ImageBuild Group Pty Ltd v Cidec Pty Ltd
[2017] VCC 615
•23 May 2017
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-17-02147
| IMAGEBUILD GROUP PTY LTD & ANOR | Plaintiffs |
| v. | |
| CIDEC PTY LTD & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 May 2017 | |
DATE OF JUDGMENT: | 23 May 2017 | |
CASE MAY BE CITED AS: | ImageBuild Group Pty Ltd & Anor v. Cidec Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 615 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Interlocutory injunction – Plaintiffs’ website “taken over” by disgruntled creditors – Statements published on website alleging criminal behaviour and serious misconduct by the plaintiffs, its director and others associated with them – Tort of injurious falsehood alleged – Whether sufficient evidence to establish a serious question to be tried as to the falsity of the statements on the website.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J. W. Kewley of Counsel | Bayston Group |
| For the Defendants | Mr T. J. Mullen of Counsel | Rigby Cooke Lawyers |
HIS HONOUR:
1ImageBuild Group Pty Ltd (“IBG”) is a builder. It has a website, through which it used to promote the company’s business.
2The website was established for IBG by an IT consultant, Bekoers Pty Ltd (“Bekoers”) trading as Tyko Managed Services (“Tyko”). Tyko shared offices with Cidec Pty Ltd (“Cidec”), an electrical contractor. Earlier this year Tyko merged as part of the business of Cidec.
3Tyko and Cidec allege that IBG owes them money. In about late April or early May 2017, IBG alleges, Tyko “altered IBG’s website so as to include on it vast amounts of disparaging information regarding IBG”, its sole director and shareholder, Brett Allen Spits and his mother Theresa Spits.
4IBG and Mr Spits allege that the alterations made to the IBG website:
a.breached the “care and skill guarantee” pursuant to section 60 of the Australian Consumer Law (“ACL”), owed to IBG by Tyko under the IT agreement between those parties (“the IT agreement”);
b.constituted conduct comprising injurious or malicious falsehoods.
5IBG seeks interlocutory injunctions to restrain Cidec, Bekoers and Peter Thomas Stacey (the sole director of Cidec and Bekoers) from placing damaging and false material on the website and denying access and control of the website to IBG and Mr Spits. The application was opposed.
6The issues for determination on the application for interlocutory injunctions are:
a.whether there are serious issues to be tried in relation to:
i.whether IBG or Tyko are entitled to control the website and the status of the IT agreement;
ii.whether a care and skill guarantee pursuant to section 60 of the ACL arises;
iii.the falsity of the statements and other material on the website;
b.whether the balance of convenience favors the grant of an interlocutory injunction.
The proceeding
7On 15 May 2017, the plaintiffs’ solicitors foreshadowed to the associate to the Commercial Division Duty Judge an application seeking an interim injunction. The proposed application was referred to me as the duty judge. Upon my instructions, my associate informed the plaintiffs’ solicitors by email on 16 May 2017 that, “His Honour has indicated that unless notice of the application is given to the defendants there is a risk that ex parte relief will not be granted”.
8Plaintiffs’ counsel, Mr Kewley, responded by email stating that his clients were “very concerned as to how the defendants will react upon receipt of the Court documents” and expressed a preference to appear before the Court, “initially on an ex parte basis”.
9Mr Kewley appeared before me in court. After discussion, I suggested that the papers be served. On the afternoon of 16 May 2017, Mr Triaca of counsel appeared on behalf of the defendants. The application was adjourned to 19 May 2017, and directions were given for the filing of further affidavit material.
The parties’ relationship and ongoing litigation
10IBG was the builder of apartment complexes in Nicholson Street, Brunswick East and Sydney Road, Brunswick. Cidec was the electrical sub-contractor on the projects. In action CI-16-05453, Cidec brought a proceeding against IBG pursuant to the Building and Construction Industry Security of Payments Act 2002 (Vic) (“the SOP Act”) in respect of unpaid progress payments totalling $336,052.87.
11IBG defended the proceeding on the basis that the construction contract was not between Cidec and IBG but with another company in the “group” which included IBG. That company, SFOPPS Pty Ltd (“SFOPPS”), went into liquidation in December 2016.
12Mrs Spits had previously been a director of SFOPPS. She was replaced by “Lisa Baker”. The defendants allege that Lisa Baker is a fictitious person created by Mr Spits and his mother.
