the respondents. Mr Cornwell applied to strike out part of the respondents’ defence which pleaded four contextual imputations by way of a defence of contextual truth, pursuant to s 26 of the Defamation Act 2005 (NSW) (Defamation Act). The grounds of that application were that none of the contextual imputations is capable of arising (from the matters complained of). In addition, Mr Cornwell contended that contextual imputation (iii) is incapable of meeting the requirement (in s 26 of the Defamation Act) that it be an “other” imputation “carried” “in addition” to the imputations of which the plaintiff complains.

4. On 9 December 2015, the primary judge (McCallum J) gave reasons for her earlier rulings on 13 November 2015 that contextual imputations (i) and (ii) were incapable of arising from the matter complained of and should be struck out, and that contextual imputations (iii) and (iv) should go to the jury: Cornwell v Channel Seven Sydney Pty Ltd [2015] NSWSC 1673.

5. Mr Cornwell seeks leave to appeal from part of McCallum J’s decision, namely her Honour’s refusal to strike out contextual imputation (iii) (“the plaintiff is dishonest”). Leave is required because the decision is interlocutory: Supreme Court Act 1970 (NSW), s 101(2)(e).

6. Against the possibility that leave is granted, the respondents filed a cross-summons seeking leave to appeal from that part of her Honour’s decision to strike out contextual imputations (i) and (ii) (set out at [16] below). The cross-summons is defensive only. Counsel for the respondents acknowledged that the issues raised by that application only arise if the applicant is granted leave to appeal and the appeal is successful.

The proceedings

7. The proceedings concern the publication of a television broadcast by the first respondent during a segment of ‘Channel Seven News’ on 6 August 2014 (the first matter complained of) and the publication of a video clip of that broadcast on the same day on the third respondent’s website, ‘Yahoo!7’ (the second matter complained of). The second respondent is the distributor of ‘Channel Seven News’ and the fourth respondent is a journalist.

8. In view of the similar content of the two publications, it is only necessary to refer to the television broadcast. A transcript of that broadcast, prepared by Mr Cornwell’s solicitors and attached as Schedule A to the amended statement of claim, includes a description of various images appearing on screen during the broadcast. That transcript is set out in the Schedule to these reasons.

The broadcast

9. The broadcast concerned Mr Cornwell’s links to illegal investment schemes and his conduct in his capacity as a director of two companies referred to in the broadcast as “Newcastle Palais Holdings” and “Newcastle CBD Developments”. The broadcast commenced with an image behind the newsreader of Mr Cornwell and the words “Family Finances” in bold capitals in red and white. After making reference to Seven News’ earlier report that “Two government MPs are the latest casualties of the ICAC hearings into Liberal Party finances”, the newsreader continued:

Over the last nine months, Channel Seven News has been investigating the business conduct of one of the men, Andrew Cornwell, the Member for Charlestown and his property developer father, Brien.

10. The broadcast consisted of a mix of voiceover (while the screen showed footage and images such as Mr Cornwell addressing parliament and excerpts from company searches) and videos, for example, showing the newsreader approaching and speaking to Mr Cornwell at a café. The broadcast included a clip of Mr Cornwell denying he was director at the time that the company “sent a group of mums and dads into financial ruin” followed by a clip of Fiona Cross stating “he would have had to have been very much aware of what his father was up to”; a clip of Margaret Harvey calling it a scam; a clip of Mr Cornwell stating he knew nothing about it; and a clip of Rob Wyld, an anti-corruption lawyer, stating that a director of a company cannot sit back and say ‘I have no idea’. The broadcast concluded with the reporter commenting:

Investors are hopeful they will learn what role Brien Cornwell’s parliamentarian son played in their financial pain.

The pleadings

11. The amended statement of claim pleaded that 14 defamatory imputations (five imputations being in the alternative) were conveyed by the broadcast as follows:

(a)   The plaintiff, a Member of Parliament, had so misconducted himself in    his involvement in illegal investment schemes with his father, as to    warrant Channel 7 investigating him for 9 months;

(b)   The plaintiff, as a director Newcastle Palais Holdings, has been    knowingly involved in some illegal investment schemes;

(c)   The plaintiff is a hypocrite in that, as a Member of Parliament, he    takes a moral stance on false and misleading practice, while at the    same time, as a business man he has been involved in illegal    investment schemes;

