Hayward v Barratt

[2001] NSWSC 8

CITATION:

Hayward v Barratt & Anor [2001] NSWSC 8

CURRENT JURISDICTION:

Common Law

FILE NUMBER(S):

SC 20126 of 2000

HEARING DATE(S):

11 October 2000

JUDGMENT DATE:

25 January 2001

PARTIES :

JAMES R W HAYWARD
(Plaintiff)

v

DAVID JOHN BARRATT
(First Defendant)

BAZZA INVESTMENTS PTY LTD
ACN 008 119 891
(Second Defendant)

JUDGMENT OF:

Levine J

COUNSEL :	T Blackburn (Plaintiff) A Harris Q.C. (Defendant)
SOLICITORS:	Piper Alderman (Plainiff) Phillips Fox (Defendant)
CATCHWORDS:	Imputations - capacity - form - SCR Pt 67 r 11(3) - refusal of separate trial under SCR Pt 31 r 2 in respect of oral publication
CASES CITED:	Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 Krahe v TCN Channel Nine Pyt Limited [1986] 4 NSWLR 536 Love v Mirror Newspapers Limited [1980] 2 NSWLR 112 Marsden v Amalgamated Television Services Pty Limited (1998) 43 NSWLR 158 Stewart v Shoalhaven & Nowra News Limited (Hunt J, 26 September 1980, unreported)
DECISION:	See paragraph 31

DLJ: 1

[2001] NSWSC 8

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
DEFAMATION LIST

No. 20126 of 2000

JUSTICE DAVID LEVINE

THURSDAY 25 JANUARY 2001

JAMES R W HAYWARD
(Plaintiff)

v

DAVID JOHN BARRATT
(First Defendant)

bazza investments pty ltd
ACN 008 119 891
(Second Defendant)

JUDGMENT (Imputations - capacity - form - SCR Pt 67 r 11(3) - refusal of separate trial under SCR Pt 31 r 2 in respect of oral publication)

1    The plaintiff is the Chairman of Southern Equity Holdings Limited (SEQ) and at all material times was the Secretary of Sengate Pty Limited (Sengate). The first defendant, Mr Barratt, was a Director and Shareholder of Bazza Investments Pty Limited (Bazza) which corporation held shares in SEQ and Sengate.

2    The plaintiff has sued the defendants in respect of two publications. The first publication is a letter dated 10 June 1999 the text of which is appended hereto. It is alleged that the letter was forwarded to all shareholders of SEQ.

3    The second matter complained of is based upon an event that is said to have occurred on 30 November 1999 at the Annual General Meeting of SEQ where certain words were uttered. I shall return to that matter complained of in due course.

4    In respect of the first matter complained of, the plaintiff pleads 18 imputations said to arise out of the natural and ordinary meaning of the letter or as true innuendos by reason of particularised facts and matters. The imputations are as follows:

“7.1 The plaintiff as managing director of Southern Equity Holdings Limited had acted disgracefully by accepting incredibly high remuneration from that company which was wholly unjustified in view of the poor results of the company.
7.2 The plaintiff was a greedy person.
7.3 The plaintiff as managing director of Southern Equity Limited had failed in his duty to the shareholders of that company by failing to give the shareholders the least they were entitled to, namely an explanation for the substantial losses of that company, and his wholly undeserved level of remuneration.
7.4 The plaintiff as managing director of Southern Equity Holdings Limited has treated the shareholders of that company with contempt by failing to give them the least that they were entitled to, namely an explanation for the substantial losses of the company and for his wholly undeserved level of remuneration.
7.5 The plaintiff as managing director of Southern Equity Holdings Limited was so arrogant that he refused to give shareholders of that company the least that they were entitled to, namely an explanation for he substantial losses of the company and for his holly undeserved level of remuneration.
7.6 The plaintiff’s performance as managing director of Southern Equity Holdings Limited was shameful.
7.7 The plaintiff’s performance as Managing Director of Southern Equity Holdings Pty Limited was poor and had caused SEQ to record financial losses.
7.8 The plaintiff’s performance as Managing Director of SEQ was poor - having caused SEQ to invest in loss making ventures and thereby a failure of SEQ to record profits and shareholders funds to reduce in value;
7.9 The plaintiff after resigning as managing director of Southern Equity Holdings Limited had thwarted the will of the shareholders of that company by manipulating the resignation of directors who had been democratically elected by the shareholders.
7.10 The plaintiff had practised deception on the shareholders of Southern Equity Holdings Limited in connection with a proposed merger between that company and a company named Balmoral.
7.11 The plaintiff had practiced deception on the shareholders of Sengate Pty Limited in connection with the proposed merger between SEQ and a company named Balmoral.
7.12 The plaintiff had acted dishonestly in connection with a proposed merger between Southern Equity Holdings Limited and a company named Balmoral.
7.13 The plaintiff had acted discreditably by using his voting power in Southern Equity Holdings Limited to support a merger between that company and a company named Balmoral, without disclosing to the shareholders of either company that Balmoral had agreed to buy the plaintiff’s interest in a company named Sengate for $1.25 million.
7.14 That Hayward had breached his legal and/or moral duties to other Sengate shareholders by secretly and improperly negotiating with Balmoral to purchase Hayward’s interest in Sengate.
7.15 That Hayward had breached his legal and/or moral duties to other Sengate shareholders by secretly and improperly preferring his own interests over those of other Sengate shareholders.
7.16 The plaintiff had used his voting power improperly by causing SEQ to pay to him a wholly undeserved and incredibly high remuneration.
7.17 The plaintiff had tried to prevent his shareholders in Southern equity Holdings Limited attending a meeting to remove him and other directors of that company by having the meeting held in Sydney rather than Adelaide, thus preventing a large turnout of shareholders.
7.18 The plaintiff was a dishonest person”.

