JWH Group Pty Ltd (Discontinued 30 August 2004) v Buckeridge

[2006] WASC 11

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   JWH GROUP PTY LTD (Discontinued 30 August 2004) & ANOR -v- BUCKERIDGE & ANOR [2006] WASC 11

CORAM:   MASTER NEWNES

HEARD:   7 NOVEMBER 2005

DELIVERED          :   31 JANUARY 2006

FILE NO/S:   CIV 2566 of 2003

BETWEEN:   JWH GROUP PTY LTD (Discontinued 30 August 2004) (ACN 098 664 709)

First Plaintiff

JULIAN ALAN WALTER
Second Plaintiff

AND

LEONARD WALTER BUCKERIDGE
First Defendant

BGC (AUSTRALIA) PTY LTD (Discontinued 30 August 2004) (ACN 005 736 005)
Second Defendant

Catchwords:

Defamation - Application by first defendant to amend defence to plead "Polly Peck" defence - Proposed imputation that plaintiff was owner and controller of companies that could not pay their debts - Whether proposed imputation defamatory of plaintiff - Whether pleads distinctly different meanings to the meaning pleaded by the plaintiff - Turns on own facts

Legislation:

Nil

Result:

Application to amend refused

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr J D MacLaurin

Second Plaintiff            :     Mr J D MacLaurin

First Defendant             :     Mr W S Martin QC & Mr J A Thomson

Second Defendant         :     Mr W S Martin QC & Mr J A Thomson

Solicitors:

First Plaintiff                :     Clayton Utz

Second Plaintiff            :     Clayton Utz

First Defendant             :     Mallesons Stephen Jaques

Second Defendant         :     Mallesons Stephen Jaques

Case(s) referred to in judgment(s):

Aspro Travel Ltd v Owners Abroad Group [1996] 1 WLR 32

Bargold Pty Ltd v Mirror Newspapers Ltd [1981] 1 NSWLR 9

Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519

David Syme & Co Ltd v Hore-Lacy (2000) 1 VR 667

Hunt Australia Pty Ltd v Davidson's Arnhemland Safaris (2000) 179 ALR 738

Nationwide News Pty Ltd v Moodie [2003] WASCA 273

Woodger v Federal Capital Press of Australia Pty Ltd (1992) 107 ACTR 1

Case(s) also cited:

Askew v Morris [2004] WASC 43

Atkinson v Fitzwalter [1987] 1 All ER 483

Favell v Queensland Newspapers Pty Ltd [2005] HCA 52

Fogarty v Nationwide News Ltd [2005] WASC 2

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Gumina v Williams (No 2) (1990) 3 WAR 351

Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Jackson v ACP Publishing Pty Ltd [2001] WASC 121

Lewis v Daily Telegraph Ltd [1964] AC 234

Lucas­Box v News Group Newspapers Ltd [1986] 1 All ER 177

Monte v Mirror Newspapers Ltd [1979] 2 NSWLR 663

Polly Peck (Holdings) plc v Trelford [1986] QB 1000

Rubenstein v Truth & Sportsman Ltd [1960] VR 473

Stubbs Ltd v Russell [1913] AC 386

Taylor v Jecks (1993) 10 WAR 309

1. MASTER NEWNES:  This is an application by the first defendant to amend his defence.  The application is opposed by the second plaintiff on the ground that the defence, as amended, would not disclose an arguable cause of defence or alternatively would be likely to embarrass, prejudice or delay the fair trial of the action.

The litigation

1. In the action, the second plaintiff claims that he was defamed by the first defendant in two publications; first, in a telephone conversation on about 17 December 2003 with a Mr Neil Prior, a journalist employed by West Australian Newspapers Ltd, and secondly, in an article published in "The West Australian" newspaper on 18 December 2003 and on its website, that article being the natural and probable consequence of the publication made by the first defendant to Mr Prior in the telephone conversation.

