Larach v Urriola

[2009] NSWDC 97

CITATION:	Larach v Urriola [2009] NSWDC 97
HEARING DATE(S):	9 - 13 and 26 February; 27 March 2009
JUDGMENT DATE:	22 May 2009
JURISDICTION:	Civil
JUDGMENT OF:	Gibson DCJ
DECISION:	(1) Judgment for the first plaintiff on the first publication in the sum of $10,000. (2) Judgment for the first plaintiff for the second publication in the sum of $5,000. (3) Judgment for the first plaintiff on the third publication in the sum of $5,000. (4) Judgment for the second plaintiff on the third publication in the sum of $20,000. (5) The parties bring in Short Minutes of Order concerning mathematically agreed interest calculations on the damages awards. (6) Liberty to restore in relation to interest and costs. (7) Exhibits retained for 28 days.
CATCHWORDS:	Tort - defamation of corporation and director - defences of truth, contextual truth, comment, qualified privilege and triviality - damages - limits on damages available to corporations - whether director entitled to aggravated compensatory damages
LEGISLATION CITED:	Defamation Act 1974 (NSW), ss 13, 16, 22 and 46A Defamation Act 2005 (NSW), ss 9, 26, 30, 31, 33, 34, 35, 36 and 40 Defamation Act 1952 (UK), s 5 Evidence Act 1995 (NSW), ss 135, 136 and 140 Trade Marks Act 1995 (Cth), s 58A
CASES CITED:	Adam v Ward [1917] AC 309 Aktas v Westpac Banking Corporation Ltd [2009] NSWCA 9 Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225 Angel v Hawkesbury City Council [2008] NSWCA 130 ASIC v Rich (2006) 235 ALR 587 Australian Broadcasting Corporation v Comalco Ltd (1986) 12 FCR 510 Bashford v Information Australia (2004) 218 CLR 366 Bell v Kingsbay Pty Ltd [2001] VSC 388 Bellino v Australian Broadcasting Corp (1996) 185 CLR 183 Blacktown City Council v Hocking (2008) Aust Torts Rep, 81-956 Breen v Nationwide News Pty Ltd [2007] NSWDC 192 Broome v Cassell [1972] AC 127 Carson v John Fairfax (1993) 178 CLR 44 Chakravarti v Advertiser Newspaper Ltd (1998) 193 CLR 519 Channel Seven Adelaide Pty Ltd v Manock (2007) 232 CLR 245 Cross v Queensland Newspapers Pty Ltd [2008] NSWCA 80 D & L Caterers v D’Ajou [1945] KB 354 Davis v Nationwide News Pty Ltd [2008] NSWSC 693 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 Feo v Pioneer Concrete (Vic) Pty Ltd [1999] 3 VR 417 Gacic v John Fairfax Publications Pty Ltd (2006) 66 NSWLR 675 Guise v Kouvelis (1947) 74 CLR 102 Harman v Home Department State Secretary; sub nom Home Office v Harman (ALLER) [1983] 1 AC 280 Hepburn v TCN Channel Nine P/L [1984] 1 NSWLR 386 Holmes v Fraser [2008] NSWSC 570 Howden v Truth and Sportsman Ltd (1937) 58 CLR 416 John Fairfax Publications Pty Limited v Blake [2001] NSWCA 434 John Fairfax Publications Pty Limited v O'Shane [2005] NSWCA 164 Jones v Sutton (2004) 61 NSWLR 614 Kay v Chesser [1999] 3 VR 55 Lewis v Daily Telegraph Ltd [1964] AC 234 Lindholdt v Hyer [2008] NSWCA 264 Liquor Marketing Group v Sadler [2000] NSWCA 161 Lloyd v Syme & Co Ltd (1985) 3 NSWLR 728 Maisel v Financial Times Ltd [1915] 3 KB 336 Martin v Bruce (2007) 6 DCLR (NSW) 157 McLean v David Syme & Co Ltd (1970) 72 SR(NSW) 513 McPhersons Ltd v Hickie (1995) Aust Torts Reports 81-348 Mowlds v Fergusson (1939) 40 SR(NSW) 311 Mount Cook Group Ltd v Johnstone Motors Ltd [1990] 2 NZLR 488 NAB v Rusu (1999) 47 NSWLR 309 Peter Walker & Son v Hodgson [1909] 1 KB 239 Porter v Robinson Sheppard Shapiro (2004) 71 OR (3d) 547 Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16 Radio 2UE v Chesterton [2008] NSWCA 66 Readers Digest Services Pty Ltd v Lamb (1982) 150 CLR 500 Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 Rigby v Associated Newspapers (1969) 1 NSWR 729 Roberts v Bass (2002) 212 CLR 1 Rodgers v Nine Network Australia Pty Ltd (No 2) [2008] NSWDC 275 Rogers v Nationwide News Pty Limited (2003) 216 CLR 327 Selecta Homes and Building Co Pty Ltd v Advertiser-News Weekend Publishing Co Pty Ltd (2001) 79 SASR Shipley v Todhunter (1836) 173 ER 298 Short v Barrett [1990] NSWCA 164 Sims v Wran [1984] 1 NSWLR 317 Skalkos v Assaf [2002] NSWCA 14 Smith v The New South Wales Bar Association (1992) 176 CLR 256 State Bank of NSW Ltd v Currabubula Holdings Pty Ltd (2001) 51 NSWLR 400 The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 Thomas v Bradbury [1906] 2 KB 627 Toogood v Spyring (1834) 1 Cr M & R 181 Traztand Pty Ltd v GIO of NSW (1984) 2 NSWLR 598 Triggell v Pheeney (1951) 82 CLR 497 Uren v John Fairfax (1956) 117 CLR 118 Zunter v John Fairfax Publications Pty Ltd [2005] NSWSC 759
TEXTS CITED:	Fleming, Law of Torts, 8th ed (1992)
PARTIES:	First Plaintiff: Oscar Larach Second Plaintiff: Stormwater Solutions LLC First Defendant: Humberto Urriola Second Defendant: Atlantis Corporation Pty Limited
FILE NUMBER(S):	1468 of 2007
COUNSEL:	Plaintiffs: Mr R Potter Defendants: Mr M McHugh
SOLICITORS:	Plaintiffs: Bolzan & Dimitri Defendants: Alexander & Associates

Introduction

1.The plaintiffs by way of Statement of Claim (most recently amended on 26 September 2007) bring proceedings for damages for defamation for three publications dated 5 and 7 December 2006 and 22 February 2007. The relevant Act is the Defamation Act 2005 (NSW) (“the Act”). The parties have waived any requirement for a jury trial and I have determined all issues, including defamatory meaning, liability and quantum.

2. The text of the matters complained of is set out in a schedule to this judgment.

3. The defences pleaded are truth, contextual truth, qualified privilege, comment and triviality. There were some changes to these defences in the course of the trial, but these are of comparatively minor significance.

4. The factual background is of some complexity and I will first set this out in detail.

The parties and the publications

5. The first plaintiff is a natural person and the managing director of Stormwater. Stormwater was a corporation (employing less than 10 people) incorporated in the State of California, USA (T-28.30). Section 9(6) of the Act makes it clear that "corporation" includes any body corporate or corporation constituted by or under the law of any country.

6. The first plaintiff brings proceedings in relation to the third publication only. By s 9(5) of the Act, individuals associated with corporations retain the right to sue for defamation in cases where a publication simultaneously defames them and the corporation.

7. All publications are letters published in the United States. Section 9 of the Act has no application to defamations published outside Australia. Publication occurs when the matter complained of is received, downloaded or seen by the recipient: Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575. All of the publications were made in the United States and the law of the place of the tort is the appropriate law: Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491. However, the parties have elected to conduct this case pursuant to New South Wales law, including the defences to the claims of defamation.

The background to the publications

8. Mr Larach is a former employee of Mr Urriola’s company. He studied civil engineering at university in Chile for three years. During the political crisis surrounding the Allende coup in 1973 he was obliged to flee the country without graduating. He came to Australia and was involved in various businesses, including a motor vehicle dealership, before commencing to work for Mr Urriola’s company, Atlantis Corporation Pty Ltd (“Atlantis”), in 1990. He had previously helped him out, on an unofficial basis, for some years (T-26). His friendship with Mr Urriola went back about 30 years.

9. Atlantis was the manufacturer of products to manage stormwater, particularly in the landscaping industry, with roof gardens and planter boxes. That business began to expand and incorporated in early 1993, when Atlantis began installing a new kind of box designed to trap water. These boxes consisted of a porous geotextile which was fitted together rather like Lego pieces to create a space which would allow water to go through but not soil. This enabled the creation of very large water spaces underground to store and recycle water, as well as allowing time for infiltration (which is technically called “exfiltration”) from the system into the groundwater to recharge the water table.

10. When Mr Larach first joined Atlantis it was only operating in a few countries, but the company rapidly built up in Europe, Asia and eventually the United States.

11. As Atlantis began to grow, there were disagreements between Mr Larach and Mr Urriola about Mr Larach’s commission. There were a number of items about which they could not agree and in late 2004 they decided to part company (T-27). On 22 October 2004 Mr Larach entered into a commercial termination agreement with Mr Urriola and his company (Plaintiffs’ Bundle (“PB”) 61) and had discussions with one of the distributors, Stormwater, in California USA. At the time Stormwater was a distributor for Atlantis products in California, where it was incorporated. Mr Larach became a director of Stormwater together with Mrs Arriagada, the wife of Manuel Arriagada, who was the general manager of Stormwater. The other employees included three sales consultants. This company had been dealing with Atlantis since 7 May 2002, when it entered into a distribution agreement with Rebirth Pty Ltd, a sister company to Atlantis Corporation (BP 35; T-29) and had worked on a number of projects using Atlantis’ products.

12. The way Stormwater operated in California was as follows. Stormwater purchased stock from Atlantis for potential projects which were identified by one of their sales consultants. Stormwater employees and consultants would visit engineers, architects or city authorities around California to show the kind of products that they had, in the hope that it would be considered as an alternative to existing plans for run-off water. If the tender to supply products was successful, then Stormwater would deliver the Atlantis products and be present at the initial stages to show the client how to assemble the product and how to install it. Atlantis’ role was essentially to supply the product to Stormwater and Stormwater would do the rest.

13. Stormwater had a website on which many products and jobs which had been carried out were displayed for the benefit of customers, to show the way that this product worked. It is not in dispute that Stormwater was permitted to put material on its website from Atlantis, including photographs of Atlantis’ products, not only in California but from other countries as well, in order to demonstrate the nature and range of situations in which the product could be used.

14. The termination notice of September 2005 (PB-76) gave three months to finalise all matters, to 1 January 2006. However, further permission was given to sell Atlantis goods up to 31 March 2006 (PB-45, clause 20.2). Although Stormwater commenced proceedings seeking damages for breach of contract, this suit, filed on 8 November 2005 in the Supreme Court of California, was dismissed with costs (at the request of Stormwater) on 14 April 2006 (Defendants’ Bundle (“DB”) 62), presumably as a result of some negotiations.

15. In December 2005, according to Mr Heng’s undated letter (DB-65), “our factory” (Hyplas, in Malaysia) received a phone call from “an ex-employee”, Mr Larach, wanting him to supply Atlantis products without informing the defendants. Mr Heng said he refused. This document, which was not produced until just before the trial, is unusual in several respects. It is undated and unsigned and is only a copy. If the defendants were told at the time of Mr Larach’s conduct it seems surprising that they consented to allow the plaintiffs to continue to supply Atlantis goods for another three months in 2006. Mr Heng, who gave evidence by telephone from Malaysia, was an unsatisfactory witness on these and other issues; his evidence is discussed in more detail in the section of this judgment on the defence of truth.

16. The fact that the distribution agreement was terminated created a problem for Stormwater because the main product it was supplying was the Atlantis product. Stormwater decided to develop another product that would allow them to continue trading. Mr Larach obtained advice from experts and developed a product like a flat pipe which would allow water to be collected universally and then move horizontally in any direction. The tank had two plates, one of which was small and the other large.

17. Because he was anxious to ensure that it was sufficiently his own invention rather than a copy of the Atlantis product, Mr Larach sought advice from Mr Paul Taylor, who had written the Atlantis patents. Mr Taylor provided a written advice to Mr Larach on or about 15 March 2006 (PB-78). The gist of that advice is that the product did not infringe any of the defendant’s patents and that the product was substantially different. This was essentially because the lines inside the product were not parallel to the frame of the pieces. Mr Taylor also prepared patent and design applications for Mr Larach.

