Fletcher v POS Solutions Australia Pty Ltd

[2004] VSC 435

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 6582 of 2003

MARK TIMOTHY FLETCHER & TOWER SYSTEMS INTERNATIONAL (AUST) PTY LTD (ACN 007 009 752)	1st named Plaintiff 2nd named Plaintiff
v
POS SOLUTIONS AUSTRALIA PTY LTD & BERNARD ZIMMERMAN & ZELJKO VARGA	1st named Defendant 2nd named Defendant 3rd named Defendant

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JUDGE:	MASTER EVANS, Master of the Supreme Court of Victoria
WHERE HELD:	MELBOURNE
DATE OF HEARING:	12 August 2004
DATE OF JUDGMENT:	3 November 2004
CASE MAY BE CITED AS:	Fletcher, M. & Anr. v POS Solutions
MEDIUM NEUTRAL CITATION:	[2004] VSC 435

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PRACTICE & PROCEDURE – Leave to amend defence and counterclaim.

LIBEL – Polly Peck imputations – Justification of – Qualified privilege – Occasion on which defamatory comments made – Duty to make and receive comments.

INJURIOUS FALSEHOOD – Elements of cause of action.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr  C. Golvan, S.C. with Mr G. Hardy	The Law Offices of Barry Fried Solicitor
For the Defendant	Mr  M. Goldblatt with Mr C. Shaw	Adam Kempton Solicitor

The Application

1           The defendants have sought leave to amend their amended defence and counterclaim filed 17 November 2003 and directions consequential on the grant of that leave.  The Plaintiffs have responded by seeking judgment pursuant to Rule 21.02 sub-paragraph (3).  That rule enables a plaintiff to apply for judgment ‘where a defendant has served a defence and by or under an order of the Court the defence is struck out.’  On 17 June 2004 the defendant’s amended defence was struck out by order of the Court.  The plaintiffs could have awaited the outcome of the defendants’ application to amend their defence but chose to incur the unnecessary expense of an inter partes application to the Court – unnecessary because if that application had failed, judgment could have been entered administratively (Rule 21.03(1)).

2           The proposed amended defence which is the subject of the defendants’ application is exhibit A to the affidavit of AK Kidman sworn 9 August 2004.  It is the defendants’ fifth attempt to formulate its defence.  The plaintiff contend that it is not in form and substance a proper pleading and that no further indulgence should be allowed to the defendants.

The Proceeding

3           The proceeding was commenced by writ filed on 7 July 2003.  In the statement of claim on the writ it is alleged that:

(i)at all material times -

(a)the second plaintiff (‘Tower’) was marketer in Australia of computer software generally in competition with the first defendant (‘POS’);

(b)the first plaintiff (‘Fletcher’) was the general manager and a director of Tower;

(c)the second defendant (‘Zimmerman’) and the third defendant (‘Varga’) were shareholders, directors and office bearers of POS.

(ii)in or about November 2002 the defendants published a newsletter (‘the defendants newsletter’) ‘in the form containing the comments set out in Schedule A of this statement of claim’ of and concerning the plaintiffs.

(iii)the defendants’ newsletter in its natural and ordinary meaning was defamatory of Tower and Fletcher.

(iv)(somewhat mysteriously) in the alternative, Zimmerman and Varga ‘acted as joint tortfeasors with POS in the...publication’.

4           The defendants have responded by counterclaiming in respect of statements published by the plaintiffs or one of them of and concerning the defendants during the period 1994 – 2002. 

The proposed amended defence

5           In the proposed amended defence the defendants deny the imputations allegedly made by the defendants’ newsletter and allege that in its natural and ordinary meaning it made other imputations which are set out in paragraphs 9B & 9C and are true in substance and in fact.

6           The first of these six imputations was that Fletcher (9B) and Tower (9C) had been ‘circulating libelous (sic) and misleading information within the newspaper industry about the systems and services of POS’.  Particulars of the truth of that imputation are provided in paragraph (a) of the particulars. 