13Cidec lodged a claim for $26,643.43 against Image Assets Pty Ltd (“Assets”) and Mr Spits in the Building and Property List at VCAT on 6 December 2016 in respect of sums unpaid for electrical work carried out on projects at Lower Plenty and Echuca. Mr Spits was the sole director and shareholder of Assets.
14In points of defence filed on behalf Mr Spits, it was alleged that both sub-contract arrangements were with IBG, although the building work was being carried out for Assets as “the owner”.
15Bekoers, trading as Tyko, has lodged two claims against IBG in the Civil Claims List at VCAT. The first dated 18 March 2017 sought payment of $42,232.46 in respect of the provision of “fibre optic internet services” for IBG. The claim arose upon IBG “unexpectedly departing [its previous office] upon the liquidation of one of their companies as part of the group”.
16A second claim by Bekoers, trading as Tyko, was lodged at VCAT in April 2017 against IBG, Mrs Spits and Mr Spits claiming $2,820 in relation to the provision of “onsite and remote managed IT services” in February 2017.
The website
17It is unclear how long the website has operated to distribute information disparaging of IBG, Mr Spits and Mrs Spits, although it was from a date prior to 4 May 2017. Mr Toby Pope from Alpha 14 Property Group (“Alpha 14”) is the developer of a substantial project at Spencer Street Melbourne for which IBG is the builder.
18On 4 May 2017, Mr Pope wrote to IBG stating that, having recently been referred to the IBG website, he found “a large amount of content that makes accusations about Imagebuild Group and Brett Spits”. Mr Spits stated in an affidavit sworn 16 May 2017 that, “I first became aware the defendants had hijacked IBG’s website about two weeks ago”.
19A printout of the website, apparently updated at 8:12pm on 15 May 2017, was exhibited to an affidavit of Mr Spits. Statements made on the website include the following, with reference to the relevant pages of the exhibit:
a.“ImageBuild Group & SFOPPS – Don’t be the next contractor to be fleeced. Save your business. Keep your money” (1/82);
b.“ImageBuild Group [fled] from…Preston upon the illegal liquidation of SFOPPS” (2/82);
c.“So many sad stories of unsecured creditors being burnt, broken promises, payment plans gone wrong, delaying tactics when it comes to litigation” (2/82);
d.Brett Spits’ “attempted hacking efforts [of the website] are repeated on a daily basis” (2/82). Mr Spits “had claimed responsibility for the…attack” on the website (38/82-39/82);
e.“Continuing to cash up…your money in their pocket. The fire sale continues…” (3/82). The website suggested an extensive liquidation of assets by IBG, Mr Spits and Mrs Spits was taking place, perhaps for the benefit of creditors – “Let’s hope those unsecured creditors out there see some money and get the urgent relief they so desperately need” (4/82);
f.“…why should they pay us? There are more important things in life than unsecured creditors! Like boats, cars, holidays and personal wealth – of course” (5/82). We are “exposing the lies, corruption, money washing and embarrassment of being busted” (5/82);
g.“It’s…heartbreaking for creditors [to] see their money being spent” on a Lamborghini motor vehicle by Mr Spits (14/82). At 62/82 – “What better way to insult unsecured creditors by not paying them and lashing out on expensive toys”. Followed by a photograph of a luxury car;
h.“Theresa Spits completed years of service behind the counter as frontline management at Centrelink, helping the weak and needy. Today, she has no problem fleecing anyone, washing money and ultimately defrauding all in her path. She was sold the corporate dream by her son, throwing away her moral compass for a life of riches” (20/82);
i.“We’re nearly up to $2m dollars washed and ready to run [of assets sold]…if you add Lower Plenty in to the mix we are nearly at $5m. Will creditors see a cent of this? We hope so. If not it’s just another example of easy come, easy go, professional fleecing”;
j.Mr Spits was involved with “getting [Mrs Spits] set up as a director and engaging in illegal phoenix activity in an attempt to build personal and family wealth – defrauding unsecured creditors” (35/82);
k.Mr Spits had been “caught…out trying to do everything on credit, ripping off the taxpayer, small businesses and destroying families…then run to QLD. You got busted” (35/82);
l.a residential house at Lower Plenty had been “fully paid for by unsecured creditors”, and had been built by “unpaid tradies” that had been “financially burnt” (42/82);
