McMahon v John Fairfax Publications Pty Ltd (No 7)
[2013] NSWSC 933
•15 July 2013
Supreme Court
New South Wales
Medium Neutral Citation: McMahon v John Fairfax Publications Pty Limited (No 7) [2013] NSWSC 933 Hearing dates: 7-10, 13-17, 20-24, 27-29 February; 1, 2, 5-9, 12, 13 March; 4 April; 8 August 2012 Decision date: 15 July 2013 Before: McCallum J Decision: Defendants' motion for leave to reopen proceedings to make submissions dealing with plaintiff's standing to bring proceedings or to claim special damages dismissed
Plaintiff's damages determined in the amount of $300,000
Catchwords: BANKRUPTCY - plaintiff bankrupt at time of publication of defamatory articles by defendants and at time of commencement of proceedings - whether plaintiff had standing to bring proceedings including claim for special damages - whether right to prosecute action vested in trustee in bankruptcy
PRACTICE AND PROCEDURE - issue of plaintiff's standing to bring proceedings not pleaded in defence - application brought after conclusion of jury trial and hearing as to damages for leave to re-open proceedings to submit plaintiff had no standing - need to amend defence - factors relevant to exercise of discretion to grant leave to re-open case
DEFAMATION - damages - approach to assessment where defendants successful in establishing truth of some of plaintiff's imputations and contextual imputations - claim for economic loss - whether caused by publication of matter complained of - aggravated damagesLegislation Cited: Bankruptcy Act 1966 (Cth)
Civil Procedure Act 2005
Conveyancing Act 1919
Corporations Act 2001 (Cth)
Defamation Act 2005
Legal Profession Act 2004
Real Property Act 1900
Uniform Civil Procedure RulesCases Cited: Ahmadi v Fairfax Media Publications Pty Limited [2010] NSWSC 702
Besser v Kermode [2011] NSWCA 174
Bryant v Commonwealth Bank of Australia [1997] FCA 582; (1997) 75 FCR 545
Carson v John Fairfax & Sons Limited & Slee [1993] HCA 31; (1993) 178 CLR 44
Chakravarti v Advertiser Newspapers Limited [1998] HCA 37; 193 CLR 519
Davis v Nationwide News Pty Limited [2008] NSWSC 693
Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115
Hughes v Mirror Newspapers Limited (1985) 3 NSWLR 504
John Fairfax Publications Pty Limited v Zunter [2006] NSWCA 227
Mannigel v Hewlett Phelps [1991] NSWCA 186
McMahon v John Fairfax Publications Pty Limited (No 3) [2012] NSWSC 196
McMahon v John Fairfax Publications Pty Limited (No 4) [2012] NSWSC 216
McMahon v John Fairfax Publications Pty Limited (No 6) [2012] NSWSC 224
Moss aka Miller v Reimer Winter Williamson Lawyers (No 2) (New South Wales Supreme Court, Rothman J, 13 November 2009, unreported)
Moss v Eaglestone [2011] NSWCA 404; (2011) 285 ALR 656
Mundine v Brown [2010] NSWSC 1285
Nationwide News Pty Limited v Rogers [2002] NSWCA 71
Ord v Upton [2000] Ch 352
Rogers v Nationwide News Pty Limited [2003] HCA 52; (2003) 216 CLR 327
Triggell v Pheeney (1951) 82 CLR 497Category: Principal judgment Parties: Bryan McMahon (plaintiff)
John Fairfax Publications Pty Limited (first defendant)
Marcus Priest (second defendant)
Rachel Nickless (third defendant)Representation: B McClintock SC, K Andronos (plaintiff)
ATS Dawson, L Brown (defendants)
Ardent Lawyers (plaintiff)
Banki Haddock Fiora Lawyers (defendants)
File Number(s): 2008/289210 Publication restriction: None
Judgment
HER HONOUR: These are proceedings for defamation and injurious falsehood arising out of the publication of two articles in the Australian Financial Review on 5 October 2007 and 26 October 2007.