(d)   The plaintiff, a Member of Parliament, is a close business associate of    his father, a disgraced lawyer and property developer;

(e)   The plaintiff was the director of a company Newcastle Palais Holdings    at a time when it had so misconducted itself by sending a group of    parents into financial ruin that it was shut down by ASIC and the    Supreme Court;

(f)   The plaintiff, as the director of a company Newcastle Palais Holdings,    caused a group of parents to suffer financial ruin;

(g)   In the alternative to (f), the plaintiff was the director of a company Newcastle Palais Holdings at a time when it caused a group of mums and dads to suffer financial ruin;

(h)   The plaintiff, as a director of a company Newcastle Palais Holdings,    issued a prospectus to potential investors in the Belge Café Hotel    Development that was false and misleading;

(i)   In the alternative to (h), the plaintiff was the director of a company    Newcastle Palais Holdings at a time when it issued a prospectus to    potential investors that was false and misleading;

(j)   The plaintiff, as a director of a company Newcastle Palais Holdings,    conducted a scam to defraud investors;

(k)   In the alternative to (j), the plaintiff was the director of a company Newcastle Palais Holdings at a time when it conducted a scam to defraud investors;

(l)   The plaintiff, as the director of a company Newcastle CBD    Developments, used a deed of release to silence Roy and Margaret    Harvey, who were the victims of fraud committed by companies in the    Cornwell Group;

(m)   In the alternative to (l) and (n), the plaintiff was the director of a company Newcastle CBD Developments, at a time when it used a deed of release to silence Roy and Margaret Harvey, who were the victims of fraud committed by companies in the Cornwell Group;

(n)   In the alternative (l), the plaintiff was negligent as a director of    company Newcastle CBD Developments in that he was unaware that    the company had used a deed of release to silence Roy and Margaret    Harvey.

12. The defence filed by the respondents admitted that the first, second and fourth respondents published the first matter during the broadcast on Channel Seven News and that the second, third and fourth respondents published the second matter on the Yahoo!7 website, but, respectively, denied that the first and second matters complained of were capable of conveying or in fact conveyed the meanings alleged, and that the meanings alleged were capable of being or in fact were defamatory of Mr Cornwell.

13. Alternatively, the respondents pleaded that six of the imputations (relevantly, imputations (d), (h), (i), (l), (m) and (n)) were substantially true, and supported a justification defence pursuant to s 25 of the Defamation Act. In the further alternative, the respondent pleaded a defence of contextual truth pursuant to s 26 of the Defamation Act.

14. Section 25 of the Defamation Act provides that it is a defence to the publication of defamatory matter if the defendant proves that the defamatory imputations carried by the matter of which the plaintiff complains are substantially true.

15. Section 26 of the Defamation Act provides that it is a defence to the publication of defamatory matter if the defendant proves that (a) the matter carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations (contextual imputations) that are substantially true and (b) the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations.

16. The respondents’ contextual truth defence pleaded the following contextual imputations:

(i)   The plaintiff engaged in such serious misconduct in relation to Liberal    Party finances that he had to resign his position as a Government MP    thereby disgracing the Government of which he had been a member;

(ii)   The plaintiff was exposed by the Independent Commission Against    Corruption as having engaged in serious misconduct;

(iii)   The plaintiff is dishonest;

(iv)   The plaintiff was negligent as a director of Newcastle Palais Holdings    in that he was unaware that his father, a disgraced lawyer and    property developer, was using the company for the purpose of an    illegal investment scheme.

17. Particulars of the facts alleged to support the justification defence and the defence of contextual truth are set out in par 14 of the defence. All of the particulars relied upon to support the justification defence and contextual imputations (i) and (ii) are relied upon to support contextual imputation (iii).

18. Division 6 of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) deals with pleadings concerning defamation. UCPR r 14.31(2) provides that if a plaintiff complains of two or more imputations, the pleading of a defence under, among others, s 26 of the Defamation Act, must specify to what imputation or imputations the defence is pleaded. UCPR r 14.33(2) provides:

Defence under Defamation Act 2005

Subject to rule 14.31 (2), a defence under section 26 of the Defamation Act 2005 is sufficiently pleaded if it:

(a)   specifies one or more imputations on which the defendant relies as being contextual to the imputation in question, and

(b)   alleges each contextual imputation on which the defendant relies was substantially true, and

(c)   alleges that the imputation in question did not further harm the reputation of the plaintiff because of the contextual imputations on which the defendant relies.