7           It would be desirable to have a heading to the particular which makes that apparent.  In the course of argument the Court was informed that each paragraph of the particulars responds to the imputation with the same alphabetical identification.  That is not apparent at first glance and should be made apparent as a simple aid to comprehension in a complex pleading.

8           The pleader incorporates in it by reference a large part (in the case against Fletcher) and the whole (in the case against Tower) of the succeeding particular(e).  That particular incorporates by reference a series of allegations of material fact contained in a subsequent paragraph in the proposed pleading (9E (a)-(h)).  Those allegations are of publication by Tower (and in some cases by Fletcher as well) of eight identified publications and of the natural and ordinary meaning of each of those publications. 

9           The effect of incorporating those allegations of material fact was to provide particulars of the truth of the allegation of the circulation of information and of the natural and ordinary meaning of that information.

10         The incorporated particular then proceeds to identify the respects in which the imputation arising from each of the publications was ‘misleading and untrue’ (c.f. misleading) but without indicating which facts falsify which imputation (a criticism advanced on behalf of the plaintiffs).

11         It is a clumsy method of providing particulars and demonstrates the limitations of pleading, as a particular, a complex matrix of facts upon which an allegation of ultimate fact (i.e. the truth of an imputation) is founded.  It would have been easier to understand had it been set out in full as a sub-divided particular of the truth of the imputation with sub-headings:

(i)The form in which the information was circulated.

(ii)The circulation (or publication) of the information of and concerning the defendants.

(iii)The natural and ordinary meaning of the information.

(iv)The false and misleading nature of the information.

12         Each of those sub-headings could then be subdivided in respect of each publication containing the information.  Laborious as this may seem, for convenience and ease of comprehension it is a far better solution even if it results in a lengthier pleading.  The particulars could be annexed as a schedule to the pleading to avoid obscuring the essential structure of the defence.  This process could then be repeated in respect of each of the particulars as to the truth of the imputations which the defendants contend are made in the defendant’s newsletter.

13         Paragraph (a) then incorporates ‘the reasons set out in paragraphs 22-36 of the proposed further amended counterclaim’ by way of particulars of the truth of the imputation that the information circularised was ‘libelous’ (sic). Those paragraphs plead the material facts (in abbreviated form by reason of the short form identification of the defamatory meanings adumbrated in paragraphs 9E of the proposed further amended defence) constituting the publication of a series of libellous statements of and concerning the defendants and not reasons.

14         No point was made in argument of the possible difference between circulating libellous information about the systems and services of POS and publishing libels of and concerning the defendants.  The defendants have simply accepted what may           be a heavier burden in proving the latter in order to prove the former.

15         The plaintiffs complaints about this particular were as follows:

(i)In so far as the information was allegedly circulated in the memorandum published to Northern Territory newsagents ‘on or about (sic) November 1998’ it was too remote in time from the time of the publication of the defendants’ newsletter (November 2002) to support an allegation that the imputation was true.          The short answer to that is that the imputation will be true no matter how long ago misleading and/or libellous information was circulated by the plaintiffs about the systems and services of POS.  This criticism was made in respect of many of the other publications which the defendants allege contained misleading and libellous            information.  The submission misconceives entirely the purpose of the particular which I have indicated above is to justify the truth of the imputation as to the circulation of misleading and libellous information.  The imputation for which the defendants contend is not temporally limited to a time proximate to the time of the publication of the defendant’s newsletter.

(ii)The next criticism was based on the assumption that in order to falsify the alleged misleading imputation in the publication described as the NT Memorandum that ‘the defendant did not supply computer systems which were as advantageous for newspaper businesses as those supplied by the second plaintiff’ it was necessary for the defendant to plead facts that could establish the comparative worth of the defendants’ products.  What the defendants state (particular (e)(i) Paragraph 9C) is that its system was no less advantageous than Tower’s system because its system’s software was not affected by a series of identified problems which affected Tower system software.  If it can be demonstrated by reason of those problems, Tower’s system is of no advantage to newspaper businesses it will falsify the imputation without having to establish its own system is of advantage to newspaper businesses.  If it can be demonstrated that the absence of those problems in a system’s software is an advantage it may establish that its system is more advantageous but it does not have to do so, necessarily in order to falsify the imputation.