The plaintiff is Mr Bryan McMahon, a well-known and experienced solicitor. By the year 2007, Mr McMahon had been in practice for over 30 years and had established a national law firm carrying his name, with offices in each of the three capital cities on the eastern seaboard. In that year, however, the practice was struggling financially. On 2 October 2007, the practice went into administration and Mr McMahon filed a petition for bankruptcy. The articles sued on in these proceedings discussed those events.
The first defendant is the proprietor of the Australian Financial Review. The second and third defendants are the two journalists who wrote the articles.
The proceedings are governed by the Defamation Act 2005 and were tried by jury. In accordance with s 22(2) of the Act, the task of the jury was to determine whether the defendants had published defamatory matter about Mr McMahon and, if so, whether any defence raised by the defendants had been established. The trial before the jury went for over 5 weeks. In accordance with the usual practice in defamation trials in this State, the jury was asked to answer specific questions. Owing to the complexity of the issues that arose for the jury's determination, the questions were directed in two stages: see McMahon v John Fairfax Publications Pty Limited (No 6) [2012] NSWSC 224 at [4].
The effect of the jury's answers to the first set of questions (MFI 41) was that the claim in injurious falsehood was not established. That claim must accordingly be dismissed. However, the fact that a claim in injurious falsehood was prosecuted remains relevant to the consideration of an application brought by the defendants after the conclusion of the hearing (explained below).
The defamation claim was partly successful. Accordingly, it fell to me to determine the amount of damages (if any) that should be awarded to Mr McMahon and all unresolved issues of fact and law relating to the determination of that amount: s 22(3) of the Defamation Act.
After a separate hearing as to damages and while my decision was reserved, the defendants filed a notice of motion in substance seeking leave to re-open their case. This judgment determines that application. Since I have determined that the application must be dismissed, this judgment also determines the amount of damages that should be awarded to Mr McMahon.
Defendants' application for leave to re-open their case
Order 1 sought by the defendants is in the following terms (notice of motion filed in court on 8 August 2012):
that the defendants be granted leave to file a further written submission dealing with the plaintiff's standing to bring his special damages claim.
Although the order sought is directed in terms to a particular aspect of the remedy sought by the plaintiff, the argument on the motion proceeded by reference also to the causes of action prosecuted by him in the proceedings. The relief sought was thus better captured in the form of an amended order 1 set out in a proposed amended notice of motion handed up during argument, as follows:
that the defendants be granted leave to file a further written submission dealing with the plaintiff's standing to bring these proceedings, and alternatively the claim in injurious falsehood and for special damages.
The proposed amended motion also sought to add a prayer (order A) for leave to amend the defence, as follows:
that the defendants be granted leave to amend their defence to plead specifically that the plaintiff had no standing to bring these proceedings, and alternatively the claim in injurious falsehood and for special damages.
For the reasons debated at some length with counsel at the conclusion of argument on the motion, the proposed amended motion was not ultimately filed in Court, its consideration being deferred on the basis that the application for leave to amend had come without notice and may not arise in any event (see T29-35). I should indicate, however, that in dismissing the present application, I have considered (and rejected) the arguments put by the defendants in support of order 1 in its proposed expanded form.
The defendants' application for leave to make a further submission directed to the issue of standing arose from the bankruptcy of the plaintiff (a fact which existed before publication of the matters complained of). The plaintiff became a bankrupt on 2 October 2007. The first matter complained of in these proceedings was published on 5 October 2007. The plaintiff commenced the proceedings on 6 June 2008. He was discharged from bankruptcy by operation of law on 5 October 2010.
Although the application proceeded as an application to put submissions not yet before the Court, it is necessary to summarise the proposed submissions in order to explain the point.
Mr McMahon's claim included a claim for special damages based on the contention that, on 5 October 2007 and as a result of the publication of the first matter complained of, a large client of the practice (Lumley General Insurance Limited) withdrew all instructions from him, resulting in substantial financial loss. That contention formed the basis for a claim for special damages in the defamation action and was also relied upon as the element of actual damage in the injurious falsehood action.
The standing point turns on the status, in Mr McMahon's bankrupt estate, of the right to make that claim. Upon Mr McMahon's being made a bankrupt, certain property of his became property divisible amongst his creditors: s 116(1) of the Bankruptcy Act 1966 (Cth). Pursuant to s 116(2)(g) of the Act, the property divisible amongst the creditors did not extend to:
(g) any right of the bankrupt to recover damages or compensation:
(i) for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
(ii) in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person.