18. In addition, Mr Larach took his samples to the United States and sought advice from a Mr Joseph Trojan, a patent attorney in California. This occurred in approximately April 2006. Mr Trojan confirmed that there was no infringement of the patent (T-34-35). Mr Trojan later provided a long written advice to this effect (PB-81-90).

19. While Mr Larach was launching a patent application in Australia and America (T-38), he commenced manufacturing his EcoRain modules. The first EcoRain modules came onto the website after 1 April 2006. At this time, Stormwater had what Mr Larach called a “very basic website with a lot of information that was sort of all over the place” (T-39) and as he had no time to change the website, he simply added a note to say that as from 1 April 2006 Stormwater would be selling EcoRain products. Mr Larach received Trojan’s written advice on 4 April (PB-81). Essentially, it agreed with the advice already given to Mr Larach by Mr Taylor.

20. Rather confusingly, despite giving advice and sending a bill for $2,000 plus GST (PB-80) to Mr Larach’s company, Mr Taylor continued to act for and advise Atlantis. On 1 May 2006 he wrote to Atlantis, noting that the Stormwater website had been altered and that the website now read that Stormwater had “started its association with the most advanced stormwater management systems in the world – EcoRain Systems Incorporated”. Mr Taylor considered that the wording of the home page was misleading because there was reference to Atlantis’ Woolloomooloo and Randwick projects “as if they were their projects”. He was also concerned about a product they offered called “Turf Pavers”. He went on to note that all photographs and drawings in relation to the Atlantis products “appear to have come from the Atlantis records or copied from the Atlantis website”. Any entitlement to validly advertise and sell Atlantis products had terminated on 1 April 2006. He recommended legal action against Stormwater for six possible causes of action and also suggested approaching the web hosting service (although referred to throughout in correspondence as the Internet service provider (“ISP”)) of Stormwater to have the Stormwater website closed.

21. On 22 August 2006 Peacock Myers PC, lawyers for the Hydros Group LLC, wrote to the defendant complaining about the EcoRain product and calling it a “knockoff”. They offered to send a cease and desist letter to EcoRain’s distributor but said it would be best if this letter was sent on behalf of both their own client and Atlantis (DB-72-3). If there is a reply to this letter, it has not been included in the defendants’ tender bundle. Once again, the defendants passed up the chance to complain about the plaintiffs’ product.

22. Central to Mr Taylor’s advice, and to a subsequent letter signed by Mr Urriola on 2 May 2006 to distributors, was the defendants’ belief that the plaintiffs’ product was “a blatant Chinese copy” (letter to distributors dated 2 May 2006, PB-102). The defendants wrote to their distributors suggesting they consult a patent attorney to obtain an independent legal opinion. They did not, however, contact the plaintiffs until 18 September 2006, when a letter was sent from Atlantis to Mr Trojan, the plaintiffs’ patent attorney and lawyer, concerning the website (PB-117).

23. Meanwhile, Mr Trojan was proceeding with Stormwater’s patent application and on 5 June 2006 prepared a letter stating that there was no infringement of other products (PB-111). In addition, during this time Stormwater had acquired a lucrative client. Stormwater competed against Atlantis for a large project at the Los Angeles Airport and won it.

24. An approach was finally made by Atlantis to the plaintiffs’ web hosting service, Doteasy, on 4 September 2006. However, no other steps were taken and no complaint made to the plaintiffs. Doteasy referred the complaint to the plaintiffs and it was being discussed in emails between 15 to 20 September.

25. It was against this background that Mr Trojan learned of an application made by a company associated with Atlantis, namely a company named Astral which, as early as 30 April 2006, had filed an application for the “trademark” of the name EcoRain in the United States (PB-149). (I note in passing the Australian usage preference of “trade mark” as two words in the Trade Marks Act 1995 (Cth) as opposed to the US usage “trademark”.) After discovering this in September 2006, Mr Trojan sent the following letter to Mr Urriola:

“This firm represents Stormwater Solutions Inc’s (“Stormwater”) US intellectual property rights. It has come to our attention that Astral Property Pty Ltd (“Astral”) is infringing upon Stormwater’s US ECORAIN trademark rights by using the mark in United States commerce in conjunction with water management systems and products. Stormwater hereby demands that Astral immediate [sic] cease and desist from its infringing acts and immediately withdraw its US trademark application for ECORAIN, serial no 78873006. Your written assurances as to the same are demanded by 4 pm PST on September 29, 2006.

Stormwater has spent substantial time and resources to develop, promote and protect the ECORAIN trademark and the water management system and products that the ECORAIN mark represents. The mark ECORAIN is exclusively associated with the innovation and quality of Stormwater’s products and services, and Astral’s deliberate and unauthorized use of the ECORAIN mark for similar if not identical products and services constitutes trademark infringement in violation of §43 of the Lanham Act 15 USC §1125, as well as unfair competition prohibited under §17200 of the Cal Bus Prof Code subject to your profits, Stormwater’s damages and costs of the action. Please note that Stormwater’s commercial usage of ECORAIN mark in the United States predates Astral’s filing date of its application and Astral is estopped from claiming a date of first commercial use earlier than the filing date of its intent-to-use application.

Accordingly, Stormwater demands that Astral:

· Immediately cease and desist from all display, advertisement, marketing, publication and use of ECORAIN or any other marks confusingly similar to Stormwater’s mark, and
· Withdraw the trademark application for ECORAIN, serial no 78873006 from the United States Patent and Trademark Office.

Your written confirmation of such is requested by 4 pm PST on Friday, September 29, 2006.

We expect to receive your immediate written confirmation that you have ceased usage of the mark ECORAIN and have withdrawn the trademark application. If we do not receive your reply by September 29, Stormwater will immediately file a suit against Astral in addition to beginning opposition proceedings against your application for ECORAIN before the Patent and Trademark Office. Stormwater has a very strong interest in protecting its Mark and will swiftly pursue all legal remedies to do so, including the recovery of damages, injunctive relief, and costs of action.

Thank you for your prompt cooperation in this matter, and we look forward to hearing from you shortly.”

26. Atlantis replied on 18 September 2006 as follows:

“Astral Property Pty Ltd is one of the companies of the Atlantis group. We advise that we previously had to write to the ISP of Stormwater Solutions LLC, back in February 2006, to have offending material removed from Stormwater Solutions web site after their distributor agreement with Atlantis was terminated by us, due to their non-performance.

In the light of your letter of your letter of 14th September 2006, we have reviewed the web site of Stormwater Solutions LLC, and see that Stormwater Solutions LLC are again up to their old tricks. We take offence to the blatant misleading and deceptive statements that perpetuate the above web site.

Firstly the home page states that:

“ALL PRODUCTS ARE PATENTED AND DESIGN REGISTERED”

A review of the United States Patent and Trademarks Office records lists no granted utility or design patents in the name of EcoRain Systems Inc or Oscar Larach, the alleged designer of the EcoRain products.

Hence any reference to “patented or design registered” is deceptive and misleading conduct under the “ Uniform Deceptive Trade Practices Act ” and the “ Californian Business and Professional Code ” §17200, particularly §17206.

Additionally, under 35 USC 292 (False marking) of the Manual of Patent Examining Procedures (a) … “Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article the word “patent” or any word or number importing the same is patented, for the purpose of deceiving the public … Shall be fined not more than $500 for every such offence.

It is our understanding from previous court cases that every time anyone accesses the site would count as an offence.

Further all photographs of project sites on the website are sites where Atlantis products have been used and not products produced by EcoRain Systems Inc. Such an action is deceptive and misleading conduct under the “ Uniform Deceptive Trade Practices Act ” and the “ Californian Business and Professions Code ” §17200.

Additionally the photographs of the shotcrete study are photographs taken by Atlantis for an underground car park in Five Dock of suburb of Sydney, Australia. A view of our web site on Wall Drainage – Shotcrete Application clearly shows these photographs, which are being blatantly copied on the Stormwater website.

Such publication of these photographs by Stormwater Solution LLC constitutes infringement under section 501 of the Copyright Law of the United States of America , as well as being deceptive and misleading conduct under the “ Uniform Deceptive Trade Practices Act ” and the “ Californian Business and Professions Code ” §17200.

Further the SWS web site has published the Water Quality Studies which were based upon the Atlantis products, and Stormwater Solutions LLC are passing the results off as if they referred to the EcoRain Systems Inc products, which action would be deemed to be deceptive and misleading conduct under the “ Uniform Deceptive Trade Practices Act ” and the “ Californian Business and Professions Code ” §17200.

We draw these irregularities to your attention and demand that Stormwater Solutions LLC remove all the offending material from their website. We have placed the ISP of Stormwater Solutions LLC on notice of these irregularities and have sort [sic] legal advise [sic] on having the site shut down. The solution is simple, have Stormwater Solutions LLC behave in an ethical and professional manner and removal of the offending material from the website.

I would strongly suggest that you have the true facts before you write threatening letters; as our ownership date of the mark EcoRain, is set in concrete, whilst that of Stormwater Solutions LLC is at best fuzzy if non existent. Again we require proof of the ownership of whatever marks Stormwater Solutions LLC believe they own, as we have been advised that there are other parties claiming an interest in the name EcoRain Systems.”

27. On 22 September 2006 Atlantis wrote to a firm of patent attorneys in Milsons Point who had expressed concern that the trade mark EcoRain was being used by Astral and Atlantis. It was asserted that the lodgement of the trade mark EcoRain was “a natural extension of our earlier trade marks, which are being used in Australia in the course of trade containing the prefix Eco-”. The letter concludes by noting that Mr Larach was “well versed in the art of bluffing, being a used car salesman”. This is a good indication of the level of hostility between the plaintiffs and defendants.

28. On 15 November 2006 Mr Urriola personally (and on behalf of Atlantis) wrote to Trojan Law Offices noting that: “some of the more blatant examples of deceptive and misleading conduct, if not blatant falsehoods” had been removed from the website but complaining that some pictures were still on the website.

29. The following allegations were made:

(1) Mr Urriola insisted that his company owned the name EcoRain and complained that Mr Larach was using “our trademark”. He requested a list of all sales in relation to such goods.
(2) He asserted that the products were made in China and said that steps would be taken to seize any Chinese products brought into the country.
(3) He demanded proof that there were patent and design applications as “We believe they are lying or bluffing and have no such applications in the USA”.
(4) He complained that Stormwater had “used photographs of project sites where Atlantis products have been installed”. He does not, however, say which ones are still on the site.
(5) He noted there was no granted design patent and complained that this was deceptive and misleading conduct.
(6) He complained that the photographs shown on the website are “all photographs of a project” dated 16 and 17 March 2005 using his product.
(7) He complained of another photograph taken on 5 March 2005 still being on the website.
(8) He complained of the BMP Study photographs still being on the website.
(9) He complained of the Dewatering Study photographs taken 19 March 2005 still being on the site.
(10) He complained of the Roof Garden Study photographs still being on the site (the Woolloomooloo photographs).
(11) He complained of the Retaining Wall Study photographs still being on the site.
(12) He complained of Water Quality Studies being based on Atlantis products.

30. He concluded by demanding the removal of all offending material from the website. Many of these items were removed from the website shortly afterwards, but the letter was not replied to.

31. On 4 December 2006, having received no reply to this letter, Mr Urriola (on behalf of Atlantis) wrote again to Trojan, complaining that the product was advertised as “Made in USA and other countries” and demanding to know where in the United States the product was produced as well as the other countries involved. There was also a complaint that the reference to the “dedicated professionals and technically skilled distribution network” was untrue. He demanded to know who were the professionals and what were their qualifications. He also complained that the statement about having over 25 years’ experience in other countries was a gross overstatement, complained about the reference to turf and gravel paver product names and demanded information about them.

32. Without waiting for a reply, Atlantis wrote the following day (5 December 2006) to Tutor Saliba Builders. This letter is the first matter complained of (see Annexure A).

33. On 7 December 2006 Atlantis wrote direct to EcoRain Systems. This is the second matter complained of (see Annexure B).

34. On 22 February 2007 a letter was sent to Denver Plastics, which manufactured products in the United States. This is the third matter complained of (see Annexure C).