(iii)Next it was said that the NT Memorandum said nothing about the Y2K compliance of the POS system (Particular (e)(ii)).  What it does say is that one reason that ‘partnering with my company is better for your business than buying a computer system from POS’ is our ‘software is Y2K compliant’.  It is arguable that the reader is invited to infer from that positive assertion the negative implication that the POS system is not so compliant.

(iv)The defendants have accepted the plaintiffs’ submission that they have not alleged facts which establish that the document described as the Bertolotti facsimile was published (c.f. ‘circulated’) and do not intend to pursue any of the allegations in respect of it.

(v)The plaintiffs then contend that the publications described in paragraph 9E as the 19 November 2002 Memorandum and the 25 November 2002 Memorandum ought not be relied on as part of the particulars to paragraphs 9B & 9C ‘as no publication is sought to be pleaded’.  That is not correct.  Publication is alleged but not particularised.  The defendants promise particulars after they have had discovery and interrogation is completed.  A cursory reading of the documents reveals that each is a document not addressed to an identified person intended for circulation to newsagencies for the purpose of promoting Tower’s computer systems and denigrating the POS solutions.  That intention has been acted upon to the extent at least that Fletcher has signed each document and at least one of each has left the possession of Tower.  The inability to particularise further the presumed publication is not a matter of which the plaintiffs should complain at this            stage of the proceedings.  As the defendants’ newsletter was published in or about November 2002 it would be desirable that the defendants make it clear that each of these publication were made prior to that publication as it must have been to be relevant as a particular of the truth of this imputation.  Counsel for the plaintiffs asserted that the particulars fail to come to grips with the imputations.  If by this it was intended to mean the plaintiffs imputations then the submission misses the point entirely.  These are particulars of one of the imputations for which the defendants contend.  No critical analysis was made of the particulars in respect of these publications so as to demonstrate their insufficiency in achieving the purpose for which they are provided.

(vi)A complaint was made that the defendants proposed pleading referred (by incorporation) in this particular to a letter described as ‘the 20 April 1995 letter’ which was not as it stated attached to a schedule to the pleading.  This was simply an oversight and can be corrected as the relevant publication was produced to the Court during the course of argument before me.

(vii)Complaint was made of the reference in this particular to an undated publication described as the ‘SA Flyer’.  It is essential in this particular that any misleading or libellous information was circulated prior to the publication of the     defendants’ newsletter.  Accordingly the particular should assert at least that the SA Flyer was published prior to that publication.  Counsel for the plaintiffs helpfully indicated that the reference in the SA Flyer to a seminar to be held on Monday 25 August might be to Monday 25 August 1997.  Certainly it can be surmised that the SA Flyer was published between the 14 August survey referred to in it and 25 August in the same year.  The defendants’ proposed pleading falsifies the natural and ordinary meanings they attribute to the SA Flyer which refer to a state of facts existing at the time of the SA Flyer.  That state of facts may have existed at all times prior to the publication of the defendants’ newsletter.  Nevertheless, it is desirable if the time of the publication is to be referred to that it is specified with particularity.

16         This was the extent of criticism of the particularisation to the truth of the imputations contained in paragraph 9B & 9C of the defendant’s proposed pleadings and was confined to the particulars of the first imputation.

17         The next complaint was made about paragraph 9D of the proposed pleading.  It is to be read in the context of the previous allegations in which the defendants have pleaded that the publication of the defendants’ newsletter is denied alternatively that it does not make the imputations alleged by the plaintiffs, makes other imputations that are true in substance and in fact (in so far it consists of statements of facts).  To that extent the criticism that there was no reference to the facts which it is said were true in substance and in fact cannot be justified.  Nevertheless, any doubt could be resolved by inclusion of a reference to those pleadings.