I did not understand the defendants to contend that the tort of defamation is anything other than a "personal injury or wrong" done to a person (in the sense in which that expression is used in the Bankruptcy Act). The defendants expressly accepted that a bankrupt is free to pursue a claim in defamation, at least where only damages for personal injury or wrong done to the bankrupt are claimed (by which they meant where no claim for special damages is or can be made).
However, the defendants seek to submit that, where there is an available claim for special damages in a defamation action, the right to sue is property which vests in the trustee in bankruptcy. It was submitted on that basis that "either the whole of the cause of action in defamation, or at least the special damages claim, vested in the trustee". On that premise it was submitted that, depending upon which conclusion is correct, the plaintiff required an assignment either of the whole of the cause of action or of "the claim for special damages in order to have standing to sue (assuming that it is possible for the trustee to assign property to the bankrupt during the bankruptcy)".
The defendants further submitted that the claim in injurious falsehood, being a claim for economic loss suffered by the plaintiff in his business, was property which vested in the trustee. As already noted, the result of the jury's findings is that that claim must be dismissed. The defendants nonetheless submitted that the issue as to whether Mr McMahon ever had standing to bring the claim must now be determined.
The defendants' contention rests principally on the alleged indivisibility of the plaintiff's causes of action. They contend that, on the present state of the law, the causes of action in defamation and injurious falsehood are indivisible and so vested in their entirety in the trustee in bankruptcy. That conclusion was said to flow from the fact that the claims included a claim for loss of business income which could not be severed from the part of the claim seeking damages for injury to person or reputation. It was submitted that, the causes of action having vested in the trustee, the right to recover damages for injury to reputation (undoubtedly personal to the bankrupt) was held on constructive trust by the trustee, citing Ord v Upton [2000] Ch 352. On that premise, the defendants submitted that Mr McMahon had no standing to bring the proceedings at all.
Mr McClintock SC, who appeared with Mr Andronos for Mr McMahon, submitted that the application for leave to put those submissions should be dismissed peremptorily. He noted the requirement of r 14.14(2)(b) of the Uniform Civil Procedure Rules that any matter which a defendant alleges "makes any claim not maintainable" must be pleaded specifically. It was in response to that submission that the defendants sought to amend their notice of motion to add a prayer for leave to amend the defence.
Mr Dawson, who appeared with Ms Brown for the defendants, submitted that whether or not the matter had been pleaded it had to be addressed, since it raises the spectre of the proceedings being a nullity. In the face of that submission I considered that it would be preferable to determine the defendants' application for leave to make the further submissions summarised above having regard to the merits of those submissions rather than resting on the pleading point.
It was frankly acknowledged that the explanation for not having taken the standing point earlier was that it did not occur to counsel for the defendants until the decision of the Court of Appeal in Moss v Eaglestone [2011] NSWCA 404; (2011) 285 ALR 656 came to their attention. That decision was in fact published before the jury trial in these proceedings. It was implicit in the explanation offered that the decision did not come to Mr Dawson's attention until after the hearing as to damages. Had the application not raised a matter potentially going to jurisdiction, the plain inadequacy of that explanation and the gross prejudice to Mr McMahon in allowing the point to be taken so late would clearly have been fatal to the application.
The question is whether the decision of the Court of Appeal in Moss or the principles and authorities considered in that decision hold or support the conclusion that the right to prosecute Mr McMahon's claims vested in his trustee in bankruptcy.
It is clear enough that the decision in Moss is not itself binding or determinative on that point. Mr Moss brought proceedings against his former solicitor, Mr Eaglestone. Mr Eaglestone had been retained to act for Mr Moss in earlier proceedings in the District Court for an alleged breach of contract by a journalist in failing to pay Mr Moss for information provided by him and used in a published article. The earlier proceedings were ultimately unsuccessful. Mr Moss then sued Mr Eaglestone for a series of alleged breaches of duty including for failure to include, in the proceedings in the District Court, a claim against the journalist for defamation by the same article. The primary judge ordered that the proceedings be stayed permanently: Moss aka Miller v Reimer Winter Williamson Lawyers (No 2) (New South Wales Supreme Court, Rothman J, 13 November 2009, unreported). Rothman J held (at [16]) that Mr Moss's action against Mr Eaglestone (for negligence or breach of contract) was not in respect of a "personal wrong" of the kind contemplated by the provisions of s 60(4) of the Bankruptcy Act. Accordingly, his Honour held that Mr Moss could not continue the action in his own name.