Commencement of defamation proceedings and subsequent events

35. These proceedings for defamation were commenced on 13 April 2007. Mr Larach’s application for the US patent for his modular rain tank was lodged on 13 July 2007 (PB-122) and Atlantis’ trade mark in the United States lapsed later that same month (PB-151). A notice of abandonment of the EcoRain trade mark application in the United States was later lodged by the Atlantis company group.

36. On 18 September 2008 Atlantis wrote a letter to Hanes Geocomponents (“Hanes”) repeating allegations that the plaintiff, Mr Larach had copied the Atlantis tank module and produced the EcoRain tank module as a result. The letter stated that Atlantis “is presently in Court in Australia against Stormwater” and that as part of the evidence an expert opinion had been obtained from a US patent attorney on the infringement of the EcoRain tank modules to the effect that this was an infringement. The letter went on to claim that:

“This document has been presented in Court in Australia. We are awaiting the outcome of the Court case, which will be heard in February 2009, before we decide what action we take in the USA and other countries. For your reference we enclose herewith a copy of the expert opinion.” (PB-153)

37. In fact, Atlantis had abandoned the proceedings it brought in the United States against Stormwater. The proceedings in Court in Australia which were to be heard in February 2009 were these defamation proceedings in which Atlantis was the one of the defendants. Although it was open to Atlantis to lead evidence that imputations about infringement were true, it elected not to do so.

38. This brings me to a consideration of the matters complained of and in particular the imputations pleaded by the plaintiffs which, it must be said, similarly avoid any imputation that Stormwater infringed the second defendant’s product or copied Atlantis products with a Chinese imitation branded with a copy of the Atlantis trade mark, or any other imputation in relation to the main dispute between the plaintiffs and the defendants, namely the originality of the products being sold by the plaintiffs.

39. The defendants have explained that the expense of proving whether or not the plaintiffs’ products are copies and thereby infringe the defendant’s trade marks and designs is too expensive an issue to litigate, and they do not want a decision which may amount to issue estoppel. Thus the issues about which the parties have joined issue are whether or not Stormwater committed fraud by placing certain pictures of project sites on its website, whether Stormwater knowingly and blatantly overstated the experience of its consultants, contextual imputations about “copying” ((a), (c), (g) and (h)), which fall short of asserting infringement, and a complaint that the website stated the products were patented when the patent was merely pending.

40. I shall consider each publication and the imputations conveyed separately.

Were the imputations conveyed?

41. The relevant test is whether an ordinary reasonable reader would derive from the words of which complaint is made any imputation or imputations pleaded. In answering this enquiry any strained or unreasonable interpretation is to be rejected. The Court is entitled, and required, to take into account the mode or manner of publication. Some forms of publication, such as a letter or book (as distinct from a newspaper) require more assiduous attention than others: Holmes v Fraser [2008] NSWSC 570 at [24] per Simpson J.

42. I shall consider each of the publications in turn.

The first matter complained of

Imputation 6(a): That Stormwater had committed fraud by placing certain pictures of project sites on their website.

43. The defendants admit that this imputation is conveyed by the first matter complained of and is defamatory of the second plaintiff. No ruling by me is required.

Imputation 6(b): That Stormwater had knowingly and blatantly overstated the experience of its consultants on its website.

44. The defendants challenge that this imputation is conveyed. The plaintiffs draw my attention to the portion of the first matter complained of commencing at line 35 under the subheading "Website, misleading and deceptive conduct":

“Additionally on the Home Page, it states that "Our consultants have over 25 years of experience in over 30 countries worldwide. You would be led to believe that Stormwater Solutions LLC or their employees have been in the water management business for 25 years, and have sold products in 30 countries. This is false.

That is a blatant misrepresentation. Oscar Larach worked for Atlantis Corporation for 12 years. Prior to that he sold women's stockings and before that used cars.

Manuel Arriagada, a friend of Oscar Larach has only been in the Stormwater industry for five years after becoming an Atlantis distributor in California, before that he was a truck driver. Hence the claim 25 years experience is a gross misrepresentation.”

45. The terms of the publication are quite scathing in their denunciation of the first plaintiff and his fellow director, not only in relation to the length of time they actually spent in the form but also the menial nature of their previous employment. The clear inference is that the company consists of these two persons whose qualifications in terms of length of time and skills fall so far short of their claims that their exaggerations must be deliberate. This imputation is conveyed.

Is 6(b) defamatory of the second plaintiff?

46. The test for defamatory meaning in relation to damage to business reputation has been substantially revised by the High Court in Radio 2UE Sydney Pty Ltd v Chesterton [2009] HCA 16, in which the Court held that the Court of Appeal’s decision in Radio 2UE v Chesterton [2008] NSWCA 66 and Gacic v John Fairfax Publications Pty Ltd (2006) 66 NSWLR 675 were in error in requiring a jury to be directed that the general test as to defamatory meaning should not be applied in business libel cases (at [60]).

47. In anticipation of the successful High Court challenge to Chesterton, the second plaintiff submits that the imputation would still be defamatory under the orthodox community standards test of whether it is likely to cause ordinary reasonable persons to think less of the plaintiff or to shun or avoid the plaintiff. On the orthodox test, this is clearly an imputation which would cause ordinary right-thinking members of the community to think less of the second plaintiff.

48. That a company would knowingly and blatantly overstate its experience on its website, (which the ordinary reasonable reader knows is there to advertise its business) must cause damage to the reputation of the second plaintiff in the mind of ordinary right-thinking persons. Accordingly, I find this imputation defamatory.

The second matter complained of

Imputation 8(a): That Stormwater had committed fraud by placing certain pictures of project sites on their website.

49. The defendants admit that this imputation is conveyed by the second matter complained of and is defamatory of the second plaintiff.

Imputation 8(b): That Stormwater had knowingly and blatantly overstated the experience of its consultants on its website.

50. I make the same findings for 8(b) as 6(b).

The third matter complained of

Imputation 10(a) - That Stormwater had behaved in such an underhanded and devious way, that one needed to be extremely cautious in dealing with it.

Imputation 10(b) - That Mr Larach had behaved in such an underhanded and devious way, that one needed to be extremely cautious in dealing with him.

51. The defendants admit that these imputations are conveyed by the third matter complained of and are defamatory of the plaintiffs.

52. This brings me to a consideration of the defences. The defences of truth and contextual truth have been pleaded.

Defence of truth

53. The test for establishing this defence was set out by the Court of Appeal in Cross v Queensland Newspapers Pty Ltd [2008] NSWCA 80 where the Court confirmed (at [71]) the test for determining whether an imputation is substantially true, citing Dixon J in Howden v Truth and Sportsman Ltd (1937) 58 CLR 416 at 420:

"The defence depends upon the substantial truth of the defamatory meaning conveyed by a libel. Every material part of the imputations upon the plaintiff contained in the words complained of must be true; otherwise the justification fails as an answer to the action."

Imputations 6(a) and 8(a) - That Stormwater had committed fraud by placing certain pictures of project sites on its website.

54. What is “fraud”? Both parties relied upon dictionary definitions. I note that "fraud" is defined by the Macquarie Dictionary as "1. deceit, trickery, sharp practice or breach of confidence by which it is sought to gain some unfair or dishonest advantage. 2. One who makes deceitful pretensions; imposter". Both parties agreed that the burden of proof, which rests upon the defendants, must be discharged in accordance with s 140 Evidence Act 1995 (NSW).

55. What do the defendants point to as the conduct amounting to fraud? The defendants’ contention is that the second plaintiff (through Mr Larach) admits to these photographs remaining on the website “long after its distributorship ended”, the justification being that some sites “are sites where it had been involved and hence are merely portraying its experience” (defendants’ written submissions, paragraph 5). The defendants do not accept this explanation because, they contend, a fair reading of the website shows that the plaintiffs’ intention was to “pass off the sites as sites where EcoRain product was used” (paragraph 5, written submissions). The defendants particularly complain that three of the sites depicted never used Stormwater at all.

56. Even if everything the defendants say is true, is keeping a former partner’s product on the website so that readers may think these are someone else’s “straight out fraud”? To establish fraud it is necessary to establish mens rea (albeit to a s 140 Evidence Act standard rather than to the criminal standard) and the elements of the fraudulent act. It is necessary to examine Mr Larach’s explanation for leaving these previously permissible photographs on the website between 1 April 2006 (when the plaintiffs’ connection with the defendants ended) and 18 September 2006 (when the defendants first complained to the plaintiffs about the photographs still being on the website).

57. What is the factual background? It is not in dispute that from 7 May 2002 until 31 December 2005, Stormwater was an authorised distributor of Atlantis products (Agreement at PB-35, Larach T-29.30) and that Mr Larach supplied the material, including photographs to place on their website. There was express authority from Atlantis during the period Stormwater was a distributor, for photographs depicting projects which utilised Atlantis products, to be placed or remain on the website of Stormwater (Larach T-30.41).

58. This permission ended when the relationship between the parties was terminated. However, although the notice period expired on 31 December 2005, Stormwater was able, by agreement, to continue selling Atlantis products under the agreement for a further three months ending on 31 March 2006. I find that permission to keep the information on the site continued until that date (PB-98, advice from Taylor to Urriola 1 May 2006).

59. As set out above, the plaintiffs added a note to the website that from 1 April, Stormwater would start its association with EcoRain. Very few consequential changes were made and photographs, which were already on the same website before 31 March 2006, remained on the website.

60. Atlantis made no objection to the plaintiffs about the photographs of its product remaining on the website after 31 March 2005 until its letter of 18 September 2006 to Trojan Law Offices (PB-117). This letter was triggered by the Trojan letter of 13 September 2006 (PB-115) complaining about alleged infringement of trade mark. The only complaint made by Atlantis was to the web hosting service of Stormwater, Doteasy, when on 2 February 2006 Rebirth invited Doteasy to close down the website of Stormwater (the Web Bundle (“WB”) 32). There is no evidence that Stormwater was given any notice of this letter by Doteasy (or Atlantis).

61. The first the plaintiffs knew of the objection was when they received Atlantis’ lawyers’ letter of 18 September 2006. However, Mr Larach must have known that the photographs used on the site depicted Atlantis’ products and that people reading the website material could have wrongly assumed that these were jobs using Stormwater products rather than Atlantis’ products.

62. The reasons given by Mr Larach for the continued use of photographs which depicted Atlantis products after 31 March 2006 (and before the complaint on 18 September 2006) are summarised in Mr Potter’s very helpful submission as follows:

(i) after starting with the new product they had little time to overhaul the website and so it remained to a great extent in its original form (T-39.33); and
(ii) he believed that the note on the home page would alert visitors to the site that after 1 April, new products would be supplied (which included tank modules) i.e. EcoRain instead of Atlantis products (T-39.33 and T-41.1).

63. It was the plaintiffs who fired the first shot in this war, because it was the plaintiffs’ solicitors who first wrote complaining about the use of the EcoRain trade mark by the defendants. This was a complaint with some merit. However, the defendants’ letter pointed out that it was the pot calling the kettle black, because the plaintiffs were using the defendants’ photographs and that the patent for the plaintiffs’ product had not been granted.

64. When Mr Larach received this letter he took a number of steps. He obtained legal advice that even though he had a 'PCT', (PB-147) there was no patent granted yet in the US for the EcoRain module and the website should not therefore say 'patented'. This change was made in September 2006 (T-42.12).

65. In addition, Mr Larach gave evidence that he removed from the website all photographs which he believed depicted sites which were not projects undertaken by Stormwater, namely, sites outside California which for historic reasons had remained on the website (T-41.30). While the defendants submit that he did not do so, Mr Larach’s evidence was that this was his intention.

66. Mr Larach said in his evidence he considered it was legitimate to maintain photographs of Stormwater projects, even though they contained images of Atlantis modules. These were Stormwater projects and went to the overall commercial experience of this company in this market. The project at Hermosa Beach California remained on the website after September 2006 (T-44.15). This was because Stormwater won the tender, provided technical support and onsite training and invoiced for the job.

67. In addition, the plaintiffs draw my attention to the following:

(i) Under clauses 3.1 and 3.3 of the distribution agreement (PB-37), the distributor must sell products in its own name and for its own account and could not use the name of Atlantis or Rebirth;
(ii) Stormwater also supplied other (i.e. non-Atlantis) products to the project such as geotech fabric and filter pumps (T-41.40 and T-338.36).