5    This daunting number of imputations, not surprisingly, gave rise to several objections as to difference in substance, form and capacity. In respect of the first matter complained of, by consent, an order was made pursuant to SCR Pt 31 r 2 for the separate determination of relevant issues.

6    For the defendants it was argued that imputations 7.1, 7.3, 7.4 and 7.5 do not differ in substance one from the other in contravention of SCR Pt 67 r 11(3).

7    The second paragraph of the letter, refers to certain investments in which the company SEQ made losses and an amount of money which was said to have been paid during that period to the plaintiff. It was argued that three concepts were involved: first, the fact that SEQ sustained substantial losses; secondly, the “incredible” payment to the plaintiff; thirdly, no explanation having been received by shareholders in respect of those matters. In the course of argument these were described as “co-ordinates” which limit the availability of defamatory imputations.

8    The pleaded imputations all involve criticism of the plaintiff in relation to the coincidence of the substantial losses of SEQ and his level of remuneration as Chairman. It is not a situation where some of the imputations allege conduct on a particular instance and others are general in nature. It was submitted that the conduct is in each case the same and that it can be characterised as the receipt by the plaintiff of a “wholly undeserved level of remuneration” in the light of the company’s poor result. There lies the sting: if the level of remuneration is wholly undeserved then there is no relevant explanation which could be given. The only imputation that could be available, it was agued, in effect, was that the plaintiff received a wholly undeserved level of remuneration.

9    I do not accept these submissions. The “co-ordinates” submission could well turn out to be a valuable jury argument. If accepted, then the situation may arise where no pleaded cause of action in fact can be found. If the argument is not accepted and those advanced for the plaintiff given the specific terms of the letter are, then I am not persuaded that multiple causes of action stating the same thing have, in fact, been pleaded. In other words, the structure of the defendant’s argument as I understood it really was directed to capacity. The terms of the letter make clear the availability of the several “stings” found in the imputations, if the letter is understood in the way the plaintiff asserts.

10    It is to be noted however that the plaintiff asserts that imputation 7.3, or certainly appears to be asserting, arises by reason of the knowledge of an extrinsic fact. As presently pleaded that imputation is said to arise out of the natural and ordinary meaning or alternatively, by reason of extrinsic facts. If it is the case for the plaintiff that it arises only by way of true innuendo it should be separately pleaded as such.

11    Imputations 7.7 and 7.8 were objected to on two bases: first, that each was bad in form by reason of inclusion of the uncertain word “poor”; the second basis was that they do not differ in substance.

12    I am not troubled by the use of the word “poor”; this is a situation where a pleader can do the best that that pleader can given the language of the matter complained of and its use in relation to either of the imputations would cause no confusion (Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 137B per Gleeson CJ). It does appear to me however quite clear that really imputations 7.7 and 7.8 are saying, in essence, that the performance by the plaintiff of his function as Managing Director/Chairman of SEQ was poor having caused that company to received financial losses in its investments (that is one way of putting it).

13    Imputation 7.7 and 7.8 will be struck out by reason of not differing in substance; leave to re-plead will be granted.

14    As to imputation 7.9: it is argued that this imputation is incapable of arising and in any event, is bad in form by reason of not clearly disclosing the conduct of the plaintiff constituting “thwarting the will” of the shareholders. As to form I am satisfied that it is proper; it is the manipulation of the resignation of directors that constitutes the thwarting of the will. That the plaintiff manipulated the resignation of directors is implicit in the matter complained of, in my view, and an inference is directly available that that manipulation thwarted the will of the shareholders. This is an inference upon an implication (Marsden v Amalgamated Television Services Pty Limited (1998) 43 NSWLR 158 at 167B per Hunt CJ at CL). This imputation, proper in form, is clearly be capable of arising and will go to the jury.