m.“If you are an unsecured creditor or are currently working for Imagebuild Group at the…project we urge you to read the material posted on this site to protect your business from being destroyed” (65/82);
n.“You may have dealt with a company named SFOPPS Pty Ltd. This entity is currently being investigated by ASIC, the ATO and Police” (65/82);
o.“SFOPPS Pty Ltd director Theresa Spits (mother of Imagebuild Group director Brett Spits) was used by Imagebuild Group to avoid paying creditors. This company was placed into voluntary administration just prior to Christmas leaving millions of dollars unpaid to trades” (66/82);
p.“SFOPPS Pty Ltd, namely former director Theresa Spits, is being investigated as she appointed a ‘fake director’ – Lisa Baker – prior to the company being placed into the hands of external administrators. This highly illegal conduct resulted in their solicitors…being raided by the ATO” (66/82);
q.“We are one of many small businesses, collectively owed approximately $8m dollars amongst the entities forming part of the group” (66/82);
r.“Brett and Theresa are spending your money…Brett Spits, director of Imagebuild Group has just purchased a Lamborghini, is building a multi-million dollar house in Lower Plenty, yet refuses to pay hard working trades that are pivotal to the success of the business” (67/82). A photograph of a Lamborghini motor vehicle with a sale price of $429,900 and registration details is at 68/82 with the caption, “Brett’s new Lamborghini…thanks to all the generous creditors out there…even registered to Imagebuild Group!” (69/82);
s.“Theresa has just sold her luxury apartment in South Yarra…and her home [at] Mill Park…There are so many more assets, we will be listing them here to reinforce how bad the situation is at Imagebuild Group and how little respect Brett and Theresa Spits have for your business” (71/82);
t.under the heading, “Are you going to the media?” at 71/82, “We are completing a story with the media, so if you would like to come forward and share your dealing with Imagebuild Group, particularly promises for payment from Theresa Spits – mentions of the ‘Priority Spreadsheets’, ‘Delayed Funds’ etc…these are all tactics to delay payment – they have been paid in full for projects completed – they have simply spent your money on luxury homes and toys”;
u.“We reasonably believe: Imagebuild Group Pty Ltd – trading whilst insolvent and have been for a period in excess of 12 months” (75/82);
v.IBG prepared “a questionable VCAT hearing between the two entities [IBG and SFOPPS] to negate the monies owed in a very dishonest and unscrupulous tactic to defraud creditors” (75/82);
w.Cidec and Tyko have spent “hours of wasted time dealing with [IBG’s] now corrupt legal team” (76/82);
x.“At this stage, rumour has it that Imagebuild Group don’t have enough funds to cover the outgoings, so you will get an email back from Theresa based upon one of the following templates that we have collected from creditors: Excuse 1: Shortfall of funds, due to no fault of our own,…(We have had confirmation from a source within Imagebuild Group that all projects (completed) have been paid in full – Brett and Theresa have simply spent the money and can’t pay)”; Excuse 2: You are on my priority spreadsheet;… (sounds nice but never happens)” (78/82 to 79/82).
20In addition, the following further matters were detailed on the website:
a.using illustrations from a children’s book, “Mrs Wishy-Washy” to highlight conduct by Mrs Spits. These pages (7/82-14/82) included:
i.the comment, “Has Mrs Wishy-Washy been engaging in illegal conduct? You be the judge” (7/82);
ii.comparing Mrs Spits with “the original, less corrupt, Mrs Wishy-Washy” (7/82);
iii.the sale of assets by IBG, Mr Spits and Mrs Spits included a caravan annexe and residential properties at Mill Park and South Yarra (11/82-14/82);
b.Lisa Baker (the sole director of SFOPPS at the time of liquidation) is said not to be a real person (18/82-20/82, 32/82). At 75/82, it is said that, “The appointment of external administrators for SFOPPS has been conducted illegally as the director, Lisa Baker, does not exist. You cannot appoint a fictitious individual as a company director. Theresa Spits should be facing criminal charges for her conduct appointing a director that she knew didn’t exist or have any association with the entity”;
c.under the “Batman” image, Mr Spits is described as Batman and “SFOPPS former director Theresa Spits as ‘Robthem’” and that “together they are Batman and Robthem, partners in crime – superheros of the insolvent world” (31/82-32/82);