68. The plaintiffs submit there was nothing on the website prior to the dates of the first two matters complained of (and the third publication did not have the references to misleading photographs on the website) which could be construed as passing off the products in the photographs as EcoRain or Stormwater products (the BMP project is addressed specifically below). They were photographs of Stormwater projects. Whether or not this is the case needs to be considered in relation to each project site.

Specific project sites

69. A significant problem in this case was that the only way the content of the plaintiffs’ website could be viewed was to read the printouts which were tendered. For reasons which were later explained as being printing difficulties, the dates on which the website pages were copied did not come through on some of the pages of the website that were printed off.

70. Unfortunately, as a result, everyone was confused. Not only the lawyers made errors, but so apparently did the parties. This only became apparent when Mr McHugh addressed on the basis of the web page details as they were given to him by his clients after the hearing, which were factually different to the evidence in the trial.

71. Mr Potter commenced his oral submissions at T-464, by addressing that evidence when Mr Potter said:

“I thought I’d start, your Honour, with that blistering point that my friend raised about how incorrect my submissions were on the factual point, to deal with that up front. Now, it floored me when he said this, because I prepared my submission on the basis of the transcript, and at all times, Mr Larach was cross-examined both in relation to the unknown site and the BMP matter, in relation to the website material on 24 January. They put to him “Go before they [sic] look at this website in September, and why did you put EcoRain then?” So there’s a Brown v Dunn point there, but I thought that I’d looked at these websites in September and I couldn’t find it, and over lunch I’ve had another look at it, and I’d just like to take your Honour to this bundle, because there’s something very wrong with it.”

72. At T-465ff, Mr Potter took me through the bundle to demonstrate what was wrong. Mr McHugh told me, at T-467, that while some of the entries had dates at the bottom, others did not.

73. There then came the question of whether the dates on the document were the dates when the material had been cached, or whether that was the date that they had been created into a PDF file or the date of printing. Mr McHugh said, at T-438.11, that a particular document dated 31 January 2006 was showing the date on which it was printed.

74. Further complications arose when it transpired that copies of the document given to me as part of a tender, which did not have any dates at the bottom were different to the dates on the copies that counsel had (T-469). However, a fundamental problem was that none of the documents behind Tab 5 of the computer generated material contained the line reflecting either the date of printing or the date of creation as a PDF document. Such was the state of confusion that the proceedings were adjourned to 27 March so that Mr McHugh could seek leave to re-open his case to lead evidence from Mr Taylor, a consultant retained by the defendants, as to the manner in which the folder was put together by him and how it came about that these pages went into the wrong folder.

75. Mr Taylor gave evidence, at T-503ff. His evidence was that there was a hand-written note on the top right-hand side of the first document in Tab 5 showing that those documents were dated 1 September 2006. As to Tab 9, all of those documents should have been dated 15 November 2006 but because some of the documents were printed in landscape rather than portrait format, not all of them were dated on this day. However, as Mr Taylor looked through the documents, he became hesitant. He said, at T-505, that some of the pages were “numbered with that date on them and the others aren’t”. When asked if the answer was that he did not know what the date was, he said: “Well there appears – well I don’t know whether they are or not”.

76. At T-506 he gave evidence that some of the pages had been transposed. Pages 161-186 should be in the November website bundle (T-509). In other words they had to be placed behind Tab 9.

77. Mr Potter, who objected to the calling of the additional evidence on the basis that he could not cross-examine the defendant about it, asked some very pertinent questions in cross-examination. First of all, he was able to elicit from Mr Taylor that he did not know whose handwriting it was concerning the handwritten entry of “1 September 2006” on page 120. Despite having no idea who made this handwritten entry, Mr Taylor still insisted that he had recalled seeing the web page “as at that time”, and he was unable to explain why it is that none of the documents under Tab 5 bore any imprinted date. He was also able to point out to Mr Taylor that contrary to Mr Taylor’s assertion that pages printed in landscape did not show a date, page 97, which was in landscape, showed a date of 15 May 2006. Mr Potter put to Mr Taylor that it was not correct to say that a page printed in landscape did not have the date printed on it for some related reason but Mr Taylor replied “No, it depends on how the web page has been set up” (T-517). He agreed, however, it was not a universal rule.

78. Finally, and most crucially, Mr Potter asked him:

“Q: Now could you go to page 139? Do you have that?
A: Yes.

Q: Could you keep a mark open in that page and then turn to page 169?
A: Correct.

Q: Now these are the two pages which originally appeared in September, and they both can’t be right, can they?
A: That’s correct.

Q: When did you first discover this mistake, that they were both in September and they were wrong?
A: When the bundle was given – sent out to you, I noticed that one of the sections after it had been sent out appeared to be thicker.

Q: So you knew before the trial had commenced there was a problem?
A: Correct.

Q: Did you raise that problem with the solicitor for the defendant?
A: Yes.

Q: Was anything done, to your knowledge, as a result of your report?
A: No I was told it was too late.

Q: You were told it was too late?
A: Yes.” (T-517)

79. Mr Potter went on to point out that the only reason for saying the photographs that appear in the bundle in September should be in November was by virtue of a letter that Mr Taylor had written in November. He then asked:

“Q: So therefore, what you‘re saying is that you don’t recognise these documents by any date, they bear, or any specific recollection on your part as to the date that you printed them, or copied them, you only relate your answer to where they should be by virtue of an order that you put pieces of paper in another file?
A: Correct.”

80. In NAB v Rusu (1999) 47 NSWLR 309, Bryson J notes, at paragraph 17ff:

“[17] Before a business record or any other document is admitted in evidence it is obviously necessary that there should be an evidentiary basis for finding it is what it purports to be. …

[18] In equity and commercial litigation proof of the authenticity of business documents does not often claim attention because practices are followed which limit the occasions when it needs attention.

…

[26] Section 51 does not abolish or in any way affect the need to prove that a document tendered is the document which it purports to be and subsection 48(1) does not authorise the adduction of evidence merely by tendering a document in the absence of any evidence establishing what the document is.”

81. Bryson J noted that procedures open to the parties in those proceedings would have included discovery or notices to admit facts. The difficulty in the present case is that documents have been prepared and tendered, a case particularised and pleaded, and evidence led, on a basis which is now asserted to be incorrect.

82. Where a party seeks leave to re-open its case, it is relevant to enquire why the evidence was not called at the hearing. In Smith v The New South Wales Bar Association (1992) 176 CLR 256 at 266, a majority of the High Court held that: “If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application.”

83. In ASIC v Rich (2006) 235 ALR 587, Austin J, at [18] listed the factors relevant to the exercise of the discretion. One of these is the need for finality in litigation, a point made in a number of Court of Appeal decisions concerning amendments to pleadings such as Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [23]-[29]. The issue was considered recently in The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 by Einstein J. Einstein J noted, at [27]-[29] that the party seeking the indulgence of being permitted to lead further evidence after the defendant had made forensic decision as to cross-examination and affidavit evidence, completed its documentary tender, closed its case and made closing submissions. That is factually very similar here. It is a further complication that by reason of the admission of Mr Taylor, it is clear that the defendants’ solicitors knew of this change but told Mr Taylor that it was “too late” to do anything.

84. Finally, there is real doubt that the documents say what Mr Taylor claims they say. Even if I were to grant leave and permit the tendering of the documentary material, the concessions made by Mr Taylor to Mr Potter in cross-examination are such that the documents should meet the fate of the documents in NAB v Rusu.

85. While I granted the defendant leave to bring the application to re-open its case, and both parties have addressed me in relation to the evidence, I am of the view that the application to re-open the case should not be granted and that if it were, the documents in question should not be permitted to be tendered, both for the reasons explained by Bryson J in NAB v Rusu and pursuant to the provisions of s 135 Evidence Act 1995. My reasons for rejection of the tender pursuant to s 135 are factually the same as my reasons for holding that the documentation does not satisfy the threshold test of relevance.

86. Finally, in the event that I have erred in rejecting the tender of these documents, I should formally note that I would in any event reject Mr Taylor’s explanation for the date of the documents. As he conceded in cross-examination, he does not know who wrote the handwritten date and the real reason he assumes these documents were dated in accordance with that handwritten note is because this fits in with information he has in another file. His explanation for some documents not having other dates is frankly unconvincing, but even if his explanation for the documents not having any date is correct, there is still no evidence that can satisfy me that Mr Taylor’s belated explanation as to the correct date should be accepted.

87. Accordingly, I now turn to a consideration of the issues of truth by having regard only to the evidence as it was led at trial. I shall consider each of the construction sites on the Internet one by one.

1. Wendy's restaurant site

88. The Wendy’s restaurant site is one of three construction sites (the others being the Eastern Distributor and BMP) where the second plaintiff had no involvement. It is asserted that the Wendy’s restaurant site remained on the website until December 2007, which was after these proceedings were commenced (see WB-234). The defendants submitted that this is referred to in the letter of 18 September 2006 but I am satisfied that it is not referred to until the letter of 15 November. However, nothing turns on this.

89. The plaintiffs’ submission is that the first mention of this photograph was at paragraph 4 of the Atlantis letter of 15 November 2006 (PB-125). No copy of the photograph was sent with that letter to identify the offending image. There was just a general description of a photograph in the 'modular tank section' of the website concerning a project of another distributor, ACF. At T-103.20, Mr Larach conceded that he did not go back and look at the website to see if this was still there after he made the changes in September. However, in re-examination at T-206.35 he clarified the issue by looking at WB-124, being the website as at 1 September 2006. At the 'modular tanks' section there were two photographs. Mr Larach gave evidence that he believed the ACF reference was to the first photograph and so removed this photograph (T-208.30). This error was consistent with the answer to interrogatory 14, sworn 11 July 2008 (T-209.35). Mr Larach said at all times that he did not know where the real Wendy's photograph was taken and thought it was a Stormwater project (T-103.9).

90. However, Mr Larach did say that he believed that the Wendy’s site was a project of Stormwater (T-107), even after receiving the letter of 15 November 2006, which categorically stated to the contrary. The defendants complain that Mr Larach’s evidence that he failed to recognise the Wendy’s photograph and therefore did not remove it (T-203) is implausible.

91. Mr Larach did make attempts to remove the photographs from the website. The question is whether it is an honest mistake or, to use the words of the imputation, he committed fraud by placing the pictures of the Wendy’s project site on the website.

92. The defendants’ written submissions (paragraph 8) complain that this inconsistency in Mr Larach’s evidence, in that he removed one photograph and not another is “not explained”. The evidence, in my view, falls short of actual fraud. The plaintiffs did remove a number of photographs from the website promptly, such as the residential site in Madrid. On the balance of probabilities, I am inclined to accept the evidence of Mr Larach that he intended to remove all the offending photographs and that this was a photograph he overlooked. No convincing reason (for example, the high desirability of having a project site like Wendy’s restaurant on the website, or the degree of engineering difficulty) was put forward to show the advantage of this photograph, or how keeping this photograph on the site was actual fraud.

2. Residential site in Madrid

93. This photograph was removed after the September (first) letter of complaint. It does not appear in the 15 November copy of the website.

94. As I have indicated elsewhere, I accept Mr Larach’s explanation in relation to this and other photographs which were removed as soon as the request from the defendants was brought to his attention.

3. Unknown site photographed at 19 May 2005

95. The plaintiffs submit that this is not a situation under Maisel v Financial Times Ltd [1915] 3 KB 336 where the plaintiffs’ imputations were sufficiently general to allow evidence of acts subsequent to the time of publication to be used to prove the truth of the pleaded imputations. The imputation is that Stormwater committed acts of fraud by placing certain pictures of project sites on its website. As at the date of publication those acts of fraud had either been committed or not committed and changes to the website after that date is not evidence of any act before that date. The charge in the imputation was not therefore general but specific.

96. I do not accept this submission. The terms of this imputation are such that the placing of pictures on the website at any time within a reasonable parameter of the imputation ought to be evidence concerning which particulars of justification can be led. The charge in the imputation is a general one of fraud. It is significant that the word “certain” is used, and certainly the matter complained of, with its reference to “pictures of project sites” is equally general.

97. The allegation made in the matter complained of is that “only” pictures of Atlantis project sites are featured. It was never put to Mr Larach that every single project site on the website used only Atlantis products.