15    The next set of imputations are imputations 7.10, 7.11, 7.12, 7.13, 7.14 and 7.15.

16    Imputation 7.14 will be struck out as bad in form. It contains within it two sufficiently distinct concepts “legal” and “moral” duties which constitute an embarrassment. The same considerations apply to imputation 7.15. Both will be struck out with leave to re-plead.

17    As to the balance of this clutch of imputations: is it not really the case that the sting sought to be captured by this extravagant series is that set out in imputation 7.13? I am not persuaded that there is a difference in substance in the notion of “deceit” “dishonesty” and “discreditably”. The non-disclosure is the nub of the complaint and it can be characterised, in my view, by the attribution of one of those qualities and only one.

18    Imputations 7.10, 7.11, 7.12 and 7.13 are struck out with leave to re-plead.

19    Finally, it was submitted that there is no difference in substance between imputation 7.2 “greedy” and 7.18 “dishonest”. The plaintiff has chosen to plead two imputations of a very general nature which, in my view, are capable of being carried. How the defendants, if they choose to do so, propose to justify such general matters will be a matter for them. Whilst the matter complained of appears to be focused on particular matters, for example, or events, remuneration, investment failure, manipulation of Board membership and non-disclosure, it nonetheless is capable of giving rise to these general imputations which in my view, do differ in substance. Certainly, dishonesty does not necessarily connote greed.

20    I decline to strike out imputations 7.2 and 7.18.

21    No objection was taken to the innuendos in paragraph 8.

22    The second matter complained of pleaded in paragraph 6 of the Statement of Claim is as follows:

“On 30 November 1999 at the Annual General Meeting of SEQ in Sydney Barratt uttered the following words:
‘On 24 June 1999 a letter in support of directors was sent from SEQ to all shareholders and according to a letter of 1 July 1999 from SEQ, SEQ paid for it. That is illegal as it is in contravention of s 227(5) of the Corporations Law - what is going to be done about it?’

The Chairman (Hayward) responded in the following words;
‘In the Company’s view this is not illegal and in fact it was quite appropriate. The Company won’t do anything about it. If you want anything done about it you’ll have to complain about it yourself. Do you intend to do that?’
Barratt uttered the following words in response;
‘Yes, I am going to complain to the ASIC’”.

23    The imputations said to arise from the second matter complained of by way of true innuendo are 9.1 and 9.2.

“9.1 That the plaintiff, as Chairman of SEQ, condoned illegal conduct.
9.2 That the plaintiff, as Chairman of SEQ, condoned conduct by that Public Company which was sufficiently serious as to warrant investigation by the ASIC”.

24    With respect to this second matter complained of, a proposed amendment setting out additional particulars of extrinsic facts satisfactorily resolves the role to be played, as an extrinsic fact, by the first matter complained of, as opposed to its mere existence as a letter (cf. Stewart v Shoalhaven & Nowra News Limited (Hunt J, 26 September 1980, unreported).

25    However, I do not consider it appropriate to make an order under SCR Pt 31 r 2 for the separate trial of the capacity issues raised by the defendants.

26    First it was indicated in the course of submissions that whilst the plaintiff’s assertions as to the words used will not be disputed, other words will be alleged to have been used which will alter the meaning. What those words are, is unknown, the defendant, of course, at this stage, not having filed a Defence nor otherwise having sought to have “struck in” relevant material.

27    Secondly, this is a case that points to a likelihood of a difference between the extrinsic facts as particularised and the facts as revealed by evidence as affecting meaning, especially in relation to the import of the content of the written document being one of the extrinsic facts, namely, the first matter complained of. In these circumstances it is quite inappropriate and of little utility otherwise to seek to determine this preliminary question of law: see Love v Mirror Newspapers Limited [1980] 2 NSWLR 112 at 123 and Krahe v TCN Channel Nine Pty Limited [1986] 4 NSWLR 536 at 542C.

28    The result will be a s 7A trial of some complexity. It is to be borne in mind that one of the issues to be determined by the jury under s 7A(4) is whether the defendant published the relevant matter complained of. At present that appears to be a matter that will have to be resolved by the jury by reason of the suggestion that other words were spoken that will affect the meaning. The jury will have to determine the extrinsic facts. Upon the determination of what was published and the determination of the extrinsic facts, it might well be then appropriate, upon receipt of the jury’s findings on those issues, to argue the question of capacity. At present however, it is quite inappropriate to do so.

29 The nature of this case is such that I can only but recommend to the parties that consideration be given by them to the operation of s 89(2)(b) of the Supreme Court Act 1970 relating to the dispensing with the jury.

30    At the end of the day the parties have been successful on each side in relation to the matters in dispute and a costs order will be made appropriately.