d.the photograph “Philip Whiteman” appears on 32/82. On 20/82, Mr Whiteman is described (immediately above an entry relating to Theresa Spits) as “the mastermind behind schemes to defraud the honest taxpayer, small businessman and families – destroying the lives of so many people”. On 33/82, Mr Whiteman is said to be a “Melbourne man identified in multi-million dollar tax evasion investigation still in business”. There is a link to an ABC News story;
e.the website appears to reproduce a number of text message exchanges between Mr Spits and persons associated with the defendants. These include, a message from Mr Spits reading, “When your [you’re] at the top all the jealous losers want to bring you down. You wouldn’t no [know] what that feels like and I’m sure you never will. Jealousy is the root of all evil” (34.82);
f.on 41/82, “Phoenix activity” is defined as “the fraudulent act of transferring the assets of an indebted company into a new company to avoid paying creditors, tax or employee entitlements. The new company, usually operated by the same director, continues the business under a new structure to avoid the responsibilities to their creditors”;
g.at 53/82 there are copies of emails relating to the amount claimed by Bekoers in VCAT. At 58/82 it is stated, “Rather than paying the bill, Imagebuild thought it was a good idea to NOT pay…then let us disconnect them…and then BACK CHARGE us for disconnecting them from a service they haven’t paid for! Genius!”;
h.at 72/82-74/82 there are details relating to IBG’s former solicitors and to a named person whom it was said, “works with” the solicitors “to avoid paying creditors”;
i.Cidec claimed at 76/82 that it is owed a total of $436,403.68 for electrical work carried out for projects at Nicholson Street and West Melbourne “defect free”. (76/82). This claim was disputed by Mr Spits. Competing “expert” reports were exhibited to affidavits by both sides of the dispute;
j.the credit files for IBG and SFOPPS prepared by VEDA were linked to the website with their “VedaScore” and the comment, “How can a company or individual buy all those toys on credit with such a terrible score? You be the judge” (77/82).
21A “Google Review” of ImageBuild Group, under the name of “Peter Stacey” and apparently prepared “2 months ago”, reads as follows:
“100% scum that fleece suppliers and subcontractors. Try to use tactics to avoid paying and string you out in the courts. Brett Spits and Theresa Spits are deceptive con-artists. Thanks Theresa for your priority spreadsheet of deny, delay, don’t pay! Hey Brett if you can’t cash flow small amounts maybe you should drop back to domestic…or sell the Lamborghini”.
Ownership of the website
22IBG have exhibited certain documents which apparently relate to the establishment of the website by Tyko, including:
a.application form - business broadband (ethernet) including “part 5: Terms and conditions” signed by Mr Spits on 15 July 2016;
b.letter dated 16 February 2017 from Tyko to Theresa Spits;
c.Tyko invoice to IBG for $2,820 dated 22 February 2017;
d.AAPT sales order for IBG “disconnect” – “expected cancellation fee is $38,252.05”;
e.Tyko invoice to IBG dated 25 February 2017 for $38,252.05 plus GST for “payout figure AAPT fibre optic connection”.
23The terms and conditions signed by Mr Spits noted:
a.“If you wish to disconnect your Tyko service you are required to give us 30 days notice”;
b.“ADSL/EFM/NBN/Fibre 36 month contracts – If you disconnect before the completion of your 36 month contract you will be required to pay the standard monthly fee of your remaining months of your…contract”.
24Documents exhibited to an affidavit of Mr Stacey show that:
a.Bekoers is the “registrant” of the “domain name” imagebuildgroup.com.au;
b.“the hosting of the website on the server is paid for by, and in the name of, Bekoers”;
c.IGB was the “registrant” of the “domain name” imagebuild.com.au.
25On the basis of this material, it is not clear:
a.what IBG says are the nature or terms of its relationship with Bekoers;
b.the ownership of the website imagebuildgroup.com;
c.how it is asserted that a “care and skill guarantee” applies to the IT agreement between IBG and Bekoers;
d.whether the conduct alleged against the defendants might have constituted breach of such a guarantee;
e.whether a breach of a consumer guarantee under the ACL would breach the IT agreement between IBG and Bekoers.
26In the circumstances, as presently pleaded and evidenced, the contractual basis for the injunctive relief sought has not been made out.