98. The allegation of fraud made in the matter complained of identifies as misleading and deceptive conduct, the placing of these photographs on the website; what is fraudulent is that although “some of these” were “belatedly” removed, they were forced to write again, pointing out that only pictures of project sites where Atlantis products were used were being shown.

99. It was not suggested to Mr Larach that this was not a Stormwater project and the same reasons are applicable that this photograph was not removed from the website after 31 March 2006. The wording at WB-244 (where Mr Larach was cross-examined at T-99.5), which referred to EcoRain modular tank system appeared for the first time after the first two matters complained of in 29 January 2007. Before that there was simply no change to the website from prior to 31 March 2006 and this was not removed as it was a Stormwater project. The third matter complained of did not contain references to misleading photographs on the website and conveyed different imputations.

100. The plaintiffs’ conduct in leaving the photograph of this unknown site on the website until some time in early 2007 may be foolish or incompetent, but on the balance of probabilities, having regard to s 140 Evidence Act 1995 I am not satisfied that this conduct amounted to fraud.

4. Eastern Distributor / Woolloomooloo site

101. The Eastern Distributor / Woolloomooloo site is another site where the first plaintiff had no involvement of any kind. The defendants, in written submissions, assert that this publication remained on the website until 2007 and was certainly there after 15 November 2006.

102. Mr Larach said in his evidence that this was removed after the September letter. The next Atlantis letter (15 November) stated that it was still there (paragraph 10, PB-126). However it is not depicted in the 15 November copy of the website (Tab 9 WB).

103. At T-166.24 Mr Larach was asked in cross-examination:

“Q. And it was there right through until September, wasn't it?
A. Correct.”

104. There was no suggestion in cross-examination that it stayed on the website despite the letter of 15 November. As I have noted in the introductory section to the defence of truth, despite Mr Taylor's insistence that it must have been there for him to mention it in his letter, that is no explanation if his letter was in error. It makes no sense for other non Stormwater sites to be removed and to leave what is obviously a Sydney project on the website. I find that this site was removed after the first complaint by Atlantis in September. This is insufficient evidence, having regard to the standard under s 140, to amount to fraud, even on the terms put forward in the matter complained of (which restricted its fraud allegations to photographs not removed after the September letter).

5. Car park site in Singapore

105. Although this is relied on at item 5 on page 2 of the defendants’ Outline of Submissions, there are no references to the WB or any submission about being put to Mr Larach in cross-examination. There is no reference in the submissions to when this photograph was on the website, or removed. I do not regard this as sufficient evidence to establish fraud.

6. Lambrook Park at El Monte

106. This was a Stormwater site. At T-97.11, Mr Larach was asked about these pictures:

“Q. There's no acknowledgment on that page, or anywhere on the website, as at 29 January 2007, that there are pictures of Atlantis products, is there?
A. No.

Q. And yet there are pictures of Atlantis products, aren't there?
A. The aim of the Stormwater Solution website is to show projects that Stormwater Solutions has been involved, and the expertise which Stormwater Solution has in these products or systems.”

107. Again this was kept on the website as it was a Stormwater project and was illustrative of projects carried out by Stormwater. There is nothing on the relevant pages to suggest that the boxes depicted were made by EcoRain or Stormwater and the pictures were retained on the website for that reason.

7. Hermosa Beach

108. This was also a Stormwater site. It was not fraud for the company that had supplied everything except the product to allow a photograph to remain on the website showing its installation, for the same reasons as set out above.

8. BMP Study

109. As with the 'unknown' site, the wording which was put to Mr Larach in cross-examination appeared on the website after publication of the first two matters complained of. The third matter complained of did not address any issue of misleading photographs on the website (the only reference to the website was an allegation that 'Additionally they blatantly copied our website' (line 23 PB-16). This was not a reference to any of these photographs.

110. Mr Larach explained the chronology of the BMP study in re-examination at T-210.40. Firstly it is necessary to look at the web page as at 15 May 2006 (WB-97) and from that it is clear that the photographs were historically left on the website along with the old words under ‘the problem' and ‘the solution'. These photographs were of a Stormwater project so Mr Larach left them on the website. Of the three photographs, only one contains a discernible picture of a rain tank box partially covered in sand. When one then looks at the same web page in January 2007, it is clear that Mr Larach has added new wording but not removed the photographs.

111. Mr Larach gave evidence (T-212.10) that he added the references to EcoRain on the website as they had carried out projects with EcoRain boxes by January 2007. The relevance of this is that there was no need to hold out to anyone that the photographs were something they were not, as it would have been just as easy to photograph EcoRain jobs. The existing photographs were to all indiscernible from those which would be present for an EcoRain installation. There was therefore no dishonesty involved as this was a “historic” retention of these photographs, where the writing on the web page later changed in 2007.

112. I reject the plaintiffs’ submissions concerning Maisel. However, there is insufficient evidence to amount to fraud. At its highest, this conduct might be misleading or even deceptive but it cannot amount to fraud, and the defendants’ statement of “straight out fraud”, in bold letters, cannot make it so.

113. I accept the explanation of Mr Larach that he was busy setting up a new business and that he left photographs on the website, which had been legitimately there until 1 April 2006, showing sites where Stormwater expertise (using Atlantis products) had been used. This particular group of photographs did not depict a Stormwater project site. How, then, did the plaintiffs obtain it? As I understand the evidence, these photographs were either taken by Stormwater during installation or, in the case of the three non-Stormwater sites, supplied by the defendants for promotional purposes. I have also accepted Mr Larach’s evidence that as soon as the defendants notified him of their objections he removed photographs of the Atlantis products, including those installed by Stormwater. Again, this may have been foolish of him, or even misleading or deceptive, but it is not fraud.

Imputations 6(b) and 8(b): That Stormwater had knowingly and blatantly overstated the experience of its consultants on its website.

114. The defendants submit that as a matter of substantial truth Stormwater Solutions had not been in business for 25 years or sold products in 30 countries. That, however, is not the imputation. The imputation related to the experience of its consultants on the website and in particular made disparaging remarks about Mr Larach and Mr Arriagada.

115. The defendants submit at paragraph 18 of the defendants’ Outline of Submissions, that the reference at lines 45-56 is limited to the experience of Mr Larach and Mr Arriagada, which is less than 25 years. It is the imputation which must be justified and the imputation cannot be justified by limiting 'its consultants' to two. As a matter of practical fact, the defendants simply assumed that there were only two consultants and published the defamatory imputation on this basis.

116. The evidence at T-51.30 from Mr Larach was:

“Q. As at the date of this letter, being 5 December 2006 that you had consultants with over 25 years experience in over 30 countries worldwide?
A. Yeah, we've had it over 25 years as a matter of fact …

POTTER
Q. Just to expand on that, how much experience have you got?
A. Up to that day I probably had 14 years myself.

Q. And who else, Mr Arriagada?
A. I had Mr Arriagada, which had four years, say four years. Then we had one of our consultants, Mr Montgomery, which had over 30 years in the water industry and we had Mr David Ruth which had another two/three years, I would say, or four.

Q. Anybody else?
A. Maybe even more than four years, I would say, maybe Ruth.

Q. Any other consultants?
A. And Mary Angle, which had at least another three to four years.

Q. In between all those consultants, did they have experience in the water management business in 30 countries?
A. Yes.

Q. I won't ask you about details of the specific countries.
MCHUGH: I'd like the details.

HER HONOUR
Q. What were some of the 30 countries? Just give us as many as you can think of off the top of your head?
A. Sure. While I was with Atlantis at the time, we had most of the Asian countries, including Singapore, Malaysia, Korea.

Q. No, that will do. Most of the Asian countries while you were with defendant?
A. Yeah, most of the Asian countries. A number of European countries, you know, we were selling at the time, countries in South America as well.”

117. Mr Montgomery confirmed his long (and impressive) experience in the field of 'water management business' at T-177.15. He was not cross-examined as to anything which could cast doubt as to his evidence of length of experience and as to the many countries in which he had worked.

118. The defendants submit (paragraph 19, written submissions) that Stormwater had not been in business for 25 years. The closest entry to 31 March is the copy of the web page of 20 April 2006 where the entry on page 2 states "We offer the most advanced range of water management systems in the world today, bringing together over 25 years of experience in over 30 countries around the world". I accept the plaintiffs’ submission that this is a reference to the people within the organisation. In the matter complained of, this same interpretation is given by the defendants (only limited to two people).

119. The defendants must not only establish that the second plaintiff over-stated the experience of its consultants on its website but that it did so knowingly and blatantly. The imputation requires the defendants to establish prior knowledge on the part of the second plaintiff that the experience of its consultants was overstated on its website. Mr Larach said in his evidence he was referring to the experience of both himself and his consultants.

120. The defence of truth to this imputation fails.

Imputations 10(a) and 10(b) - That Stormwater (Mr Larach) behaved in such an underhanded and devious way that one needed to be extremely cautious in dealing with it (him).

121. The particulars of truth supplied during the trial on 10 February 2009, duplicate the particulars for the truth of imputations in the first and second matters complained of. That is the complained behaviour relates to the depiction of photographs on the website of Stormwater, not to any fact or matter referred to in the third matter complained of.

122. There is no attempt to justify the facts of the letter to Denver Plastics but upon evidence of extraneous facts to justify these imputations. The defendants are entitled to do so. However, the truth or falsity of the imputation requires an examination of the whole of the conduct of the plaintiffs.

123. The plaintiffs submit that there was no underhanded or devious conduct in adding new wording to the BMP material in January 2007 as Mr Larach said there had been plenty of experience of EcoRain undertaking this work as at that date and so no one was mislead by the experience that was described in the words set out on that page in January. The photographs remaining were illustrative of the type of job undertaken and not a misleading statement that Stormwater had experience of this work, when in fact it did not.

124. The defendants, in written submissions, refer to the copying of the Atlantis modular tank system and the Copycat system and that such is substantially identical to the patented system which is substantially true. It is asserted that Mr Larach actually agreed with this (T-168).

125. The evidence in these proceedings, essentially by reason of the forensic decision of the parties not to lead expert evidence of copying or trade mark infringement, falls short of establishing that the plaintiffs’ product is a copy (let alone a blatant copy) of the defendants’ product. Nor is it true that the defendants “blatantly copied our website” and in particular it is not true that the defendants were the proprietor of the trade mark EcoRain in the United States. This is a defamation case, not an action for damages for breach of trade mark rights. Although the letter asserts that the “Copycat” system is an infringement, no proceedings were ever brought in any country, nor have I been asked to determine this issue. Pursuant to s 136 Evidence Act, the experts’ reports tendered by the defendants were specifically restricted to the qualified privilege defence. Those experts were not made available for cross-examination and I do not propose to embark on the complex and difficult task of determining whether the plaintiffs’ products are copies of the defendants’ products without such assistance.

126. I have set out below in the section on contextual truth my reasons for rejecting all of the contextual imputations. The failure of these imputations means that there is no evidence upon which this imputation can be sustained.

Defence of contextual truth - Preliminary issues

127. The amended defence at paragraphs 16.5 and 17.4 seeks to plead back those of the plaintiffs' imputations which have been successfully justified in order to combine these with the contextual imputations for the purpose of balancing the true contextual imputations against the plaintiffs' imputations not successfully proved true.

128. Section 26 of the 2005 Act is worded quite differently to s 16 Defamation Act 1974 (NSW). The contextual imputations are defined as those in addition to the plaintiffs’ imputations. The balancing test is then between the contextual imputations and the plaintiffs’ imputations (not between the contextual imputations plus the plaintiff’s justified imputations against the plaintiffs’ unjustified imputations). The form of pleading in the amended defence appears to have been copied from a 1974 Act precedent. However, the defendants do not intend to argue that the effect of s 26 of the 2005 Act is the same as s 16 of the 1974 Act in this respect.