In the appeal, it was uncontroversial that an action for defamation is an action in respect of a personal injury or wrong within the meaning of ss 60(4) and 116(2)(g)(i) of the Bankruptcy Act. The Court of Appeal expressly so held, noting that "the fruits of any such action would not form part of the property divisible amongst the creditors of the bankrupt": at [8] per Allsop P; Campbell and Young JJA agreeing at [81] and [82] respectively. The critical issue in the appeal was whether Mr Moss's action in professional negligence against Mr Eaglestone for the loss of that action should be treated any differently. The issue raised by the present application did not arise for determination by the Court of Appeal.
Mr Dawson nonetheless submitted that the principles stated by the President (as his Honour then was) in Moss point inexorably to the conclusion that Mr McMahon had no standing to bring the present proceedings. Mr Dawson relied in particular on the President's discussion of the difficulties that arise where property and personal damage arise from the same wrong or cause of action.
The President's judgment traces the development of the concept of the property of the bankrupt as meaning the property divisible amongst his creditors. After explaining the genesis of the exclusion of actions for personal wrongs from that divisible estate in the English "common law of bankruptcy", his Honour drew assistance from that history in appreciating that the distinction in the law of bankruptcy between person and property is "a substantive one". His Honour said (at [64]):
It was a distinction made by courts and judges of the highest authority who declared it to be unjust and harsh that the estate of the bankrupt and the participating creditors should be swelled and advantaged by a wrong to the person or reputation of the bankrupt.
That unjust and harsh outcome is a potential corollary of the construction of the law contended for by the defendants in the present application. They submitted that, in accordance with the principles discussed by the President, particularly at paragraphs [68] to [77] of his Honour's judgment, Mr McMahon's "personal damage is inseverable from the property claim" (T5.41 of 8 August 2012). Mr Dawson submitted that although (on that analysis) a chose in action to prosecute a claim for economic loss, if vested in the trustee, takes with it the right of the bankrupt to recover damages or compensation for the personal wrong (the defamation), it has nonetheless been held that "you can't divide it". It would follow from that analysis that a claim in defamation would be left to be prosecuted at the discretion of a person other than the person defamed.
Close attention must be paid in that context to what is said to be indivisible. It was at one point suggested by Mr Dawson that the claim in defamation was indivisible from the claim in injurious falsehood since, although they are two different causes of action, they arise in respect of the same wrong (T26.13 - T27.13 of 8 August 2012). That submission serves to emphasise the prejudice to Mr McMahon of allowing this point to be taken at this late stage, after the conclusion of the hearing. Had the point been taken in a defence filed within 28 days after the filing of the relevant pleading, the plaintiff may have elected to recast his claim.
In any event, no clear principle holds that an action in defamation (vesting in a bankrupt) is indivisible from an action in injurious falsehood (if that vests in the trustee) arising from the same publication. It may be acknowledged that the prosecution of those separate claims by different parties may give rise to difficulties but the present question is what principle holds. The remarks of Allsop P in Moss relied upon by the defendants were directed to the difficulty which arises "where property and personal damage arise from the same wrong or cause of action" (at [68], my emphasis). Section 116(2)(g) excludes from the divisible estate "any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt". I see no reason why those words should not be construed to protect a right to prosecute a cause of action in defamation, regardless of the existence of a discrete right (whether in the bankrupt or someone else) to prosecute a cause of action in injurious falsehood arising from the same publication.
It may be noted in that context that, in Moss at [68], Allsop P said:
The dividing line in these cases has been drawn by reference to whether the personal action is severable from, or directly related to, or consequential upon, the property claim. These difficulties do not arise here; the limitation on the grant of leave to appeal was to the claim for defamation.