Injurious falsehood as a basis for the injunctive relief
27The elements of a claim based on injurious falsehood are set out by Kirby J in the High Court decision Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at 425, paragraph 114, as follows:
“In my opinion, there are seven elements to the tort. They are:
(1) That the defendant published matter that was false;
(2) That the falsity concerned the plaintiff or its property;
(3)That such falsity was calculated to induce others not to deal with the plaintiff or was otherwise likely to damage the plaintiff;
(4) That the publication was actuated by malice;
(5) That the publication had the results complained of;
(6) That those results included actual damage to the plaintiff; and
(7) That such damage was either:
(a) The result which the person publishing the false matter intended; or
(b) The natural and probable result of such publication”.
28On the injunction application, the parties concentrated on the first element, whether the defendants had published a false statement or matter.
29The plaintiffs’ evidence in relation to this issue was primarily contained in the “third affidavit in support” of the application sworn by Mr Spits. The material is, in my view, unsatisfactory in a number of respects:
a.the affidavit contains many generalised assertions, statements of opinion and emotive comments but few facts. The website is said by Mr Spits to:
i.contain “various and numerous false statements and misrepresentations”;
ii.“create an extraordinarily negative picture of Imagebuild in the mind of the viewer”;
iii.“plan to damage, indeed to sink my company and my business, and to drag my mother and I through the mud”;
b.refers to a number of specific statements on the website and the implications that might be drawn from those statements, but without:
i.providing an adequate factual context from which it can be judged whether the statements are likely to be untrue;
ii.denying each part of the statement, which suggests that the other parts not referred to may well be true. An example was the statement on the website:
“We have a super faster fibre optic connection still in contract that Imagebuild Group ran from after fleeing from Swanston Street, Preston upon the illegal liquidation of SFOPPS”, to which Mr Spits said, “Imagebuild did not ‘flee’ from Swanston Street, Preston”. The allegation of the “illegal liquidation of SFOPPS” (said to have been “conducted illegally as the director ‘Lisa Baker’, does not exist”) and that “Theresa Spits should be facing criminal charges for her conduct appointing a director that she knew didn’t exist or have any association with the entity”, are not addressed by Mr Spits;
iii.addressing a detail of a statement of alleged impropriety rather than the substance. For example the statement on the website that he had “just purchased a Lamborghini” was said by Mr Spits to be false because the vehicle “is leased and I am making monthly lease payments” pursuant to a “Goods Loan Facility”.
30Mr Spits appears to understand the substance of the accusations made on the website. He stated in his third affidavit that the website “gives the reader the overall impression that Imagebuild is a dishonest and deceptive business operated by reckless and dishonest people engaging in a fire sale of assets while at the same time engaging in high living”.
31Mr Spits suggests that the website should be read “as a whole”. It is, in my view, appropriate to consider the context of the specific statements on the website. In this regard, it is appropriate to set out:
a.the background facts; and
b.the specific allegations of misconduct on the website on the part of IBG, Mr Spits and Mrs Spits.
32The background facts are not made particularly clear in the affidavit material. However, the following matters appear to be undisputed:
a.Mr Spits and Mrs Spits were involved in the management of all the companies in the ImageBuild Group, including IBG and SFOPPS;
b.Mr Spits has alleged that SFOPPS had a critical function in the building operations of the group – it entered into agreements with some sub-contractors on the building projects;
c.SFOPPS went into liquidation in December 2016. The summary of affairs of SFOPPS signed by Lisa Baker records debts to unsecured creditors of $1,882,019.83;
d.a number of unsecured creditors of both SFOPPS and IBG have alleged that they have not been paid what is owing to them.
33The critical aspects of misconduct referred to on the website are:
a.SFOPPS had a substantial number of unsecured creditors who were unpaid;
b.Mr Spits and Mrs Spits distanced themselves from SFOPPS at a critical time by installing a fictitious person, Lisa Baker, as a director;
c.the appointment of an administrator to SFOPPS was illegal because relevant documents were signed by Lisa Baker;
d.SFOPPS and IBG, through Mr Spits, Mrs Spits and their lawyers engaged in deceptive practices to delay or avoid paying creditors, particularly the trades working on the building projects;
e.in fact, IBG, Mr Spits and Mrs Spits had received full payment from the developers in relation to those projects but had not passed on payments to the sub contractors;
f.Mr Spits and Mrs Spits had organised the affairs of the companies so that the assets were retained in a company or companies that were not carrying the debts of the business operations of the group;
g.in this sense, the continuing companies were a phoenix rising from the ashes of SFOPPS which was discarded by Mr Spits and Mrs Spits when its debts could not be paid;
h.as a result, Mr Spits and Mrs Spits were able to enjoy extravagant lifestyles, purchasing properties, motor vehicles and other assets which was only possible because the creditors had not been paid;
i.after the liquidation of SFOPPS, Mr Spits and Mrs Spits commenced selling assets, presumably to arrange for the proceeds of the sales to be protected from being recovered by creditors;
j.raids conducted by the ATO on the offices of IBG’s solicitors suggest that there has been misconduct on the part of IBG, Mr Spits and Mrs Spits.