Relevant test

129. The questions to be asked on a defence of contextual truth were succinctly set out by Simpson J in Zunter v John Fairfax Publications Pty Ltd [2005] NSWSC 759 at [45] (although Zunter was a 1974 Act case, the questions will still be the same, save for the requirement of public interest or qualified privilege):

“[45] The questions which arise where a defence of contextual truth is pleaded are the following:

(i) does any one (or do any more) of the imputations pleaded by the plaintiff relate to a matter of public interest?; alternatively, was any one (or were any more) of those imputations published under qualified privilege?;
(ii) if so, was any one (or were any more) of the imputations pleaded by the defendant as having been published contextually to the imputations pleaded by the plaintiff conveyed by the matter complained of?;
(iii) if so, was any one (or were any more) of such imputations defamatory of the plaintiff?;
(iv) in respect of any contextual imputation found to have been conveyed and to be defamatory of the plaintiff, did any one (or any more) of those imputations relate to a matter of public interest?; alternatively, was any one (or were any more) of such imputations published under qualified privilege?;
(v) if so, was any such imputation a matter of substantial truth?;
(vi) if so, does the substantial truth of any such contextual imputation have the consequence that publication of the imputation complained of by the plaintiff does not further injure his/her/its reputation?”

130. In pleading contextual truth a defendant cannot be heard to say that he “almost got it right”. A contextual imputation pleading an imputation of a lesser nature cannot outweigh a more serious imputation pleaded by the plaintiff.

Pleading back the plaintiffs' imputations

131. Section 16 of the 1974 Act provides as follows:

" 16 Truth: contextual imputations

(1) Where an imputation complained of is made by the publication of any report, article, letter, note, picture, oral utterance or other thing and another imputation is made by the same publication, the latter imputation is, for the purposes of this section, contextual to the imputation complained of.

(2) It is a defence to any imputation complained of that:

(a) the imputation relates to a matter of public interest or is published under qualified privilege,
(b) one or more imputations contextual to the imputation complained of:

(i) relate to a matter of public interest or are published under qualified privilege, and
(ii) are matters of substantial truth, and

(c) by reason that those contextual imputations are matters of substantial truth, the imputation complained of does not further injure the reputation of the plaintiff."

132. Under the 1974 Act, imputations pleaded by the plaintiff could be “pleaded back” by the defendant, in addition to imputations the defendant pleaded and which had not been pleaded by the plaintiff. Both kinds of imputation, if pleaded contextually and established to be true, were capable of defeating those imputations pleaded by the plaintiff which had not been established to be true. In other words, the plaintiff’s imputations, if “pleaded back” by the defendant, had the same result (i.e. the plaintiff lost the action) as imputations pleaded only by the defendant, providing the “swamping” exercise was successful.

133. However, it is possible that this is no longer the case under the new Act. There was some opposition from the other States, during the discussion of the provisions of the 2005 Act, to a wholesale adoption of the 1974 Act contextual provisions. The terms of the 2005 Act differ slightly from the 1974 Act, perhaps as a result.

134. Section 26 of the 2005 Act provides:

“ 26 Defence of contextual truth

It is a defence to the publication of defamatory matter if the defendant proves that:


(a) the matter carried, in addition to the defamatory imputations of which the plaintiff complains, one or more other imputations ("contextual imputations") that are substantially true, and

(b) the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations.”

135. The new Act (which refers to imputations “in addition” to the plaintiff’s imputations) may result in a situation similar to the role of imputations under s 5 Defamation Act 1952 (UK) (“the UK Act”). The use of these words may have the result (whether intended or not) that the pleading back of one of the plaintiff’s imputations may be relevant as to mitigation, but cannot defeat the action in the same way as was possible under the 1974 Act.

136. Section 5 of the UK Act provides as follows:

“ Justification

In an action for libel or slander in respect of words containing two or more distinct charges against the plaintiff, a defence of justification shall not fail by reason only that the truth of every charge is not proved if the words not proved to be true do not materially injure the plaintiff ’ s reputation having regard to the truth of the remaining charges.”

137. Thus, if a publication asserts that the plaintiff is a swindler, a liar and entered the country illegally (to use the well-known example cited in Hepburn v TCN Channel Nine P/L [1984] 1 NSWLR 386 at 397), a plaintiff may now be obliged to plead all three imputations in order to avoid the loss of the action through “swamping”. If a plaintiff pleads only the imputations of illegal entry, the imputation of swindling and lying can be pleaded by the defendant to defeat the action. However, if a plaintiff pleads all three imputations and the defendant successfully proves the truth of one or both of the others (swindling and lying), the argument would be that the truth of these imputations would only go to mitigation of damages.

138. The language of s 26 has not yet been the subject of consideration by other courts. The pleadings in this case, however, give a good example of imputations which the plaintiffs could have pleaded but failed to do so. If one or more of the defendants’ imputations were to succeed (assuming they could outweigh the plaintiffs’ imputations) the plaintiffs may lose the action. Would that occur if the defence of one of the plaintiff’s imputations succeeded? This is a question of statutory interpretation which, by reason of my findings of fact in this case, is not necessary for me to determine, but it is an argument that has been raised in submissions and I must accordingly refer to it. Although it is not necessary for me to determine the issue, I note my view that “another” (the 1974 Act) and “additional” (the 2005 Act) mean the same thing, and that the regime under the 1974 Act applies to the 2005 Act defence.

266. There are no submissions as to why this opinion might reasonably be based on such of the facts which can be proved true by the defendants. In fact those limited facts particularised, are not sufficient to reasonably ground such an opinion in light of the facts which cannot be proved true by the defendants.

267. For all these reasons the defence of statutory honest opinion must also fail.

Unlikelihood of harm

268. The defence of triviality was raised in the submissions on 26 February 2009. The defendants had previously erroneously pleaded these matters as particulars of mitigation (defendants’ submissions, paragraph 25).

269. The defendants draw my attention to the statement by Hunt J in Traztand Pty Ltd v GIO of NSW (1984) 2 NSWLR 598 (at 599-600) that proceedings for defamation based solely on a publication to a company about its director would fail because the defence of unlikelihood of harm would succeed, a statement cited with approval by Giles JA in State Bank of NSW Ltd v Currabubula Holdings Pty Ltd (2001) 51 NSWLR 400 at [114]. Hunt J rejected an argument that such a publication did not amount to publication at all, and his Honour’s comments concerning the defence of triviality are obiter.

270. The defendants’ submissions (paragraphs 5-7) briefly note that the requirements for the defence to succeed have “particular resonance” in the publication to EcoRain, the second matter complained of. Mr Larach is a director of both EcoRain and Stormwater. The defendants submit that anyone associated with Stormwater would be able to make a judgment of their own knowledge as to whether there was any substance in the allegations.

271. The defence of unlikelihood of harm was considered at length in Jones v Sutton (2004) 61 NSWLR 614.

272. For the defence to be available, the circumstances of the publication must be such that the person defamed was “unlikely to sustain any harm” (s 33 Defamation Act 2005). It remains to be seen whether this test is the same as the test for “not likely to suffer harm” under s 13 Defamation Act 1974. The phrase “unlikely to sustain any harm” sounds very much like “no harm at all” referred to in Skalkos v Assaf and it may be that the issue which the Court of Appeal indicated in Jones v Sutton could be simply resolved (at 620) may be revived by reason of this wording.

273. Applying the test for “unlikely to cause harm” as set out in Jones v Sutton at 624-625, I note the statements of Beazley JA at 627 to 629, the fact that this was a publication to a company with knowledge of the factual background needs to be seen in the context of the fact that these were serious imputations.

274. The fact that publication was made to a very limited audience, even where that audience may have known to the contrary (as occurred in Jones v Sutton) is insufficient. Each of the matters complained of was a long and serious letter making allegations which included, in the case of the first and second publications, allegations of fraud. The first and second publications contained a great deal of legal advice, which was designed to impress the reader with the accuracy and truthfulness of the statements involved.

275. A party needs to point to more than limited publication for this defence to succeed. In the case of the second publication, the fact that EcoRain is a corporation closely related to Stormwater and with a high degree of knowledge of Stormwater’s activities, does not mean that its servants or agents or other recipients of this publication within the company would not have been alarmed and concerned to receive a letter making such serious claims. For the defence of triviality to succeed, the circumstances of the publication need to have some quality about them which would warrant the use of the word “trivial”. Such a word is unlikely to be applied to a long letter of legal advice accusing a corporation of fraud.

276. The defence of unlikelihood of harm fails in relation to each of the publications.

Conclusions concerning defences

277. All of the defences have failed and I shall not consider the issue of damages.

Damages

278. For the first two matters complained of, damages are only sought by the second plaintiff, Stormwater, which is a corporation. The third matter complained conveys two imputations in the same form but defamatory of both the corporation and an individual. The current ceiling for damages for non-economic loss (as at 1 July 2008) is $280,500.

Awards of damages for more than one plaintiff

279. The first matter to consider is the correct approach to damages where multiple plaintiffs, particularly plaintiffs with overlapping areas of reputation (such as a company and its director) seek damages.

280. Although it is clear that the s 35 ceiling includes multiple imputations and multiple publications, it is not clear whether s 35 limits damages to the ceiling where multiple plaintiffs are concerned. Technically, each plaintiff has a distinctly separate claim and there are totally separate proceedings, even though consolidated under the same matter number. The plaintiffs submit that the ceiling should apply for each plaintiff separately.

The relationship between general and aggravated damages

281. Under s 35(2) the ceiling does not apply to an award of aggravated damages. The only claim for aggravated damages is by the first plaintiff as an individual. Aggravated damages are not available to corporations, nor are damages for hurt to feelings: Lewis v Daily Telegraph Ltd [1964] AC 234 at 262; Australian Broadcasting Corporation v Comalco Ltd (1986) 12 FCR 510 at 586; Selecta Homes and Building Co Pty Ltd v Advertiser-News Weekend Publishing Co Pty Ltd (2001) 79 SASR; Bell v Kingsbay Pty Ltd [2001] VSC 388 at [29]. These factors are persuasive, in my opinion, as to the common sense in applying the ceiling separately.

282. Pursuant to s 36 of the Act the Court is to disregard the malice or other state of mind of the defendant at the time of publication except where it affects the harm sustained by the plaintiff. The plaintiffs in these proceedings claim the defendants’ improper purpose was that they wanted to destroy the plaintiffs’ business because they were business rivals who had obtained a lucrative contract the defendants had hoped to obtain. If this can be established, it can be taken into account when awarding damages.

Extent of publication

283. Injury to reputation can be claimed regardless of how limited publication may be. In the present case, publication was limited to Tutor Saliba and others concerned with the LAX project (the first matter complained of contains a distribution list (at PB-6) from which it can be inferred that a number of individuals concerned with the LAX project saw this letter). The second publication is to a company of which the first plaintiff is the co-director. The third publication is to a company.

Awarding damages to an individual

284. Damage in defamation is presumed: Readers Digest Services Pty Ltd v Lamb (1982) 150 CLR 500 at 507. The award of damages in a defamation action operates as a vindication of the plaintiff and the consolation for the wrong done to it, which may not incur injury to feelings but does include damage to reputation: Carson v John Fairfax (1993) 178 CLR 44 at 60; Uren v John Fairfax (1956) 117 CLR 118 at 150.

285. Vindication is a separate entitlement of the plaintiff for the fact of having been defamed. The sum awarded in damages must be sufficient vindication (Rigby v Associated Newspapers (1969) 1 NSWR 729 at 743). In Carson (ibid) the majority judgment quoted Fleming Law of Torts, 8th ed (1992) at p.5:

“Vindication looks to the attitude of others to the appellant [i.e. the plaintiff] the sum awarded must be at least the minimum necessary to signal to the public the vindication of the appellant's reputation. The gravity of the libel, the social standing of the parties and the availability of alternative remedies are all relevant to assessing the quantum of damages necessary to vindicate the appellant.”

Awarding damages to a company

286. There is no claim for special damages and no direct claim for economic loss. However, a company does not have to prove actual loss. In Mount Cook Group Ltd v Johnstone Motors Ltd [1990] 2 NZLR 488 at 497-8, Tipping J rejected statements to the contrary in D & L Caterers v D’Ajou [1945] KB 354 at 367. In Feo v Pioneer Concrete (Vic) Pty Ltd [1999] 3 VR 417 Winneke P explained that while it was unnecessary to either allege or prove special damage, damages are still assessed for injury to the company’s reputation, “having regard to financial and commercial considerations by which a corporation’s reputation is ordinarily assessed”. In some cases those damages may only be nominal, particularly where “the nature of the defamatory imputation, or the breadth of its publication, has caused significant harm to the trading reputation of the corporation defamed” (at [57]).