19. Mr Cornwell did not contend before the primary judge that the respondent’s defence under s 26 did not satisfy the pleading requirements of UCPR r 14.33(2).

Leave to appeal

20. The need for restraint by appellate courts in reviewing an interlocutory ruling on a matter of practice and procedure has long been recognised: Re the Will of Gilbert (1946) 46 SR (NSW) 318 at 323. The well-established principles governing the grant of leave to appeal in matters such as the present are summarised in Dank v Cronulla Sutherland District Rugby Football Club Ltd [2014] NSWCA 288 (Dank v Cronulla) at [73]-[75] (Ward JA, Emmett and Gleeson JJA agreeing). See also Dank v Rothfield [2015] NSWCA 193 at [25] (per curiam).

21. The respondents emphasised that a challenge to a discretionary decision refusing to strike out part of a defence is not a promising candidate for a grant of leave. Against this, Mr Cornwell submitted that a question of principle is raised because her Honour adopted the wrong approach on the strike-out application to the capacity question in s 26 of the Defamation Act. It was submitted that her Honour’s approach had ramifications beyond the present matter and “has the potential to cause disruption in the defamation list”.

20. Mr Cornwell further submitted that there is an injustice which goes beyond what is merely arguable because the effect of refusing to strike out contextual imputation (iii) is to expand substantially the scope of the issues at trial with a resulting costs and time burden of having to meet a general charge of dishonesty.

21. It may be accepted that the challenge to her Honour’s approach on the strike-out application to the capacity question in s 26 of the Defamation Act raises a question of principle. If the asserted error is established, it would vitiate her Honour’s discretionary decision. As the matter has been fully argued there should be a grant of leave to appeal.

Primary judge’s reasons – contextual imputation (iii)

24. Her Honour commenced by noting (at [8]) that Mr Cornwell objected to contextual imputation (iii) on two grounds – that it is incapable of arising and incapable of arising in addition to the plaintiff’s (defamatory) imputations. Her Honour then summarised the effect of the applicant’s submission to be that the plaintiff had so comprehensively trawled the matter complained of for defamatory imputations, that there could be nothing left for the defendants to plead by way of contextual imputation. She also recorded (at [8]) Mr Cornwell’s further submission, which it is convenient to set out in full, having regard to the submissions in this Court:

[i]t was further submitted, for essentially the same reason, that the general imputation of dishonesty cannot arise in addition to each of the separate instances of dishonesty captured in the plaintiff’s imputations.

25. After referring to the requirements of s 26 of the Defamation Act and this Court’s recent decision in Fairfax Media Publications v Zeccola [2015] NSWCA 329 (Zeccola), her Honour observed (at [9]):

[t]he Court in that case rejected the existence of any requirement that a contextual imputation differ in kind from the plaintiff’s imputations, evidently holding that the only requirement of a contextual imputation is that it differ in substance from the imputations complained of by the plaintiff.

26. Her Honour then addressed Mr Cornwell’s argument that, if a plaintiff pleads an imputation for every specific instance of misconduct attributed to the plaintiff in the matter complained of, a general imputation based on the same particulars cannot arise. Her Honour rejected that submission (at [10]), reasoning (at [11]-[12]) that a publication might convey a specific imputation and a general imputation at the same time, such as where the conduct of the specific kind attributed to the plaintiff is inherently such as to give him or her the general label, or where there are a series of specific instances of misconduct attributed to the plaintiff so as to give rise to the broader, general imputation.

27. At [12], her Honour recorded the defendants’ submission that the matter complained of attributes to Mr Cornwell “such a series of individual acts of dishonesty as to give rise at the same time to the general imputation that the plaintiff is dishonest”. At [13], her Honour accepted that submission and stated that she was not persuaded that contextual imputation (iii) was incapable of being conveyed or incapable of meeting the requirements of the statute.

Grounds 1 and 2

28. The grounds of appeal contend that the primary judge:

(1)   erred in finding that the matters complained of were capable of carrying contextual imputation (iii) in addition to the defamatory imputations of which Mr Cornwell complains; and

(2)   ought to have found that the matters complained of were not capable of carrying contextual imputation (iii) in addition to the defamatory imputations of which Mr Cornwell complains.