31    The formal orders are:

1. Imputations 7.7 and 7.8 are struck out with leave to re-plead.

2. Imputation 7.9 will go to the jury.

3. Imputations 7.1, 7.11, 7.12 and 7.13 are struck out with leave to re-plead.

4. Imputations 7.14 and 7.15 are struck out with leave to re-plead.

5. Imputations 7.2 and 7.18 will go to the jury.

6. The plaintiff has leave to file an Amended Statement of Claim within 21 days.

7. Each party is to pay his and its own costs.

8. The matter is listed for directions on 2 March 2001.

appendix


Letterhead of Bazza Investments Pty Ltd/Hampstead Enterprises Pty Ltd/Kanopy Pastoral Co. Pty Ltd

10 June 1999

Dear Shareholder

SOUTHERN EQUITY HOLDINGS LIMITED

When you and I bought Southern Equity Shares, in most cases at prices between a dollar and dollar fourteen we were led to expect reasonable dividends and growth. What have we got? No dividends of late. Last February SEQ shares were traded at $0.95. Today they are quoted at $0.26. Whom should you hold responsible for this state of affairs?

We were led to believe that Phoenix, Armourtech and Chiquita were great investments. The results have been published losses of $1,419,000, $1,067,000 and $689,000 respectively, a total of $3,175,000. During that time the managing director, James Hayward is reported to have received a total of $1,310,000. What an incredible payment for the results! I understand it to be a cause of anger with many shareholders that we have never received an explanation for those losses and charges from James Hayward. That should have been the least you and I were entitled to. It was our money that was lost. We might ask: is he ashamed of his performance, too arrogant to believe an explanation necessary or just treating us with contempt because of his voting power?

Following James Hayward’s resignation in June 1997 it is not hard to work out who is responsible for the director’s musical chairs game from that time on. It is interesting to note that Charlie Latham, who received 5,540,215 votes in the December 1998 directors’ election, nearly two million more than Hayward, resigned on January 15th 1999. One wonders what was behind the resignation of a director supported by the largest majority of the shareholders. A move to have Mr Latham set out in a statutory declaration all of the facts surrounding his resignation may be most revealing. Also, why did Fennell resign on the same day after standing as a director and being elected. Many shareholders were surprised that Jim Jarvis did not stand for election on December 30th but was appointed as a director twelve days later.

Then we had another proposal for a new venture or should we call it adventure involving year 2000 computer problems. That project foundered and at what cost?

James Hayward and associates had 53% of Sengate which has 42% of SEQ. Commonsense dictates that Sengate must have voted for the merger with Balmoral. What was not known to shareholders in either company was that Balmoral had agreed to buy the Hayward interests in Sengate for $1.25 million. The fact that others were not included in that sale has left a nasty taste in many a Sengate shareholder’s mouth. Court transcripts show that Balmoral withdrew its agreement to buy the shares when it was discovered that a Hayward company had lent Sengate close to a million dollars at 9.4% interest at 24 hour call. Sengate then made certain allegations to the court which became the basis on which the merger between SEQ and Balmoral failed. I have been told tat SEQ paid for al of the court costs and appeals.

-2-

Action has been taken to remove the current directors and elect local directors with specific expertise whose charges would be on a time basis at their normal professional rates. It is understood that their first priority would be to investigate the winding up of the company with a possible return to shareholders of between 70 & 80 cents based on last year’s balance sheet.

Should this move not be successful the next approach would be to ASIC on behalf of an oppressed minority.

Like most shareholders I have watched the events involving SEQ over the current period of turmoil with considerable alarm and believe the action set out above is the only way to go in our own interests.

In view of the company’s records and recent share value are you prepared to leave the current directors in charge of your investment or should we elect new directors, each with a history of success, to act in our interest?

Your vote is vital. If possible, please make every endeavour to attend the meeting on July 5th or should you be in agreement, forward your proxy form direct to me and I will deliver it to the company. For your convenience I have enclosed a proxy form completed in my favour or directing the Chairman in my absence to vote in favour of electing the new directors and removing the existing Directors. Please feel free to write or telephone me.

While the Chairman’s letter of May 28th sets out that there are more NSW shareholders than in any other state the number over SA is actually 9 more - hardly a reason to have the meeting away from the state of the registered office with the associated costs of Sydney over Adelaide. There are 5,020,589 shares held by South Australians against 2,392,306 held by shareholders in NSW and the Chairman should have known that with the matters to be addressed there would have been a large turnout had the meeting been held in Adelaide.

It is interesting to note that a majority of the twenty shareholders of Sengate have written to the Sengate directors requesting that their percentage of votes be used in favour of the six resolutions to be put to Southern Equity Shareholders.

With hope for a reasonable end to this sad and sorry saga.

I remain,

Yours sincerely,

(signed)

D J (Barry) BARRATT

***********

Last Modified: 01/29/2001