287. In Feo the Court awarded damages of $5,500 for four slanders spoken on the telephone. The award of damages in Australian Broadcasting Corporation v Comalco Ltd (1986) 12 FCR 510 was similarly modest, as Winneke P noted at [57]. In Australian Broadcasting Corporation v Comalco Ltd, Neaves J was critical of statements by Mahoney JA in Andrews v John Fairfax & Sons Ltd [1980] 2 NSWLR 225 to the effect that a company could recover damages without regard to the impact on its trade or business of the libel; the Court of Appeal in Victoria in Kay v Chesser [1999] 3 VR 55 (at 59) noted the rejection of Mahoney JA’s views and concurred.

288. The provisions of the Act requiring there to be a rational relationship between the damages awarded and the libel may well resolve any conflict in these differing views. I shall now consider the evidence relating to the reputation of each of the plaintiffs.

Reputation of Stormwater

289. Mr Larach described in evidence at T-28 the history of Stormwater in the USA which, amongst other things, was a distributor of Atlantis products in California from 2002. When Mr Larach left in 2004, he later joined Stormwater which continued to conduct the same business until the end of March 2006 when its relationship with Atlantis ended (after the three month extension period). Thereafter, it pursued the same business with the EcoRain product. At T-47.10, Mr Larach described how the LAX contract was won and it is inferred from this substantial contract that Stormwater enjoyed a strong business reputation in the USA.

290. Furthermore, Stormwater had arranged for Denver Plastics in Nebraska to manufacture all the infiltration tanks for the LAX job. At T-47.45 Mr Larach described how the need to arose to find a US manufacturer and later successfully negotiated a contract with Denver Plastics.

291. Furthermore, Mr Larach also described the fact that all jobs undertaken when an Atlantis distributor were in the name of Stormwater and all parts of those jobs were undertaken by Stormwater. Therefore they clearly enjoyed a strong business reputation at least in California during that period also.

292. At T-80.41, Mr Osendorf from Hanes in California, gave evidence that as at the date of the first matter complained of, December 2006, Hanes was a distributor of the EcoRain products and he was familiar with Stormwater in California. He said that he considered that Stormwater had a good reputation in the market of infiltration tanks (T-80.46) in California and surrounding states of Nevada, Arizona and Oregon (T-81.5).

Reputation of Larach

293. Mr Larach's reputation was synonymous with that of Stormwater. He negotiated all business contracts and was the primary contact for EcoRain products (T-81.11). Mr Osendorf said that Mr Larach's reputation in the market place was good and that “I never heard anything in the market place contrary to that”.

The first matter complained of

294. The first matter complained of is defamatory of Stormwater.

295. As I have set out above, although a company cannot be injured in its feelings, the injury need not be confined to loss of income as the goodwill of a company may be injured, yet it is not necessary to prove special damage (see Gatley (11th ed) [8.16]).

296. Evidence has been given by Mr Larach of Stormwater's trading activities and the fact that the first matter complained of was fairly and squarely aimed at a substantial client of Stormwater, Its clear intent was to prevent Stormwater from enjoying the benefit of that business contract. This letter and the imputations conveyed by it clearly damaged the business reputation of Stormwater within its own market place in the US.

297. Mr Larach gave evidence (T-47) of how the LAX contract came about. At T-48.39 Mr Larach described the effect of the letter on Stormwater and the steps which had to be taken to prevent the contract from being terminated. In effect Tutor Saliba were very concerned and a letter of indemnity was eventually negotiated and provided in respect of any proceedings by Atlantis (T-49.45). This was the only way to effectively counter the effect of the libel.

The second matter complained of

298. The second matter complained of is defamatory of Stormwater, but to a much more sympathetic recipient, namely the company whose name Atlantis claimed it owned. No evidence was given as to how many persons in the company were recipients. While damage to reputation is presumed, quantum of damages for this letter will be small.

The third matter complained of

299. This letter was aimed at the US manufacturer of products to be sold by Stormwater.

300. The imputations for both plaintiffs in respect of the third matter complained of are very serious in that the conduct alleged is one of underhanded and devious behaviour in business dealings, such that any commercial organisation should be extremely cautious in dealing with the plaintiffs. It is clearly a warning to a business client/associate of Stormwater, not to have anything to do with it because of such conduct. These are serious allegations concerning both plaintiffs, whose reputation in the US market is well known in this field.

301. The letter lists a number of instances which lead to the conclusion of underhanded and devious behaviour including infringement of the second defendant's trade mark EcoRain, blatantly copying the second defendant's website and infringing the second defendant's patent 549.

302. Evidence was given by Mr Larach at T-57.45 of the effect of this letter on Denver Plastics and the steps that he had to take to try and rectify the damage caused as a result of the letter. In view of the fact that the letter caused Denver to suspend its business with Stormwater, there was real concern that if this continued then this would put Stormwater out of business as it had overstretched itself as a small company to fulfil the terms of the large contract at LAX and Denver was obviously very concerned at the contents of the Atlantis letter.

303. In this action Mr Larach is the plaintiff as well as Stormwater. Different heads of damage are available for Mr Larach and I briefly set out those heads of damage below.

Damages to the first plaintiff as an individual

304. The first plaintiff is entitled to damages not only for injury to reputation but also injury and hurt to feelings. In Broome v Cassell [1972] AC 127 at 1073, Lord Helsham said that the concept of damages being at large should be used:

“In general to cover all cases where awards of damages may include elements for loss of reputation, injured feelings, and bad or good conduct by the party, or punishment, and where in consequence no precise limit can be set in extent.”

305. The various elements under injury to feelings are referred to at Carson, ibid, at 60. Mr Larach gave evidence of the hurt to his feelings when he was made aware of the letter to Denver Plastics (T-56.44) Also the failure to apologise (whether or not an apology was sought) may be taken into account in awarding damages as contributing to the first plaintiff’s hurt feelings and so going to ordinary compensatory damages. The lack of apology continues to this day and the letter from Atlantis dated 13 March 2007 to Bolzan and Dimitri in response to the latter for action (PB-146) illustrates the defendants' highhanded attitude towards this matter. Further the letter dated 20 June 2007 to Denver Plastics (PB-148) repeated the libel notwithstanding that proceedings had commenced against the defendants on 11 April 2007.

The defendants' plea of mitigation

306. The defence pleads a number of factors in mitigation of damages:

(a) That the circumstances of the publication of the matters complained of were such that the plaintiffs were not likely to suffer harm - this is not a factor in mitigation of damages but a substantive defence which is able to be pleaded under s 33 and dealt with separately above.

(b) The circumstances of the publication, including the fact that Mr Larach was a former employee of Atlantis and Stormwater was a former distributor of Atlantis' products. No further particulars are provided in the defence or elsewhere. These can have no relevance to the level of damages awarded by the Court. There is no plea of bad reputation and no particulars provided ( Defamation Law and Practice , [21,055]).

(c) The defendants also rely on the proceedings in California. According to the correspondence, when asked for particulars of facts and matters regarding mitigation, the defendants responded on 19 December 2007 by repeating the pleading without providing any new facts or matters.

(d) The defendants also rely on the truth of any imputations and/or contextual imputations which fall short of satisfying the defences of justification and contextual truth. I did not find that any of the imputations was true, so this particular of mitigation does not need to be considered.

Aggravated damages

307. Aggravated compensatory damages are claimed by Mr Larach for the following:

(a) failure to apologise;

(b) the letter dated 20 June 2007 to Denver Plastics (PB-148) repeated the libel, notwithstanding that proceedings had commenced against the defendants on 11 April 2007;

(c) the letter of 16 September 2008 (PB-153) to Hanes, which was lacking in bona fides or improper or unjustifiable ( Triggell v Pheeney (1951) 82 CLR 497). At T-81.35, Mr Osendorf said that Hanes was forced to suspend sales of the products until an investigation took place as to the validity of the claims set out in the letter of 16 September;

(d) the maintaining of a truth defence, including contextual truth, contributes to aggravation of damage by the accusations made and found not to be true. This includes cross-examination of Mr Larach accusing him of devious and underhanded conduct;

(e) the failure by the defendants to disclose the true facts in the third matter complained of, i.e. that there was a real dispute about ownership of the EcoRain trade mark and a real dispute about alleged infringement of patent;

(f) the Heng letter (DB-65) which accused Mr Larach of intellectual property fraud;

(g) the evidence of Mr Taylor who said that Mr Larach had approached him and asked (387.41) how he could get round patent 549. The first plaintiff submits that this clearly inferred a request to assist him to cheat Atlantis. Mr Taylor agreed in cross-examination that Mr Larach had already brought his new product with him so he could not have asked this question (T-395.1) and simply required his professional advice as to whether that product contravened the existing patent;

(h) the allegations in the interrogatories (PB-171) about Mr Larach evading creditors to the tune of $250,000 and being called a “crook” by Chilean manufacturers;

(i) the mocking nature of the references in the first two matters complained of and the interrogatories, to Mr Larach as a seller of women's stockings and used cars in a pejorative and patronising sense;

Issues relevant to the quantum of damages

308. Section 34 Defamation Act 2005 resembles s 46A Defamation Act 1974, which was the subject of careful analysis by the High Court in Rogers v Nationwide News Pty Limited (2003) 216 CLR 327. Hayne J noted that it was important to identify what features or characteristics of the particular case should be considered and what features or characteristics were relevant to compare with other cases when determining quantum. Any comparison which is drawn must look to the particular plaintiff, and not to what others may have thought of the defamatory words that were published, or what kind of injuries (including physical injuries in the case of personal injury) were sustained (per Hayne J at 354).

309. Decisions in the Supreme Court, such as Davis v Nationwide News Pty Ltd [2008] NSWSC 693 are of little assistance, because that was a mass media publication about an internationally renowned actress.

310. In Martin v Bruce (2007) 6 DCLR (NSW) 157, I noted and followed a number of decisions of the New South Wales Court of Appeal concerning small verdicts for publications which are extremely limited.

311. In the present case, an additional factor is important, and that is that in three cases a claim for damages is made by a company where there is no claim for special damages and no entitlement to damages for hurt to feelings or aggravated damages.

312. While the imputations published about the first plaintiff in the third publication and the second plaintiff in all three publications were matters of great seriousness, very great weight must be given to the limited extent of the publication of each of the matters complained of. While in relation to the first publication, there is evidence that it was read by a number of persons, and discussed at some length, the second and third publications were read only by a handful of persons.

313. Using the methodology adopted by the trial judge in Davis, I proposed to award damages as follows:

The first publication

314. This publication was the most serious in terms of its impact upon the reputation of the second plaintiff. The evidence of Mr Montgomery made this clear, as did the evidence of Mr Larach. I have had regard to sums awarded by corporations in Feo and Comalco. I award Stormwater the sum of $10,000.

The second publication

315. This was a publication to another company, EcoRain. The very limited nature of the publication of the letter is of great significance. I award the sum of $5,000.

The third publication

316. Again, in relation to the corporation, damages for this limited publication on the limited heads of damage available should be small and I award the sum of $5,000.

317. As to Mr Larach, the hurt to feelings he suffered from this letter was considerable. However, the extent of publication was limited. Taking into account the methodology explained by Hayne J in Rogers and adopted by McClellan CJ at CL in Davis, I propose to award him the sum of $20,000. This figure takes into account an entitlement to aggravated compensatory damages in that it is towards the top of the range which should be awarded for a letter of this kind, having regard to the ceiling on damages imposed by the Act. The corporate plaintiff, Stormwater, is of course not entitled to aggravated compensatory damages for any of these publications.

Costs and interest

318. The plaintiffs are entitled to interest on damages and I grant the parties leave to bring in Short Minutes of Order reflecting the agreed mathematical calculation of interest on the damages to be awarded.

319. The parties asked me not to make an order for costs until after hearing argument. I grant the parties liberty to apply in relation to orders for costs and any applications pursuant to s 40 Defamation Act 2005.

Orders

(1) Judgment for the first plaintiff on the first publication in the sum of $10,000.

(2) Judgment for the first plaintiff for the second publication in the sum of $5,000.

(3) Judgment for the first plaintiff on the third publication in the sum of $5,000.

(4) Judgment for the second plaintiff on the third publication in the sum of $20,000.

(5) The parties bring in Short Minutes of Order concerning mathematically agreed interest calculations on the damages awards.

(6) Liberty to restore in relation to interest and costs.

(7) Exhibits retained for 28 days.

