Hudson Resouces Ltd v Sandner

[1999] NSWSC 1278

CITATION:	Hudson Resouces Ltd v Sandner & Anor [1999] NSWSC 1278
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	20291/99
HEARING DATE(S):	10 September 1999
JUDGMENT DATE:	10 September 1999
PARTIES :	HUDSON RESOURCES LTD - Plaintiff Richard John SANDER & Anor - Defendants
JUDGMENT OF:	Simpson J at 1

COUNSEL :	Mr b McClintock SC - Plaintiff Mr M White - First Defendant Ms L McCallum - Secons Defendant
SOLICITORS:	Antanaskovic Hartnell - Plaintiff McDonell Milne Tolitz - First Defendant Eakin McCaffery Cox - Second Defendant
CATCHWORDS:	Defamation - imputations alleged
DECISION:	Leave to file amended statement of claim.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
Defamation List

SIMPSON J

Friday 10 September 1999

20291/99

HUDSON RESOURCES LTD v Richard John SANDNER & Anor

Judgment

HER HONOUR :

1    HER HONOUR: The plaintiff, Hudson Resources Ltd, has sued Richard John Sandner and Reef Mining NL in relation to the alleged publication of a document dated 3 May 1999 in the following terms:

"Dear Shareholder

SPECIAL GENERAL MEETING

I am writing to advise the outcome of the Special General Meeting that had been called by Reef Mining N.L.'s largest shareholder, Hudson Resources Limited to consider a resolution proposed by them to remove me as Managing Director.

At the meeting held on Thursday, 29 April 1999 a total of 649 proxies were received of which, 637 accounting for 51% of the total shares on issue, voted against the resolution and accordingly the resolution failed.

You will be aware that on Monday, 26 April 1999 Hudson Resources Limited announced another takeover offer for Reef Mining N.L.

The announcement reads as follows:

“The Company (Hudson Resources) proposes to make a takeover bid or procure that one of its Subsidiaries make a takeover bid for Reef at 7 cents per share subject to no prescribed occurrences occurring after the date of this announcement and before the end of the offer period.'

Some facts about Hudson Resources!

As at 31 September 1998

• Bank Liability $726,000

• Profit $ 58,000

• Cash on hand $ 96,000

Hudson Resources is clearly in need to (sic) cash and because Reef Mining NL has cash it is an attractive target.

As you would be aware Reef Mining N.L. is currently undertaking a major drilling program at the Tarnagulla mine to prove whether the geological theory developed for Reef Mining N.L. by Brian Cuffley and Joseph Krokowski works. Preliminary results are encouraging and assays are awaited with interest. I will of course keep you informed of progress on the drilling program.

You will also be pleased to know that Doug Derham has rejoined the Board.

May I also take this opportunity to sincerely thank you for your support and for allowing me the opportunity to continue as Managing Director and to further develop the Reef Mining N.L. program.

Yours faithfully

REEF MINING N.L.

DICK SANDNER
Managing Director."

2    The plaintiff alleges that four imputations are conveyed by the matter complained of. They are as follows:

(a) the plaintiff is insolvent;

(b) the plaintiff had so incompetently managed its business as to cause it to have a substantial cash deficiency;

(c) the plaintiff was a dishonourable company prepared to make an unfair take over offer for the purpose of remedying its cash deficiencies;

(d) the plaintiff had made a take over offer for the second defendant for the purpose of stripping the second defendant of its assets including cash.

3    Both defendants claim that the imputations are incapable of being conveyed and, in relation to at least one of the imputations, that even if it is conveyed, it is incapable of being defamatory.

4    As noted, the letter appears to have been written in response to a proposed take-over offer for Reef Mining NL by the plaintiff company and is properly construed as an advice to shareholders not to accept the offer, if it eventuated. Of significance in the letter, which is fairly short, is the paragraph commencing, "Some facts about Hudson Resources!" Set out thereunder is a short statement purporting to report the plaintiff's financial position as at 31 December 1998. Only three figures are given. One is a figure representing the bank liability of the plaintiff at $726,000, the other two representing profit of $58,000 and cash on hand of $96,000. It is entirely possible that, properly read, there is some overlap between the two figures given for profit and cash on hand, but I think that is immaterial for present purposes. What followed those figures was the statement:

"Hudson Resources is clearly in need to (sic) cash and because Reef Mining NL has cash it is an attractive target."

5    The first imputation pleaded is that the plaintiff is insolvent. The defendants argue that on the extracted material it is not possible to discern an assertion of insolvency.

6    Arguments were advanced as to what constitutes insolvency and I was reminded that, technically, insolvency means the inability to pay debts as and when they fall due and it was put that, properly construed, this paragraph could not convey that meaning.

7    Construed in terms of legal technicalities, I think that is correct. But this is not an Act of Parliament or a legal document and the test is not what may properly be construed in those circumstances, but what may be conveyed to the ordinary reasonable reader, receiving the matter complained of.

8    In my opinion, the letter has been drafted as it has in such a way, whether this was its purpose or not, as to convey a message that the plaintiff is in financial difficulties and I am of the opinion that it is capable of conveying the imputation pleaded as (a).

9    The second imputation to some extent rests upon the first imputation but adds the assertion that the company had reached that position by reason of incompetent management. On behalf of the plaintiff it was put that companies only find themselves in financial difficulties because of incompetent management. I do not accept that proposition. The ordinary reasonable reader would know that companies can find themselves in financial difficulties for all sorts of reasons that do not necessarily include incompetent management. Other than by inference derived from imputation (a) there is nothing in the letter that could convey any suggestion of incompetence in the management of the plaintiff and I accordingly strike out imputation (b).

10    The third imputation contains a number of epithets, including the word "dishonourable", "unfair take-over" and a reference to the plaintiff's alleged purpose in its take-over, as being to remedy its cash deficiencies. It was put that the word "unfair" in relation to a take-over offer is often used, although what is intended is to suggest that the offer is inadequate for the value of the target company. That simply means that the use of the word "unfair" is, strictly speaking, inaccurate.

11    In my opinion, while the letter is capable of suggesting that the offer proposed by the plaintiff is inadequate having regard to the value of Reef Mining NL, it is not capable of conveying an imputation, either that the proposed offer is unfair in the ordinary sense of that word, or that the plaintiff was acting dishonorably in making that offer, and accordingly I strike out imputation (c).

12    The final imputation concerns an allegation of asset stripping. It is this imputation which has caused me the greatest difficulty. The material is capable of conveying the imputation that the plaintiff's purpose in making the take-over offer was for the purpose colloquially known as "stripping". It is not entirely clear that asset stripping in the take-over industry is something deserving of criticism or condemnation, but on balance it seems to me that an ordinary reasonable reader might, in the context of this letter, so understand the assertion, that is that the conduct asserted against the plaintiff was worthy of condemnation. I decline to strike out imputation (d).

13    In the light of what I have said, the plaintiff has leave to file an amended statement of claim.

14    I order each party pay his or its own costs.

15    The plaintiff is to file any amended Statement of Claim by 17 September and thereafter the matter can be placed in a Holding List for determination by a jury for the matters relevant for jury determination, and thereafter for whatever directions the trial judge might consider appropriate, if there is anything.

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Last Modified: 04/18/2001