29. It is to be observed that both grounds are directed to the one issue – the requirement in s 26 of the Defamation Act that the contextual imputation be carried “in addition to” the other imputations of which the plaintiff complains.

30. There was no issue in the present case that contextual imputation (iii) differs in substance from the defamatory imputations of which Mr Cornwell complains. As McColl JA observed in Abou-Lokmeh v Harbour Radio Pty Ltd [2016] NSWCA 228 (Abou-Lokmeh) at [44], in most cases a general allegation will differ in substance from the particular.

31. In written submissions, Mr Cornwell identified three questions involved in the appeal:

(a)   Is it open to a defendant to plead a contextual imputation of dishonesty simpliciter, on no greater basis than that specific allegations of dishonesty are made in the matter complained of about the plaintiff?

(b)   Did the decision of this Court in Fairfax Media Publications v Zeccola [2015] NSWCA 329 bind the Court below not to strike out contextual imputation (iii), on the basis of the general character of that imputation?

(c)   Did her Honour err in failing to strike out contextual imputation (iii)?

32. In oral argument, senior counsel for Mr Cornwell adopted a more refined approach. First, he contended on the strike-out application that the primary judge adopted the wrong approach to the capacity question in s 26 of the Defamation Act by giving an “over-broad” reading to this Court’s decision in Zeccola. The asserted error of principle was said to be that her Honour mistook Zeccola as having the effect of only requiring that the contextual imputation differ in substance from the “other” imputations and removing the requirement that the contextual imputation be carried “in addition to” the “other” imputations of which the plaintiff complains.

33. Secondly, and connected to the first argument, Mr Cornwell submitted that the primary judge erred in concluding that she was not persuaded that a general imputation (“the plaintiff is dishonest”) was incapable of arising or incapable of meeting the requirements of the statute. He contended that the threshold requirement for that general imputation arising was either an express statement alleging dishonesty (which was not the present case) or a “catalogue of structured examples” (which Mr Cornwell argued was absent in the broadcast).

Determination

(a)    Striking out pleadings – legal principles

34. It is necessary to say something first about the proper approach to striking out pleadings under UCPR r 14.28(1)(a) on the ground that the whole or part of a pleading discloses no reasonable defence. This need arises because, in oral argument, counsel for Mr Cornwell advanced two contentions which suggested that in the present context a different approach should be taken to the well-established principles applied on a strike-out application.

35. First, he contended that the issue raised by the appeal involved a capacity determination which this Court should remake, should it see the matter differently to the primary judge, referring to Corby v Allen & UnwinPty Ltd [2014] NSWCA 227 (Corby v Allen & Unwin). Secondly and related to this, was the contention that the General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69; (General Steel) test did not apply to the striking-out of contextual imputations pleaded in the respondents’ defence.

36. Mr Cornwell’s contentions should be rejected. They conflated the approach to a separate determination of the capacity question under UCPR r 28.1 (that is, the capacity of the matter complained of to convey the contextual imputations) with the test on a strike-out application under UCPR r 14.28(1)(a).

37. Corby v Allen & Unwin, to which counsel for Mr Cornwell referred, is an example of an appeal from a capacity determination, which was dealt with as a separate question: [2014] NSWCA 227 at [13]. See also Corby v Allen & Unwin Pty Ltd [2013] NSWSC 308 at [3] where the trial judge (Adamson J) expressly noted that the capacity determination was dealt with as a separate question under UCPR r 28.1.

38. The test to be applied to striking out pleadings is well-known. It was recently summarised in State of New South Wales v Williams [2014] NSWCA 177 at [71] by Emmett JA (Macfarlan and Simpson JJA agreeing):

The requirement for establishing that there is no triable issue is a demanding one and the power to strike out a pleading on the basis that it discloses no reasonable defence, or is an abuse of process, should be exercised only in plain and obvious cases. The power should not be exercised in cases of doubt or difficulty or where the pleading raises a debatable question of law. Once it appears that there is a real issue, whether of fact or law, and that the rights of the parties depend upon it, a court should not dismiss a defence raising such an issue, either on the basis that no reasonable defence is disclosed or as an abuse of process (see Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129-130; Commonwealth v Griffiths [2007] NSWCA 370; 70 NSWLR 268 at [11]-[12] and Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at 139-140).

39. It bears repeating that there is no rule in defamation proceedings that makes these general principles inapplicable: Abou-Lokmeh [117] (Payne JA, Gleeson JA agreeing).