18         Paragraph 9D is the orthodox rolled up plea as it goes on to plead that ‘in so far as it consists of matters of opinion, it is fair comment on such facts on a matter of public interest, namely the comparative performance of the ‘service’ (sic) and products of the second plaintiff and of POS’.  The plaintiffs say that the matters of opinion (the comments) should be identified and the facts upon which the comments are made so that the foundation of the conclusion as to the fairness of each comment can be exposed.

19         The defendants (as did the defendant in The Herald & Weekly Times Ltd v Popovic[1]) have chosen not to justify the imputations the plaintiff alleges were made in the defendants’ newsletter.  They have pleaded in paragraphs 9B & 9C the imputations they say are made in it and particularise the facts they say justify each imputation.  I have already dealt with the criticisms of those particulars.  There can be no doubt as to which facts the defendants will be the basis of  the defence raised in paragraph 9D in respect of each such imputation whether statement of fact or opinion.  I was not referred to any authority for the submission that the defendants must identify which of the imputations for which they contend are statements of opinion and which are statements of facts.

[1][2003] VSCA 161.

20         In paragraph 9E the defendants raise a claim of qualified privilege.  They detail a series of publications by Fletcher and or Tower between 14 January 1994 and 25 November 2002 (sub-paragraphs (a)-(h)).  They allege further in sub-paragraph (i) publication of ‘a variety of other newsletters or circular letters of a similar nature          or content’ between November 1996 and November 2003 and promise particulars after discovery.  Plainly it was intended to plead November 2002 as publication of such a document after publication of the defendants’ newsletter would be      irrelevant to the defence of qualified privilege raised in the paragraph.  The defendants indicated that this was an error.  The sub-paragraph should be amended to read ‘November 2002 and before the publication of the newsletter’.  (I have already discussed other amendments to earlier sub-paragraphs of a similar nature which are necessary).

21          Counsel for the plaintiff asked the rhetorical question – how could these unparticularised publications justify a response from the defendants?  It may be that the defendants have been informed reliably from sources in the newsagency world that during that period a barrage of such newsletters and circular letters has been aimed at those in that world, that they had been critical of the services and products of POS in comparison with those of Tower but the informant no longer had any samples of them.  If this was the case it would be open to plead as they intend to that their newsletter was a response to, inter alia, such publications on an occasion of qualified privilege.  That will be a matter for evidence at trial.

22         Similar criticisms have been made in respect to some of the other more particularly described publications referred to in sub-paragraphs (a)-(h).  The contents of those publications are and ‘presumably’ were known to the defendants prior to the publication of their newsletter.  That also will be a matter for evidence at trial.  Such knowledge combined with knowledge of publication of similar publications could reasonably found a belief that they too had been published and to found the existence of an occasion to which the privilege could attach.

23         The privilege if it attaches affords an excuse for the making of defamatory statements.  The question that the defendants’ pleading does not answer is which defamatory statements do the defendants say are excused.  The defendants must accept for the purpose of the defence that the plaintiffs’ imputations were made in the newsletter and that they or some of them, were defamatory or that the defendants’ version of the imputations or some of them were defamatory.  The defence should indicate which part of which imputations are accepted as defamatory for the purpose of the defence.

24         The defendants rely on a campaign of publication by the plaintiff or one them of libellous information about the services and products of POS.  It is arguable that a response in 2002 to a campaign begun in 1994 is reasonably made.  Whether that can be established at trial is simply a matter of the evidence presented.  It cannot be said at this stage of proceeding that the defendants could not possibly succeed on such a defence.  That the response to some of the publications appears slow may be simply explained by the defendants’ lack of knowledge of the publications at relevant times.  For example, evidence may show that it was only shortly before the publication of the defendants’ newsletter that the defendants became aware of a substantial attack on the commercial reputation of POS, its services and products.

25         In evaluating whether or not the paragraph is capable of raising a defence of qualified privilege, I must assume the facts pleaded are true – that is, assume that over a period of time the plaintiffs or one of them have or has been responsible for publishing a series of statements about the merits of POS services and products (Gutnick v Dow Jones & Co Inc (No.4)[2]).  I must assume that as a result of the publications, ‘concern and confusion’ developed among newsagents in Australia as to the            relative strengths and weaknesses of the products of POS and the second plaintiff and the veracity of claims made by POS and the second plaintiff in relation to POS products.