34The evidence about these matters is limited, including a lack of detail of the following:
a.the management structure within the group of companies, the functions each performed and the financial arrangements between them;
b.the appointment of “Lisa Baker” as a director of SFOPPS;
c.the circumstances leading to the liquidation of SFOPPS with substantial unsecured creditors;
d.whether IBG or other companies in the group had received full payment for the projects in which sub contractors were left unpaid;
e.the financial position of IBG, Mr Spits and Mrs Spits and whether properties were purchased, sold or developed, or motor vehicles acquired, both before and after the liquidation of SFOPPS;
f.the reason IBG and its solicitors were the target of raids by the ATO.
35One matter which was the subject of disputed evidence was the financial position of IBG. There was evidence that:
a.on 30 January 2017, judgment was entered in County Court action CI-17-00239 against IBG in the sum of $540,433.86;
b.on 29 March 2017, an adjudication determination was made under the Building and Construction Industry Security of Payment Act 2002 against IBG in the amount of $90,253;
c.a print of the “aged payables (summary)” for IBG as at 16 May 2017 showed debts owing for more than 90 days totalling $11,440,614.07.
36In respect of the “age payables (summary)” for IBG, Mr Spits said that the document was “completely false and utterly misleading [as Mr Stacey] has accessed an accounting system that has no inputs for months”. Mr Spits said that for Mr Stacey to rely on the document was “mischievous and designed to mislead the Court”.
37Mr Spits produced what he described as “an accurate payable reconciliation (summary) for IBG to 3 March 2017”. The summary shows total debtors of $7,230,341.55 of which $3,360,114.02 (or 46.5%) had been outstanding for more than 90 days.
38No adequate explanation was given as to why the figures were only to 3 March 2017 or why almost half the debits were more than 90 days old.
39On the imagebuild.com.au website, controlled by IBG, two “recently awarded” projects are featured:
a.a 105 apartment development in Spencer Street, Melbourne valued at $30 – $35 million in respect of which construction commenced in about September 2016;
b.a 68 apartment development valued at $20 – $23 million.
40Mr Spits apparently claimed in a text message sent to Mr Stacey’s associate, Ty Koers, that “I need to move on with my business. I have close to $100 million dollars of work in the pipe line”.
Threats posed to IBG by the website
41Mr Spits stated in an affidavit that “the defendants threatened that unless IBG paid $500,000 the corrupted website would stay and be updated with further disparaging material”.
42The text messages in evidence between Mr Koers and Mr Spits are extensive. A summary of the relevant texts is as follows:
Spits:“All suppliers will be taken care of. Give me a figure of all costs Cidec & Tyco believe they are owed.”
Koers:“More going up online. I haven’t seen any funds nor have any other creditors.”
Spits: “Other creditors are fine… you need to give me a figure you want…”
Koers:“I’ve sent the statement so many times… We know we’re not getting our money as you have none. We are here to stop the damage to other creditors.”
Spits:“you have no idea.”
Koers:“I need 500,000 dropped into [a nominated bank account]. I’m going to pay our suppliers and hold the balance in trust for suppliers on the brink of bankruptcy.”
Koers:“Drop the cash. I’ll be fair and help you and other creditors get paid in conjunction with your 100 million of upcoming works.”
Spits: “And what happens if I don’t drop it by noon? ... you have destroyed a lot of lives”.
Koers:“Before I go: 40k dropped. I’ll take the site down. 100k this time next month followed by another 3 payments. Else it’s just status quo.”
Spits:“Let me think about that.”
43Mr Spits relied upon the reaction of Mr Pope from Alpha14 as evidence that the material on the website threatened the business of IBG. He said that Alpha14 had been due to make a $3 million payment to IBG on 16 May 2017, but would not do so until “legal proceedings are in place to rectify the corrupted website”.