2. The second plaintiff alleges that in the telephone conversation of 17 December 2003 the following words were spoken:

   "Prior:'What's this writ by J‑Corp and Kimpura suing Walter for about $700,000 all about?'

   The First Defendant:    'This claim is based on figures compiled by PricewaterhouseCoopers, which had been nominated by Walter to carry out calculations for the deed.  I think the reason that he does not want to pay is because he does not have the money to pay.' "

3. It is alleged by the second plaintiff that in their ordinary and natural meaning the words spoken by the first defendant meant and were understood to mean that the second plaintiff had not paid approximately $700,000 to J‑Corp Pty Ltd and Kimpura Pty Ltd, which sum he was legally obliged to pay, because he did not have the money to do so.

4. The second plaintiff also pleads, further and in the alternative, a true innuendo based upon what he says was Mr Prior's knowledge of a Supreme Court writ issued on behalf of J‑Corp Pty Ltd and Kimpura Pty Ltd as first and second plaintiffs respectively, and Oswald Homes (1972) Pty Ltd, Rural Building Company Pty Ltd, WA Country Builders Pty Ltd, JWH Group Pty Ltd, Julian Walter Holdings Pty Ltd and Mr Walter (the current second plaintiff) as defendants, claiming damages by reason of the failure of Oswald Homes, Rural Building Company and WA Country Builders to pay to J‑Corp Pty Ltd moneys totalling $698,946 owing pursuant to deeds executed in the middle of 2003.

5. It is alleged that by way of innuendo the words spoken by the first defendant meant and were understood to mean that the second plaintiff had not paid approximately $700,000 to J‑Corp Pty Ltd and Kimpura Pty Ltd, which sum he was legally obliged to pay, because he did not have the money to do so.

6. The second plaintiff also pleads that the first defendant spoke the words to Mr Prior intending or authorising their republication in "The West Australian" newspaper and on the website of the newspaper, or that it was a reasonable and probable consequence of the publication to Mr Prior that that would occur.

7. It is alleged that on 18 December 2003 in "The West Australian" newspaper and on its website, under the heading "Buckeridge, Walter sling brickbats", the following words were published:

   "THE simmering row between construction mogul Len Buckeridge and his former business partner, Julian Walter, has erupted into tit‑for‑tat ligation [sic] over the carve‑up of their former building joint venture J‑Corp Pty Ltd.

   Mr Buckeridge is pushing for a quick judgment in the WA Supreme Court after two of his private companies, including J‑Corp Pty Ltd itself, sued Mr Walter for about $700,000 last month over valuations of J‑Corp and its assets.

   The companies are claiming to be owed the money as a deferred settlement payment of their carve‑up in July of J‑Corp that ended with Mr Buckeridge owning 100 per cent of J‑Corp and Mr Walter owning its Oswald, Rural Building Co and WA Country Builders brands.

   In other developments, Mr Buckeridge has vowed to cut off the credit provided by his building materials operations for materials supplied to Mr Walter's new home building venture, JWH Group.

   Mr Walter is hitting back with a defamation action in the WA Supreme Court, claiming his reputation was damaged in the in‑house newsletter of the mogul's flagship BGC Group.

   In the newsletter, Mr Buckeridge described the buy‑out of J‑Corp as a very unpleasant business and gave his interpretation of what he described as an accountancy investigation.  Mr Walter that his lawyers would lodge a writ against Mr Buckeridge for defamation today unless he retracted comments in the BGC Bulletin and apologised.

   Mr Buckeridge vowed to fight, saying he would use truth as a defence to a defamation action.

   Industry observers had been expecting a legal war in the wake of Mr Walter and Mr Buckeridge breaking up in July after 18 years together as joint owners of J‑Corp, which was WA's second biggest building group last year.

   But until recent weeks, recently, ligation [sic] was confined to JWH suing J‑Corp over the former joint venture company advertising two home designs that Mr Walter claims went with him.