40. Consistent with this, the Court’s strike-out jurisdiction should not be exercised unless the contextual imputations are “unarguably bad”: Younan v Nationwide News Pty Ltd [2013] NSWCA 335 at [20] (Macfarlan JA, Bathurst CJ and Beazley P agreeing). That the General Steel test applies equally to striking out imputations pleaded by the plaintiff has long been accepted. In Abou-Lokmeh, McColl JA (at [28]) noted the earlier decision of Hunt J in Love v Mirror Newspapers Ltd [1980] 2 NSWLR 112 at 122, where his Honour applied the General Steel test (“so obviously untenable” or “manifestly groundless”) to striking out pleadings in a defamation claim.

41. Obviously it is necessary on a strike-out application involving a contextual imputation to bear in mind the test for the capacity question at trial, namely whether the contextual imputation “could reasonably be found by a jury”: Corby v Allen & Unwin at [138]. That does not mean, however, that the test on the strike-out application is not that stated above; in short, whether the pleading is “unarguably bad”. Once it appears that there is a real issue whether the contextual imputation could reasonably be found by a jury, it cannot be said that the pleading is “unarguably bad”; the court should not dismiss a defence raising such an issue. To do so would involve the exercise of the strike-out jurisdiction other than in plain and obvious cases.

(b)   Her Honour did not adopt the wrong approach to s 26 on the strike-out application

42. Turning to the asserted error of principle. Zeccola held that, for a contextual imputation to be carried “in addition to” the plaintiffs’ defamatory imputations, it must differ in substance from the plaintiffs’ imputations (McColl JA at [42]-[46] and [48]; Macfarlan JA agreeing; Sackville AJA at [114]).

43. Her Honour’s reference to the effect of Zeccola at [9] of her reasons is to be understood as directed to the main point in issue in Zeccola, namely whether the “differ in kind” test was an additional requirement to the “differ in substance” test, when determining whether the matter complained of carried the contextual imputations “in addition” to the “other” defamatory imputations of which the plaintiff complains. That is the context in which her Honour referred to “the only requirement” in Zeccola at [9] of her reasons.

44. To suggest as Mr Cornwell does, that her Honour misread Zeccola as authority for dispensing with the requirement in s 26 that the contextual imputation be carried “in addition to” the “other” defamatory imputations of which the plaintiff complains, is to misunderstand her Honour’s reasons.

45. That her Honour correctly understood the test for the capacity question in s 26 of the Defamation Act is evident from the structure of her reasons. After first identifying the subject matter and focus of the broadcast (at [2] and [4]), recording Mr Cornwell’s grounds of objection to contextual imputation (iii) (at [8]) and summarising his counsel’s argument (at [10]) that a general imputation of misconduct was incapable of arising from the matter complained of, her Honour addressed the question of the capacity of the broadcast to carry both a specific and general imputation of dishonesty (at [11] and [12]), before reaching the conclusion (at [13]) refusing to strike out contextual imputation (iii).

46. It can be accepted that her Honour’s reasons were brief but that does not mean that she did not consider and apply the correct principles in relation to the capacity question on the strike-out application. Her Honour squarely addressed the grounds of objections to the respondents’ defence as they were framed by Mr Cornwell’s counsel at trial. In expressing her conclusion (at [13]) that she was not persuaded that contextual imputation (iii) was incapable of being conveyed or incapable of meeting the requirements of the Defamation Act, her Honour may be taken to have considered the content of the broadcast and whether it was at least arguable that a jury could reasonably find that the broadcast was capable of conveying the general imputation of dishonesty in addition to the imputations of which Mr Cornwell complains.

47. There was no requirement for her Honour to give elaborate or extensive reasons for an interlocutory ruling on a matter of procedure. No error of principle in the approach taken by her Honour to s 26 on the strike-out application has been demonstrated.

48. That leaves for consideration Mr Cornwell’s challenge to her Honour’s exercise of discretion not to strike out contextual imputation (iii).

(c)   Challenge to refusal to strike out part of defence

49. To succeed in challenging the exercise of her Honour’s discretion, it is necessary for Mr Cornwell to establish an error of legal principle; a material error of fact; that her Honour took into account some irrelevant consideration or failed to take into account or give sufficient weight to a relevant consideration; or that her Honour arrived at a result so unreasonable or unjust as to suggest such an error: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45] (Heydon JA). See also Dank v Cronulla at [74].