44As a consequence of “the failure of Alpha14 to pay” on 16 May 2017, Mr Spits said in his affidavit sworn that day that, “IBG has been unable to pay its subcontractors and they are threatening to walk off the building sites currently being operated by IBG”. Mr Spits said, “the website is creating massive problems for me in my efforts to continue to conduct the business in an orderly manner and to maintain appropriate cash flow”.
45Mr Pope swore an affidavit on 17 May 2017. Mr Spits swore a third affidavit on 17 May and two further affidavits on 19 May 2017. In none of those affidavits was it disclosed that the payment of $3 million was made by Alpha14 on 17 May 2017. Mr Kewley informed me of that matter in the course of submissions when I asked when it was expected the payment would be made.
46Mr Pope in his affidavit said that he had been referred to the imagebuildgroup.com website “by numerous industry businesses including: financiers, real estate agents, contractors and the project management firm for the project”.
47On 4 May 2017, Mr Pope wrote to Mr Spits at IBG stating that “... in the event you are not paying trades, as the website states, we are concerned that you will not be able to complete the job”. The letter required “legal evidence by the 28th of May 2017 [and] in the event we are not satisfied from the documents provided we will need to discuss ceasing payments to Imagebuild and look to manage the project trades directly”.
48Mr Spits referred, in a further affidavit on 19 May 2017, to the fact that Mr Pope had that morning forwarded an email from Alpha 14’s bank manager on 18 May 2017 “expressing concern about matters contained in an ABC News report printed and published on the internet on 27 April 2017”.
49The bank manager had sent the article to Mr Pope, commenting, “This is not a good look obviously. It is particularly concerning given the allegation that Mick Gatto Snr is somehow involved in the Spencer St project”. The manager asked Mr Pope to “provide clarification on this issue”.
50A response to the Manager’s email was drafted for Mr Spits by his solicitor to send to Mr Pope. The response refers to two matters – Mr Gatto to whom the manager referred, and the “payment of sub contractors” which was apparently also referred to in the article, but to which the bank manager had not referred. The ABC News report was not in evidence.
51The solicitor’s draft letter for Mr Spits contained an assurance that “Mr Mick Gatto has no involvement in Imagebuild Group at all, or specifically in the [Spencer Street] project”. The letter suggested that the journalist may be confused because a relative of Mr Gatto “is a contractor project manager to Imagebuild, though not an employee… for a specific scope of work directly for the building project”. The letter further stated that the allegation relating to the payment of sub contractors was false.
DHR International Inc. v. Challis [2015] NSWSC 1567 (“Challis”)
52Counsel agreed that the decision of White J in Challis in the New South Wales Supreme Court usefully summarised the approach the Court might take in approaching the present application. Challis concerned an application for interlocutory orders to compel the defendant to prevent access to internet blog posts and to restrain the defendant from publishing injurious falsehoods.
53The application was refused by White J on the basis that “insufficient evidence was adduced to establish a serious question to be tried as to the falsity of the statements”.
54I do not intend to discuss the case further, save to say that I gained much assistance from the careful analysis by White J of the considerations relevant to this decision, and particularly the passages extracted by Mr Mullen in his written outline of submissions.
Conclusions
55I am reluctant to express a concluded view on the application. The original material upon which the application for an ex parte injunction was based was completely inadequate. The plaintiffs since then have filed 5 further affidavits, and the defendants’ affidavit material has assisted in clarifying certain factual matters.
56However, the totality of the material filed does little to elucidate critical factual issues necessary before a proper determination can be made on the issue of whether there is a serious question to be tried as to the falsity of key statements on the website.
57At the hearing on 16 May 2017, I expressed the view that an adjournment of 3 days was inadequate to prepare the application for hearing. I suggested that 1 to 2 weeks would be more appropriate. It seemed to me that the only reason this suggestion was not taken up was because plaintiffs’ counsel could not secure an undertaking from defendants’ counsel that, in the meantime, the website would be taken down, rather than simply an undertaking that the website would not be altered before the resumed hearing.