   J‑Corp and Buckeridge‑controlled Kimpura Pty Ltd lodged a writ in the Supreme Court last month alleging they are owed $698,947 plus interest under a formula that was included in a deed governing the carve‑up of J‑Corp assets in July.

   Mr Buckeridge told WestBusiness that the claim was based on figures complied [sic, compiled] by PricewaterhouseCoopers, which had been nominated by Mr Walter to carry out calculations for the deed.

   'I think he doesn't want to pay because he hasn't got the money,' he said.

   Mr Buckeridge said BGC had difficulty being paid by JWH for building materials supplied since the carve‑up and would only supply Mr Walter's new group as a cash‑on‑delivery basis from next month.

   But Mr Walter rejected claims by Mr Buckeridge that JWH had not paid BGC for building materials, saying his group had withheld some money recently because BGC was slow in paying rebates for bulk discount.  He would no longer use BGC as a supplier if credit was cut.

   Mr Walter said the Supreme Court action would be defended because the final accounts were based on valuations acceptable to BGC and involved changes to the underlying accounting policies at J‑Corp."

8. The defamatory imputation said to be conveyed is the same as that alleged to arise from the words spoken in the telephone conversation.

The proposed amendment to the defence

1. In his proposed re‑amended defence, so far as relevant, the first defendant seeks to plead in respect of each of the publications what is commonly known as a "Polly Peck" defence.  The material parts of that plea, so far as it relates to the publication to Mr Prior, are as follows:

   "4AFurther or alternatively, if, which is denied, the words pleaded in paragraph 3 of the Statement of Claim bore any meaning defamatory of the Second Plaintiff, those words in their natural and ordinary meaning, alternatively in the meaning they bore to Mr Prior if he was aware of the matters in paragraphs 5 and 6 of the Statement of Claim, bore or were understood to bear or were capable of bearing the meaning that:

   4A.1companies in the JWH Group of Companies owned and controlled by the Second Plaintiff and named as defendants in the Supreme Court writ as liable to pay to J‑Corp and Kimpura the sum of approximately $700,000 had not paid the sum because they did not have the money to do so,

   and the said words were true in substance and fact in that:

   [the matters relied upon are then set out] …"

2. The proposed "Polly Peck" plea in respect of the publications in the newspaper and on the internet is in the same terms, save that it omits the alternative plea referring to Mr Prior.

The second plaintiff's submissions

1. The second plaintiff submitted that the proposed pleas are defective because first, the meaning pleaded is not defamatory of the second plaintiff; secondly, it is not capable of being conveyed by the words complained of; and thirdly, it is not permissible because it falls outside the ambit of the defamatory imputation pleaded in the statement of claim.

2. Counsel for the second plaintiff submitted that the pleas do not concern or relate to the second plaintiff, but are, at best, arguably defamatory only of certain companies which are not parties to the action.  It does not add anything to say that the companies are owned and controlled by the second plaintiff.  An adverse reflection on a company is not of itself a reflection on the directors or controllers of the company.  There was nothing in the proposed imputation that could be said to be defamatory of the second plaintiff.

3. Counsel also argued that the proposed imputation was not capable of being conveyed by the words complained of because there was nothing in the words spoken to Mr Prior that referred to companies in the JWH Group; rather the words referred only to a personal indebtedness of the second plaintiff.  The newspaper article was to the same effect.  In both cases, the words complained of referred to a personal debt owed by the second plaintiff to J‑Corp and Kimpura, not to the indebtedness of any company.

4. It was also argued on behalf of the second plaintiff that the plea fell outside the ambit of the imputation pleaded in the statement of claim.  The proposed plea proceeded on the basis of the capacity of the "JWH Group of Companies" to pay the money, not to the capacity of the second plaintiff to pay the money.  The capacity of the companies to pay the money raised entirely different issues to the capacity of the second plaintiff personally to do so.