[2][2004] VSC 138; Bongiorno J, 26 April 2004, unreported at [16].

26         It is then alleged that in these circumstances POS had a duty to give an account to as many newsagents in Australia as possible of the subject matter of the concern and confusion.

27         The attack on this defence was misconceived.  The defence assumes that the defendants’ newsletter was to an extent (as yet unidentified, as I have observed) defamatory but relies on the performance by the defendants (or POS) of a duty to allay the concern and resolve the confusion which was the occasion for its publication in order to excuse those comments.  The defendants do not have to prove that their claims were true and Tower’s claims false – simply that a state of concern and confusion as to which claims were true existed.

28         Nevertheless I suspect that the defendants will make the case for being subject to a duty on the basis that its claims are true and that they knew that the plaintiffs’ claims were false.  If that is the case it will be necessary to incorporate in paragraph 9E the allegations that the plaintiffs’ claims are false and the defendants’ claims are true.  Mere self interest as pleaded in sub-paragraph (l) would not found such a duty (Macintosh v Dun[3]).

[3][1908] AC 390.

29         Paragraph 9E (o) assumes that POS had made claims in relation to its products and does do not say that the claims in any way contradict the claims made in the publications alleged.  The assumption should be a matter for explicit pleading as should the contradictory nature of those claims.

The proposed amended counterclaim

30         In the defendants’ counterclaim, the defendants allege that they were defamed in each of the defamatory publications identified in paragraph 9E and incorporate by reference the defamatory meanings ascribed to each of those publications in that paragraph.

31         Any defects in these allegations which I have already identified may be dealt with in a repleading of that paragraph.  There was a point taken also that any cause of action in respect of the SA flyer was statute barred.  Until that is raised in a defence to counterclaim, it would be premature to consider it. 

32         The final attack on the pleading related to the claim of injurious falsehood made in paragraphs 50-56 of the counterclaim.  The criticism was twofold.  First, that it was not alleged that the plaintiff knew the statements complained of to be false.  In paragraph 50, defendants allege the wilful and intentional publication of matter concerning the defendants which was false.  This is the very essence of the cause of action (Ratcliffe v Evans[4]; Palmer Bruyn & Parker Pty. Ltd. v Parson[5]).  The criticism is not well founded. 

[4](1892) 2 QB 524 at 527.

[5][2001] 208 CLR 388 at 405, 425.

33         The second criticism is that proof of actual economic loss is required (Orion Pet Products Pty Ltd v RSPCA[6]).  While the failure to provide particulars of the loss of sales complained of is unsatisfactory, it is clear that POS is alleging actual economic loss.  There is no basis advanced for the failure to particularise the loss and these particulars should be included in the revised pleading.

[6][2002] FCA 860 at paragraphs 197-206.

Conclusion

34         One solution to the difficulties caused by the cross referencing in the proposed pleading would be for the plea as to qualified privilege to be made immediately following the pleas directed to the plaintiffs’ imputations.  The pleading of the publications by the plaintiffs, their natural ordinary meanings and the falsity of each of them could be later incorporated by reference in the particulars of the Polly Peck defences in so far as they relate to the imputation as to the circulation of libellous and misleading information.  Then the pleas could be again incorporated by reference in the counterclaim based on the publication of defamatory matter of and concerning the defendants.

35         Notwithstanding the fact that in their fifth attempt to plead their defence the defendants have not escaped well founded criticism, I propose to grant leave to amend substantially in the terms of the proposed defence amended in conformity with these reasons.  It is time for the proceeding to move forward.  In this regard I note that the defendants have foreshadowed an application in respect of the insufficiency of the plaintiffs’ pleading.  The sooner the proceeding gets beyond the preliminary skirmishing to an evaluation of the substance of claim and counterclaim the better.

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Ewan K. Evans