50. In applying these principles to the circumstances of the present case, it is relevant to keep in mind the caution expressed by McColl JA in Abou-Lokmeh (at [47]), “that the question whether an imputation amounts to a general charge against the character of a plaintiff is one to be approached with care, to avoid unduly opening up avenues for defences of justification and contextual truth which would otherwise be barred to a defendant and thus prolong the hearing of defamation cases”.

51. Here the error identified by Mr Cornwell is her Honour’s acceptance (at [13]) of the respondents’ submission that “the matter complained of attributes to [Mr Cornwell] such a series of individual acts of dishonesty as to give rise at the same time to the general imputation that [Mr Cornwell] is dishonest”.

52. It was submitted that her Honour did not “consider the content of the matter complained of to see if the general imputation was capable of arising, but rather simply accepted that because the matter complained of contained specific allegations of dishonesty, it was therefore capable of also giving rise to a general allegation of dishonesty”. Counsel for Mr Cornwell asserted in argument that “at least [an] inferential error… if not [an] express error” could be gleaned from the primary judgment.

53. In support of this contention, counsel for Mr Cornwell drew attention to the specific nature of the allegations made against Mr Cornwell in the broadcast and the particular context, namely his business dealings with investment schemes. It was submitted that the reporter asked Mr Cornwell “about your links to some illegal investment schemes” and that the material which followed in the broadcast appeared to be linked to one particular scheme only, involving the Belge Café Hotel development. It was further submitted that the matter complained of is not capable of being understood as being presented as examples of a more general character for dishonesty. Rather than being “a series of acts of dishonesty”, it was argued that the broadcast contained a set of allegations about Mr Cornwell’s involvement in that particular scheme.

54. Alternatively, it was submitted that if a reasonable viewer understood the broadcast as reflecting generally upon Mr Cornwell’s business dealings, it could not be understood as extending to other spheres of his life, such as his personal life, or his life as a politician, yet those spheres would clearly fall within contextual imputation (iii).

Decision

55. In my view, Mr Cornwell’s argument is premised on too narrow a reading of the capacity of the broadcast to at least arguably convey more than one imputation of dishonesty about Mr Cornwell’s involvement in illegal investment schemes as well as other matters, and ignores the gravity of those imputations. As counsel for the respondents correctly submitted, the broadcast described more than one illegal investment scheme in which Mr Cornwell was involved, and arguably conveyed other charges of dishonesty. Reference was made to three specific matters.

56. First, in addition to describing Mr Cornwell’s involvement, with his father, as directors of Newcastle CBD Developments in the Belge Café Hotel development, which scheme had been based on a false and misleading prospectus, specific reference was made to another “illegal investment scheme”, involving Newcastle Palais Holdings, of which Mr Cornwell and his father were also described as directors. That scheme was described as having been shut down by ASIC and the Supreme Court because it had “sent a group of mums and dads into financial ruin”. It is at least arguable that the characterisation of that scheme as “illegal”, combined with the negative connotations of the “ruin” it caused to individual investors and the need for it to be shut down by the corporate regulatory authority and the Court, attributed another charge of dishonesty to Mr Cornwell in addition to his alleged involvement in the false and misleading prospectus for the Belge Café Hotel development. That is, the allegations of dishonesty attributed to Mr Cornwell in relation to the Belge Café Hotel development were not to be seen as merely “out of character”.

57. Secondly, the broadcast’s editing juxtaposed statements by the reporter and investors, made either through voiceover or in videos of them, against answers given by Mr Cornwell. This repeated contradiction of his responses from multiple angles arguably conveyed the imputation that the responses that Mr Cornwell gave to the reporter’s questions were untruthful and knowingly so, which supported the representation of dishonesty.

58. Thirdly, the broadcast’s reference to Mr Cornwell being one of the latest “casualties” of ICAC’s hearings into Liberal Party finances cast the matter of dishonesty wider than Mr Cornwell’s business dealings with illegal investment schemes. In view of the commonly understood meaning of the word “casualty”, together with its use in combination with the reference to ICAC hearings into Liberal Party finances, the broadcast arguably conveyed the allegation of dishonest conduct in that Mr Cornwell was one of the persons involved in Liberal Party finances who were (figurative) casualties – losses to the Liberal Party – of an inquiry into corruption by public officials.