The first defendant's submissions

1. On the question of whether the proposed imputation was defamatory of the plaintiff, Senior Counsel for the first defendant submitted that the plea in par 4A of the minute has to be read against the background of the pleas in pars 5.1 and 6 of the statement of claim.  In par 5.1 of the statement of claim it is alleged that at the time of the conversation Mr Prior was aware of the writ and the identity of the parties to it.  It is pleaded in par 6 of the statement of claim that the second plaintiff is the promoter, founder and managing director of JWH Group Pty Ltd, which is the ultimate holding company of the JWH Group of Companies.

2. It was submitted that it is clear that an imputation that a person cannot pay their debts is defamatory and no allegation of misconduct on the part of that person is required.  Even if the inability to pay is the result of misfortune, to impute such an inability to someone would tend to injure their credit in a financial sense, which the law protects as part of a person's reputation.  Counsel referred to Gatley on Libel and Slander, 10^th ed at par 2.21.

3. Senior Counsel for the first defendant argued that where a person is the ruling mind and body of a company, then often an imputation defamatory of one will by necessary inference be an imputation defamatory of the other, except where, although the company is the alter ego of a person, the alleged conduct consists of an act of a kind that a company could not itself commit, such as murder or adultery.

4. In the present case, it was submitted that, as it is defamatory to say of a company that it is unable to pay its debts, so it is arguably defamatory to say of the alter ego of the company that he is the alter ego of a company that cannot pay its debts.  Senior Counsel acknowledged that the imputation might have been better couched in the active voice rather than the passive voice, so as to read "the plaintiff was the owner or controller of companies in the JWH Group of Companies … [that] had not paid the sum because they did not have the money to do so", but argued that in either case the meaning was the same and was clear.

5. In support of the submission that a statement which imputes to a company an inability to pay its debts may arguably carry an imputation which is defamatory of a director or controller of the company, Senior Counsel referred to Bargold Pty Ltd v Mirror Newspapers Ltd [1981] 1 NSWLR 9 at 11 per Hunt J; Woodger v Federal Capital Press of Australia Pty Ltd (1992) 107 ACTR 1 at 15 per Miles CJ; Hunt Australia Pty Ltd v Davidson's Arnhemland Safaris (2000) 179 ALR 738 at [41] per Spender, Drummond and Kiefel JJ, and Gatley on Libel and Slander, 10^th ed, at par 8.17

6. As to whether the proposed imputation was arguably capable of being conveyed by the words complained of, it was submitted on behalf of the first defendant that it was arguable the statements concerning the second plaintiff in the newspaper article would be understood by a reader to be made about him in his capacity as the controller of corporate entities which, although not named in the article, are adverted to.  Counsel drew attention to the reference in the article to the money being owed over the "carve‑up" of a corporate entity, and to the second plaintiff's new building venture being conducted by the "JWH Group" which, it was submitted, an ordinary reader would take to be a corporate entity.  Reference was also made to statements in the article, attributed to the first defendant, that J‑Corp was having difficulty getting paid by the "JWH Group".  It was argued that a reasonable reader would understand that alleged difficulty to be the basis of the first defendant's comment that he thought the second plaintiff did not have the money to pay the claim.  Counsel also drew attention to a reference in the article by the second plaintiff to "his group".  It was submitted that there were therefore in the article a number of indicia that the allegations were directed to the second plaintiff in his capacity as the owner and controller of the JWH Group.

7. In relation to the pleaded conversation, it was submitted that as Mr Prior was aware of the terms of the writ and the names of the other defendants to it, it is arguable that a reasonable listener would have understood the references by the first defendant to "he" to be a reference to the companies in the JWH Group named as defendants to the writ.

8. As to the ambit of the first defendant's proposed plea, it was submitted that both the "Polly Peck" imputation and the imputation pleaded by the plaintiff were directed to the same matters; namely, first, that a sum of approximately $700,000 was owing or claimed by J‑Corp and Kimpura; secondly, that the claim arises out of the carve up of J‑Corp; and thirdly, that the sum had not been paid by the second plaintiff or interests associated with him.  It was argued that the sting of the proposed plea was the same as that contained in the imputations in the statement of claim, namely an inability to pay.  The only distinction was that the proposed plea directs greater attention to the inability of the second plaintiff's companies to pay the sum, rather than the second plaintiff's personal capacity to pay.  That was not sufficient to render the proposed plea substantially different.