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Annexures

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A – First matter complained of
============================

Our ref: PI30

5th December 2006

Tutor Saliba Builders

15901 Olden Street

Sylmar, CA 91342

USA

Re: Los Angeles Airport project
Underground infiltration/storage tanks

Dear Sirs,

Atlantis Corporation Pty Ltd is the proprietor of US Patent no. 6,648,549 and is the applicant for US trade mark application no. 78/873,006 for the trade mark EcoRain; there is no other listing for EcoRain on the computer records of the US Patent and Trade Mark Office.

It is our understanding Atlantis products were specified for this project. However it appears that another company is attempting to replace our Atlantis products with a copied product that even may even have been branded with a copy of our new trade mark. It is our understanding that a Chinese copied products are being offered for sale through Stormwater Solutions LLC or EcoRain System Inc.; these products, we are lead to believe, are being produced in China, from a design copied by Oscar Larach, an ex-Atlantis employee from our products. The copy would fall under the definition of 35U.S.C.271 (c) for contributory infringement.

The above opinion has been confirmed by an independent firm of US attorneys.

Therefore as we must now protect our patented products, we would suggest that you obtain advice from an independent US attorney as to any patent or trade mark infringement problems which might occur, if you use a copy product, rather than an Atlantis product. Please reply within 15 days from receipt of this letter.

A report on the intellectual Property problems is enclosed for your reference.

Yours faithfully,

Atlantis Corporation Pty Ltd

Humberto Urriola

Web Site Misleading & Deceptive Conduct

On the web site of Stormwater Solutions LLC, on 15th May 2006 it states that the products are patented, which on a simple search of the US Patent records clearly showed they weren’t. We were forced to draw this and many other misleading and deceptive statement to the attention of Stormwater Solutions LLC. They belatedly remove some of these.

However only two weeks ago we were forced to again write to their attorney pointing out that again the only pictures of project sites are sites where Atlantis products were used and not sites where any products presently sold by Stormwater Solutions LLC have been used. This is straight out fraud!

Additionally to the Home page, it states that “Our consultants have over 25 years of experience over 30 countries worldwide.” You would be lead to believe that Stormwater Solutions LLC or their employees have been in the water management business for 25 years, and have sold products in 30 countries. This is false.

This is a blatant misrepresentation. Oscar Larach worked for Atlantis Corporation for 12 years. Prior to that he sold women’s stockings and before that used cars.

Manuel Arriagada, a friend of Oscar Larach has only been in the stormwater industry for five years after becoming an Atlantis distributor in California; before that he was a truck driver. Hence the claim of 25 years experience is a gross misrepresentation.

Patent Situation

However turning to the patent question, we have compared the small and large plates, which I have been advised are produced in China on behalf of Oscar Larach or EcoRain Systems Inc. and/or sold through Stormwater Solutions LLC.

The small plates are made from plastics and are rectangular and comprise an outer edge wall, having four pins, in the shape of a cross in cross-section, on each edge wall; on the long edge walls the pins are longer than the short edge walls. Additionally the small plate engages with the Atlantis large plate.

The large plate has a similar construction except that it contains holes into which the pins of the small plate engage.

The plates comprise an array of webs, which are thicker in depth (into the plate) than in width (across the plate). The webs have a small reinforcing member running on the middle of both sides thereof. A similar reinforcing member is located on the inner side of the edge wall members.

The webs of the small plate are divided into three types:

1. a central portion having adjacent its opposed edges, short and long webs connected to a cylinder (which appears to be the injection points);

2. two edge longitudinal portions having “squashed” diagonal webs; and

3. two intermediate portions, on each side of the central portion, having diagonal webs with larger “spacing” than the “squashed” diagonal webs

The arrays of the large plate are also divided into three types

1. a central portion having two columns of “squashed” diagonal webs;

2.two edge longitudinal portions having “squashed” diagonal webs; and

3.two intermediate portions, on each side of the central portion, having diagonal webs with larger “spacing” than the “squashed” diagonal webs and with two buttressing cylinders in each portion.

It is strange that these plates are almost exactly the same size as the Atlantis plates, as if they were produced to substitute for an already prepared project specification in which Atlantis products had been specified.

I have reviewed the Atlantis US Patent no. 6,648,549 in the name of Humberto Urriola. The patent has a priority date of 18th October 1999, and is in force until 18th November 2011.

In order to infringe a claim, the allegedly infringing article must contain all the features that are stated in the claim and any claim to which it is appended.

The patent contains six (6) independent claims with eight (8) claims appended thereto.

All claims relate to “an underground infiltration system” and all of the independent claims relate to either a storage system or piping. Claims 1 & 2 are the broadest claims, with claims 6 & 7 including connection means located at the nodes to connect together adjacent tank modules.

Claim 1 reads as follows:

An underground infiltration system comprising a water storage unit

a) formed by a plurality of load bearing box like modules assembled to abut against and be stacked upon adjacent said modules to form a required size storage unit and

b) a water permeable geotextile wrapped around the assembled load bearing box like modules;

c) said modules having external wall panels, forming a void between the external wall panels,

d) said external wall panels having openings therethrough, such that water can flow into and out of the modules through the openings in said external wall panels and such that in use water can flow into and out of the storage unit through the external wall panels;

e) wherein each external wall panel has peripheral edge members, and

f) web members extending between the peripheral edge members; wherein the web members are thinner in their width than their depth;

g) wherein the web members define a plurality of arrays extending between said peripheral edge members, with each member in a respective array being parallel, and

h) the arrays meeting to form a plurality of nodes; and

i) wherein the array of the web members define, therebetween, the openings in the wall panels, providing support for the geotextile and providing structural integrity for the load bearing box like modules.

Features a) to d) and j) are common features found in the prior art, and are found in all infiltration tank modules, including the “small plate”. The novel features are features e) and h).

Turning to the Larach tank plates, we note that they have the following features:

e) peripheral edge members;

f) web members extending between the peripheral edge members, which are thinner in their width than their depth;

g) a plurality of arrays of parallel web members extending between the peripheral edge members, with

h) the arrays meeting to form nodes.

Therefore the Larach plates have all the features of claim 1 and whilst the plates on their own do not constitute an underground infiltration system per se, their only use is to form such a system and as such the importation, use, sale of the Larach plates would fall under the definition of 35U.S.C.271 (c) for contributory infringement.

Therefore at least claims 1, 2 & 12 are infringed, by the importation, offer for sale, or use of the “Larach plates” or any tank built from them.

In the specification on column 3 lines 2 it is stated that:

“These web members (4) can be curve, actuate (arcuate), sinusoidal, curved or any suitable shape. However preferably they are in the form of a plurality of straight line arrays, which intersect at nodes (5) thereby forming a plurality of triangular openings (6) separated by the thin web members (4).”

Hence it is not necessary that each web member be a single straight line, the web members could be any form and could comprise several deflections such as the form of the SS rune or zigzag.

In the case of blatant infringement the Court can award damages up to three times those assessed, (35 U.S.C. 284).

The above opinion has been confirmed by an independent firm of US attorneys.

It is our belief that Atlantis is the proprietor of the trade mark EcoRain, as shown by our trade mark application US application on. 78/873006; there are no other listings for that mark in the USPTO computer records. Therefore as soon as our trade mark application is registered we will approach the US Port Authorities to seize any goods, particularly those from China, bearing our trade mark.

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B – Second matter complained of
============================

Our ref: PI36

7th December 2006

EcoRain Systems, Inc.

1103 Rivery Blvd, #13

Georgetown, TX 7862

USA

Re: Patent and Trade Mark Infringement
Underground infiltration/storage tanks

Dear Sirs,

Atlantis Corporation Pty Ltd is the proprietor of US Patent no. 6,648,549 and is the applicant for US trade mark application no. 78/873,006 for the trade mark EcoRain; there is no other listing for EcoRain on the computer records of the US Patent and Trade Mark Office.

It is our understanding that a Chinese copied product is being offered for sale from your organization; these products, we are lead to believe, are being produced in China, from a design copied by Oscar Larach, an ex-Atlantis employee from our products. The copy would fall under the definition of 35U.S.C. 271 (c) for contributory infringement in respect of the abovementioned patent.

It is strange that these plates are almost exactly the same size as the Atlantis™ D-raintank™ plates, as if they were produced to substitute for an already prepared project specification in which Atlantis products had been specified.

We have reviewed the Atlantis US Patent no. 6,648,549 in the name of Humberto Urriola. It is our belief that your plates have all the features of claim 1 and whilst the plates on their own do not constitute an underground infiltration system per se, their only use is to form such a system and as such the importation, use, sale of your plates would fall under the definition of 35U.S.C. 271 (c) for contributory infringement.

Therefore we believe that at least claims 1, 2 & 12 are infringed, by the importation, offer for sale, or use of “your plates” or any tank built from them.

In the case of blatant infringement the Court can award damages up to three times those assessed, (35 U.S.C. 284).

The above opinion has been confirmed by an independent firm of US attorneys.

Therefore as we must now protect our intellectual property, we would suggest that you obtain advice from an independent US attorney who is not associated with Oscar Larach or Stormwater Solutions LLC as to any patent or trade mark infringement problems which might occur, if you continue to offer for sale the tank module appearing in your brochure.

Please reply to us within 15 days from receipt of this letter.

Yours Faithfully,
Atlantis Corporation Pty Ltd
Humberto Urriola

Products

Water Recycle Solutions.com uses only the best products available in the market to do the job of cleaning, purifying, storage and recycle water.
We are distributors of 3P Technik filters from Germany and Master Distributors for Australia, New Zealand and Asian Countries of the most advance Stormwater Management products and systems Eco Systems and proud of using them in our systems, we therefore only endorse and supply proven technologies to create our systems.

We only supply what is needed to complete a system that works and ideally is sustainable and with little maintenance.
Please see the following pages of our web site to see some of the technologies that we use.

Water Recycle Solutions uses only the best available products and systems to store water underground, that is why we have now established an exclusive relationship with Eco Systems to supply and install their systems of modular Eco Raintanks, Eco Drainage Cells in all of our jobs.

The Eco System of raintanks is a load bearing modular tank system that can be build to any size to create the desired storage. The system can be used under driveways, parking areas, sportfields or for infiltration, detention or retention of Stormwater or grey water.
They are economical and easy to use and install.

============================
C – Third matter complained of
============================

Our ref: PI29

22nd February 2007

Denver Plastics

2355 Aspen Street

Wahou, Nebraska 68066

USA.

Infringement of US Patent no. 6,648,549
In the name of Humberto Urriola

Dear Sirs

The Atlantis system was invented by Humberto Urriola in 1986; the complete Atlantis system for water management is marketed and sold today by Atlantis Corporation Pty Ltd and Rebirth Pty Ltd. The system comprises modular plastics wall panels which are formed by injection moulding.

It has come to own [sic] attention that a blatant copy of our Atlantis modular infiltration/storage tank system, is being produced in your area. As your company, after our investigations, appears to be a company in your area which the capability of producing the panels needed to build these tanks, we wish to draw the following matters to your attention.

Oscar Larach, an ex-Atlantis salesperson, has colluded with Stormwater Solutions LLC our sacked distributor and their associates EcoRain Systems, Inc. to copy the Atlantis tank system. This “copycat” system, which we understand is being sold under the trade mark EcoRain is substantially identical to the patented Atlantis™ system, which is the subject of the above US patent; a copy of the cover page is enclosed. Additionally they blatantly copied our website, contravening the Uniform Deceptive Trade Practices Act & the US Copyright, Patent and Trademark Act. Incidentally we are the proprietor of the trade mark EcoRain in the USA.

We have had US legal advice that the “copycat” system sold by Stormwater Solutions and/or EcoRain Systems, Inc. is an infringement of US patent 6,648,549, and that production of the components plates would fall under the definition of 35U.S.C. 271 (c) for contributory infringement as the “copycat” plates only use is to be assembled to create a tank which infringes US patent 6,648,549. Thus a manufacturer of the “copycat” plates would be guilty of infringement. Additionally if the product contains our trade mark EcoRain, the manufacturer would also be guilty of trade mark infringement.

Additionally the underhanded & dishonest actions by Stormwater Solutions LLC and Oscar Larach should make one extremely cautious in dealing with them.

If you are dealing with these people, it would be in your best interest to contact us as soon as possible.

Yours Faithfully,

Humberto Urriola