59. In Abou-Lokmeh (at [37] – [39]) McColl JA referred to various authorities which have considered whether a particular charge of wrongdoing carries a general charge. Unsurprisingly, the cases demonstrate a range of possible outcomes, reflective of their particular facts and circumstances and the context of the particular application, whether it be a strike-out application, the separate determination of the capacity question, or an appeal after a jury verdict.

55. With respect to the capacity question, in some cases, a single alleged instance of misconduct will be so serious that it may, at the same time, convey a general charge against the plaintiff. State of New South Wales v Deren [1999] NSWCA 22 (Deren) is such an example. There, a statement that a man had sexually assaulted a child on a particular occasion had the capacity to convey, at the same time, the general imputation that he was a child molester. In John Fairfax Publications Pty Limited v Jones [2004] NSWCA 205, Hodgson JA dealt with an appeal in relation to the striking out of parts of a defence pleading contextual imputations under s 16 of the Defamation Act 1974 (NSW) (the predecessor to s 26 of the 2005 Defamation Act), and found (at [59]-[60]) that an article which imputes an act that is indicative of the plaintiff’s character as a dishonest broadcaster, means that the article must be reasonably considered as at least capable of carrying the imputation that he is a dishonest broadcaster; Ipp JA agreed (at [107]), but disagreed in the result (at [110]) on the ground that he considered the plaintiff’s imputation and the contextual imputation, in effect, the same.

56. There are some cases, such as Bookbinder v Tebit [1989] 1 WLR 64, where a single allegation of misconduct will not be so serious as to convey a general charge at the same time.

57. In other cases, as Mr Cornwell accepted in argument, the collection of instances of misconduct in the matter complained of will be capable of conveying a general imputation in addition to specific imputations.

58. In Deren, Priestley JA (Powell and Stein JJA agreeing on this issue) said that the question whether a particular charge of wrongdoing carries a general charge “may depend on the context in which the words are used” and the “gravity of the misconduct imputed in the particular charge” (at [91]).

59. Here, there are two significant aspects of the collection of material presented in the broadcast. The first is the gravity of the imputations of which Mr Cornwell complains, as relating to his knowing involvement in illegal investment schemes, including such conduct as issuing a false and misleading prospectus, causing financial ruin for investors, participating in a “scam” against investors and having sought to conceal the truth by relying on confidentiality agreements with defrauded investors.

60. The second is the context of those references to Mr Cornwell’s involvement in illegal investment schemes. The broadcast contrasts that conduct attributed to Mr Cornwell against a moral stance he adopted in his capacity as a Member of the New South Wales Parliament. In addition to the particular imputation of which Mr Cornwell complains (that he is a hypocrite), the broadcast contained compounding references to other allegations relating to another illegal investment scheme, the apparently doubtful truthfulness of Mr Cornwell’s answers to the reporter’s questions, and the identification of Mr Cornwell as one of the casualties of an ICAC corruption inquiry into Liberal Party finances. These individual allegations, when taken together with the allegations of dishonesty relating to the Belge Café Hotel development, are at least arguably capable of conveying a judgment that Mr Cornwell is dishonest.

61. I am not persuaded that Mr Cornwell has established that contextual imputation (iii) is unarguably bad. It is at least arguable that the jury could reasonably find that contextual imputation (iii) is conveyed, in addition to the imputations of which Mr Cornwell complains. This constitutes sufficient reason not to strike out contextual imputation (iii). Her Honour did not err in refusing to do so.

Leave to cross-appeal

67. In light of the outcome of the appeal and the defensive nature of the application for leave to cross-appeal, it is unnecessary to address this application. The respondents’ cross-summons for leave to appeal should be dismissed with costs.

Orders

68. I propose the following orders:

1. Grant leave to appeal.

2. Direct the applicant to file a notice of appeal in the form of the draft contained in the White Book within ten (10) days.