Is the proposed defence substantially different to the plaintiff's imputation?

1. It is, I think, now well established that a defendant who pleads a "Polly Peck" defence is limited to meanings upon which the plaintiff himself would be entitled to a verdict on the pleadings as they stand; that is, meanings which are not substantially different from, or more serious than, the imputations pleaded in the statement of claim.

2. In Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519, the High Court considered, among other things, the extent to which a plaintiff is entitled to a verdict on a meaning not expressly pleaded in the statement of claim. Brennan CJ and McHugh J considered that a different nuance of meaning, or one less serious, to that pleaded by the plaintiff should be allowed to go to the jury provided that was not unfair to the defendant, but that a plaintiff cannot seek a verdict on a different meaning which so alters the substance of the pleaded meaning that the defendant would have been entitled to plead a different issue, to adduce different evidence or to conduct the case on a different basis. Their Honours considered, however, that a defendant is not entitled to plead justification in respect of an imputation not pleaded by the plaintiff. Gaudron and Gummow JJ appeared to use as their criterion "disadvantage" to the defendant and considered that, as a general rule, there would be no disadvantage to the defendant in allowing the plaintiff to rely upon meanings comprehended in, or less injurious than, the meanings pleaded by the plaintiff or meanings which are simply a variant of those meanings, but there may be disadvantage if a plaintiff is allowed to rely on meanings which are substantially different or which focus on some different factual basis. Kirby J adopted the notion of fairness and considered that this would generally permit imputations to go to the jury that are less serious than, but not substantially different from, those pleaded, or which are merely nuances or shades of meaning of those pleaded.

3. The extent to which a defendant can plead and seek to justify a meaning not pleaded by the plaintiff was considered by the Full Court of this Court in Nationwide News Pty Ltd v Moodie, [2003] WASCA 273. In that case, Steytler J, having canvassed the authorities, including Chakravarti v Advertiser Newspapers Ltd (supra) said (at [59] ‑ [61]):

   "… the extent to which a defendant will be permitted to plead defamatory meanings different from those pleaded by the plaintiff will be constrained by the extent to which the plaintiff might himself or herself be permitted to rely, at the trial, upon imputations other than those pleaded by him or her.

   No purpose can be achieved by allowing a defendant to plead, and seek to justify, a meaning different from that or those which might be found by a jury in favour of the plaintiff.  If the plaintiff cannot succeed on a particular imputation which is different to that pleaded by him or her, then, to allow a defendant to plead that imputation, and seek to justify it, can only result in the creation of a false issue and prejudice to the proper trial process.  On the other hand, if the defendant is able to justify a defamatory meaning which differs from that pleaded by the plaintiff but which might be found by a jury on the strength of the plaintiff's own pleading, then there is a basis for saying that the defendant can, and should, plead that alternative meaning and also the matters upon which it relies in contending that it is able to justify it.  In this way the issues might be defined more precisely and there would be clear benchmarks against which the relevance of evidence might be assessed.  I should add, as regards the concept of 'fairness' or 'disadvantage', that it can never be fair or advantageous to a plaintiff, or to the trial process itself, to permit a defendant to plead, and seek to justify, a meaning which could plainly not be found by a jury on the plaintiff's pleading.

   An approach of this kind would, if I may adopt the language of Ormiston JA in Hore-Lacy (at [24]), 'reduce the potential injustices to a minimum by providing both parties with an efficient but not excessive degree of flexibility'."