58In the circumstances, I will decline to make any determination on the application for an interlocutory injunction. I take that course for the following reasons:
a.both parties expressed a desire to take up the offer by the Court that they attend a judicial resolution conference to be conducted by a Commercial Division Judicial Registrar at the earliest opportunity. Judicial Registrar Tran is available to conduct a conference on a confidential basis on 1 June 2017. It is better if a judicial resolution conference is also to proceed without a prior adjudication on the issues in the case;
b.if the parties do not resolve their differences, directions can be given:
i.if the plaintiffs request it, for the resumption of the interlocutory application, although this will be before another judge and after the delivery of an amended statement of claim by the plaintiffs and further affidavit material by the parties;
ii.the fixing of an early trial, which for a 5 day hearing, might be commenced on 30 October 2017;
iii.a trial using the affidavits as evidence in chief, but with pleadings and targeted limited discovery;
c.the statements made on the website include very serious allegations of criminal activity and significant misconduct. It is likely that the defendants embarked on the preparation of the website with little forethought, and perhaps not entirely with the noble aspirations which their counsel suggested was motivating them. In the circumstances, they will be given the opportunity to be properly advised and to either withdraw or modify the website;
d.in this regard, as White J expressed in Challis, the breadth of the relief sought by the plaintiffs is unrealistic and the defendants, rather than the Court, should be required “to exercise the powers of censor”. It should, in the coming days, be the responsibility of the defendants to carefully consider the basis upon which this action proceeds hereafter;
e.the consequences of the defendants’ actions are presently unknown. The plaintiffs’ fear that its business may be destroyed. Mr Pope fears that Alpha14 may “suffer financially”. There are many sub contractors, suppliers and other creditors who are very interested in how the parties conduct themselves in future. What Mr Spits described as their “extremely acrimonious” relationship must give way to the obligations to cooperate, imposed upon all litigants and their lawyers by the Civil Procedure Act 2010.
Orders
59The following orders will be made:
1. No determination is made upon the plaintiffs’ application for interlocutory relief.
2. The parties must attend a judicial resolution conference to be conducted on a confidential basis by Judicial Registrar Tran on Thursday 8 June 2017 at 10am.
3.In the meantime, the defendants must consult with their legal advisors and consider what steps they might take to withdraw or modify the imagebuildgroup website. The defendants must bring to the judicial resolution conference a draft proposal in relation to the website.
4.The proceeding is transferred to the Expedited Cases List of the Commercial Division and is fixed for trial as a cause before a judge sitting along on 30 October 2017 (estimated 5 sitting days).
5.By 4pm on 9 June 2017, the plaintiffs must notify the defendants in writing that they intend to pursue their application for interlocutory orders, and thereafter immediately arrange a date for the hearing.
6.At least 7 calendar days before the hearing of the application for interlocutory relief, the plaintiffs must file and serve an amended statement of claim and any further affidavits upon which they intend to reply.
7.At least 3 calendar days before the hearing, the defendants must file and serve any further affidavits upon which they intend to rely.
8.If no further hearing for interlocutory relief proceeds:
a. by 4pm on 30 June 2017 the plaintiffs must file and serve their amended statement of claim;
b.by 4pm on 21 June 2017 the defendants must file and serve their defence and any counterclaim;
c.any further pleadings shall be delivered promptly;
d.by 4pm on 11 August 2017 the parties shall make discovery (including full inspection) of the following documents:
i.each document referred to in the party's pleadings or the particulars of the pleadings;
ii.any document which may be produced by the party at the trial during examination-in-chief, cross-examination or re-examination;
iii.any document which may harm the party's case;
iv.any document or class of documents which any other party reasonably requests the party to discover;
e.by 4pm on 9 September 2017, each party must file and serve any further affidavit material upon which they intend to rely.
9.Subject to any order of the trial judge, the affidavits shall be received as a witness’s evidence in chief.
10. By 4pm on 25 August 2017, each party must have issued any subpoenas under Order 42A.
11.The setting down fee must be paid by the plaintiffs by 4pm on 4 July 2017. If the plaintiffs default, the defendants may pay the fee within 21 days. If the fee is not paid the trial date will be vacated.
12.Any application to vacate the trial date must be made to the Commercial Division Duty Judge at least 30 days before the trial date.
13.Court books must be prepared by the parties jointly and filed with the Court at the commencement of the hearing.
14. The parties must notify the Court if the action settles.
15.Reserve costs.
16.Reserve liberty to the parties to apply to the Commercial Division Duty Judge for further directions upon giving reasonable notice to all other parties.
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Certificate
I certify that these 19 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 23 May 2017.
Dated: 23 May 2017
Carla Cianfaglione
Associate to His Honour Judge Anderson
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