3. Appeal dismissed with costs.

4. Cross-summons seeking leave to cross-appeal be dismissed with costs.

**********

"SCHEDULE"

Channel 7 Seven News 06/08/2014 18:29 pm

1.	Mark Ferguson in studio Image behind Mark Ferguson of Andrew Cornwell with 'Family Finances' in bold capitals in red and white.	Mark Ferguson: "Welcome back to Seven News. As we reported earlier, two government MPs are the latest casualties of the ICAC hearings into liberal party finances. Over the last nine months, Seven News has been investigating the business conduct of one of the men, Andrew Cornwell, the member for Charlestown and his property developer father, Brian. "
2.	Screen switches to Andrew Cornwell speaking in parliament.	James Thomas: "As an elected Member of Parliament, Andrew Cornwell takes the higher ground on issues of false or misleading practice. " Andrew Cornwell: "The opposition do not have clean hands on it. "
3.	Screen switches to James Thomas approaching Andrew Cornwell at a Cafe.	James Thomas: "As a businessman, he's less forthcoming on questions of conduct." "I'd like to ask you some questions about your links to some illegal investment schemes. " Andrew Cornwell: "I have no links to any illegal investment schemes. "
4.	Screen switches to excerpts from Company searches, then to James Thomas and Brien Cornwell speaking at a Barber/Hairdresser, then back to excerpts, then to a collage of pictures of alleged victims	James Thomas: "Andrew Cornwell has a long business history with his father, the disgraced lawyer and banished property developer, Brien Cornwell. " Brien Cornwell: "Any money I owe has been paid back. " James Thomas: "Brien was a director of Newcastle Palais Holdings, a company shut down by ASIC and the Supreme Court for sending a group of mums and dads into financial ruin.
5.	Screen switches to James Thomas and Andrew Cornwell speaking while walking down a street.	James Thomas: "His son, Andrew Cornwell M.P. was a director of the company." Andrew Cornwell: "I was a director until the end of 2005 and the matters you're referring to took place in...subsequent to my directorship."
6.	Screen switches to Fiona Cross, then to slow motion of Brien Cornwell leaving a building.	Fiona Cross: "Well no that's when all this - our involvement in it - started, around 2005, so, I would say he would have had to have been very much aware of what his father was up to. "
7.	Screen switches to cover of Beige Cafe Hotel Development Information Memorandum, then to another page of that document.	James Thomas: "The Cornwells' company sought investors in another scheme, called the Beige Cafe Hotel development. The prospectus proved to be false and misleading."
8.	Screen switches to James Thomas in a cafe.	James Thomas: "In the prospectus that was issued to investor, they were told that this amazing site was going to be the development for the Beige Cafe, but a check of the sales records quickly proved that the Cornwell Group, as they call themselves, had never bought this site. So, people were basically being lured into pumping their money into a dream, which was never going to become a reality.
9.	Screen switches to Margaret Harvey, then to wider shot with James Thomas interviewing Margaret Harvey and Roy Gavin.	Margaret Harvey: "The truth turned out to be a complete and utter scam. " Roy Gavin: "I threatened to go to the law Society and also to the Fraud Squad and within 14 days we had Margaret's money back."
10.	Screen switches to Margaret Harvey and Roy Gavin walking down a path, then to a shot of the Deed of Release, zooming in on and highlighting the name "Newcastle CBD Developments". The shot then pans down to a company search, and photographs of Brien and Andrew Cornwell appear next to it.	James Thomas: "Before they got their money, they had to sign a legal agreement not to make any claims against other Cornwell companies, including Newcastle CBD Developments, which lists Brien Cornwell, and son, Andrew, as directors."
11.	Screen switches to James Thomas and Andrew Cornwell speaking while walking down a street.	Andrew Cornwell: "You 're making accusations that are simply untrue. " James Thomas: "Oh, I've got a Deed of Release right here, with one of your companies on it, Newcastle CBD Developments, that you were a director at the time, on the Deed of Release that you used to silence Roy and Margaret Harvey for $14,000. "
12.	Screen switches to James Thomas and Andrew Cornwell speaking while walking down a street.	Andrew Cornwell: "Yeah, look, I know nothing about it, I'm afraid. "
13.	Screen switches to Rob Wyld, Anti-Corruption Lawyer at JWS.	Rob Wyld: "A director or officer of a company cannot sit back and say I had no idea', I did not know', 'it was not my responsibility', 'it was someone else' or 'it was management'.
14.	Screen switches to James Thomas and Andrew Cornwell walking down a street before Mr Cornwell enters a building.	James Thomas: "Investors are hopeful they will learn what role Brien Cornwell's parliamentarian son played in their financial pain. James Thomas, 7 News. "

Decision last updated: 07 September 2016