1. Anderson J concluded that, at the least, the plaintiff's case will not be permitted to go to the jury, or to judgment, on an alternative meaning which is substantially different from, or more serious than, the false innuendos pleaded in the statement of claim.  His Honour said at [11]:

   "I can see no good reason why a defendant should be permitted to advance as a positive ground of defence an alternative imputation not relied on by the plaintiff and on which the plaintiff cannot obtain a verdict and then seek to justify that meaning … [Such an alternative imputation] is objectionable because it does not answer the claim and does no more than give rise to a false issue."

2. McLure J agreed with Steytler J and expressly left for another day a final decision as to the role of "disadvantage" in determining the extent to which there could be a departure from the pleaded imputations.

3. In David Syme & Co Ltd v Hore-Lacy (2000) 1 VR 667, the Court of Appeal similarly held that a defendant who seeks to justify a defamatory meaning different to that pleaded by the plaintiff is confined to a meaning which is a variant of, or not substantially different from, a pleaded meaning and which is no more serious or injurious than the pleaded meaning.

4. In my view, the imputation which the defendant seeks to plead is substantially different to the imputation pleaded by the plaintiff.  The question of whether the companies in the JWH Group have the money to pay the debt is quite different to the question of whether the second plaintiff personally has the money to pay the debt, and on the face of it involves quite different enquiries.  One involves an inquiry into the financial circumstances of the companies concerned, not an inquiry into the second plaintiff's personal financial circumstances.  The other involves an inquiry into the second plaintiff's personal financial circumstances, not an inquiry into the financial circumstances of the companies concerned, save perhaps to any extent that the latter might be relevant to the second plaintiff's personal financial circumstances .

Is the "Polly Peck" imputation defamatory of the plaintiff?

1. That is sufficient to dispose of the present application, but I should add that I also consider the proposed imputation is embarrassing in that it is not defamatory of the second plaintiff.

2. As I understand the proposed imputation, it is that the words complained of reflect adversely on the financial reputation of the second plaintiff because he is said to be the owner and controller of companies that do not have the money to pay their debts.  If some other meaning is intended it is not clear what that meaning is.

3. The basis of the principle that it is defamatory to say of a person they cannot pay their debts, even if that inability is only due to misfortune, is because it would affect their financial reputation.  That is to say, it would affect their creditworthiness.  A statement simply that a company cannot pay its debts, however, does not, of itself, reflect on the personal financial reputation of a director or shareholder in that way.  Indeed, the limitation of personal liability is one of the accepted purposes of trading by the medium of a private company.

4. In Aspro Travel Ltd v Owners Abroad Group [1996] 1 WLR 32, the question before the Court of Appeal was whether it was arguably defamatory to say of a man that he was a director of a company that had traded while insolvent. It was held that it was. In the course of his judgment (with which Waite LJ agreed), Stuart‑Smith LJ said:

   "But to say of a company that it is insolvent does not involve any imputation about the solvency or credit of the directors.  … I do not consider that it is capable of being defamatory to say of someone that he is a director of a company that is in serious financial difficulty.  But it may be defamatory to say that he is causing or permitting it to trade while insolvent."

5. Senior Counsel for the first defendant referred to a number of cases where a statement as to the conduct of a company was held to be defamatory of the person who was the alter ego of the company.  But that was because the company could only have engaged in the alleged conduct through a natural person acting on its behalf.  It is one thing to regard the conduct of a company as the conduct of the person who acts as the mind and body of the company; it is another thing to regard the financial state of the company as the financial state of that person. 

6. Of course, that is not to say that a statement to the effect that a person is the owner or controller of a company that is unable to pay its debts could never convey an imputation defamatory of that person.  It must always depend upon the precise terms of the statement and the circumstances in which it was published.  It might be, for instance, that the terms or circumstances of such a statement gives rise to an imputation that the person's incompetence or negligence has caused or contributed to the company's financial difficulties, or, as in Aspro, that the person permitted the company to continue to incur debts at a time when it was unable to pay its debts as they fell due.  But that is not the way the first defendant's case is sought to be put in the present action.

Conclusion

1. In my view the proposed amendment is objectionable and I would therefore refuse the application to amend the defence in terms of the minute.