That remark reinforces my view that a claim in defamation is to be regarded as being severable from a claim for a different cause of action. The "property claim" in that case was failure to make a payment in accordance with an alleged contract; here it was the alleged publication of an injurious falsehood (assuming that is a property claim). In either case I see no reason why an action on the discrete cause of action for defamation may not be brought separately.
The more difficult question is whether, within the defamation action, one claim for relief (for damages for injury to reputation and hurt to feelings) is divisible from another (the claim for economic loss or "special damages"). Mr McClintock put a submission that, in hindsight, the special damages claim could better be characterised as a claim for damages for loss of earning capacity. In any event, whatever the proper characterisation or correct description of the claim, the critical question is whether it is indivisible from Mr McMahon's right to recover damages for injury to his reputation and hurt to feelings arising from the defamation such that, notwithstanding the provisions of s 116(2)(g), the latter right is not excluded from his divisible estate.
The first thing to be noted in that context is that the decision in Moss raised a different (albeit related) issue as to whether, if indivisible, the relevant action was stayed under s 60(2) of the Bankruptcy Act. Whilst similar issues arise in considering s 60 and s 116 of the Act, the focus of the two sections is not identical. Section 60 is concerned with the stay of "an action" (s 60(2)) and the right of the bankrupt to continue "an action" in his own name (s 60(4)), whereas s 116 is concerned with the exclusion of "property" (being a right to recover damages or compensation for personal injury or wrong) from the divisible estate.
Perhaps more importantly, the cases considered by Allsop P in Moss were concerned with the position where the relevant personal injury or wrong was consequential upon a proprietary claim. Here it is the other way around: Mr McMahon's special damages claim derives from the personal wrong.
Allsop P referred (at [73]) to the decision of the Federal Court in Bryant v Commonwealth Bank of Australia [1997] FCA 582; (1997) 75 FCR 545 at 554. The principal assertions made by Mr Bryant in that case centred upon his alleged rights under the Real Property Act 1900 and the Conveyancing Act 1919 in resisting the enforcement by the Commonwealth Bank of securities guaranteed by Mr Bryant. In addition, he claimed "unspecified damages" in respect of loss of business reputation, loss of standing in the community, loss of amenities of family life, stress and suffering and exemplary damages.
Lockhart J held that those claims were "consequential upon the loss or damage...which is referable to the proprietary claims" and thus passed to the trustee. O'Loughlin and Merkel JJ similarly held that Mr Bryant's claims were essentially claims referable to his financial and property rights so that, as was the case in Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115, "the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt".
Allsop P also referred (at [74]) to the decision of the Court of Appeal in Mannigel v Hewlett Phelps [1991] NSWCA 186, applied in Bryant. The principal claim in Mannigel was for professional negligence in connection with the purchase of land and the construction of a home on the land. It included a claim for loss of credit and reputation, inconvenience and mental stress and strain consequential upon the economic loss claimed. Handley JA held that the causes of action sued on (in contract and tort) were indivisible and so, in the absence of any separate cause of action to recover damages for any personal injury or wrong, passed to the trustee.
It is necessary to give close attention to the conclusions drawn (and not drawn) by Allsop P from his consideration of those and other authorities. His Honour said (at [77], my emphasis):
No one submitted that any of these Australian cases, Faulkner v Bluett, Mannigel, Bryant or Daemar should not be followed. What they permit is a conclusion, that to the extent that damages for personal injury or wrong are inseverable from or directly consequential upon interference with property rights, a claim for them does not survive the stay brought about by s 60(2). This would not mean, however, that the action here for the lost chose in action, being the defamation claim, was stayed under s 60(2). It is an action that is referable to or "in respect of" a personal wrong. Whilst the claim for defamation against News may have comprised part of the same controversy or matter as contained in the matter litigated before Delaney DCJ if one were engaged in an analysis of federal jurisdiction, it was not inseverable from the contract claim or consequential upon it as arising out of that cause of action. There was a separate and distinct cause of action for defamation for the publication of the appellant's antecedent criminal record. This circumstance was distinguishable from Hodgson, Morgan v Steble , Mannigel and Bryant where the "personal" injury flowed from, as one of the effects of, the damage to property. It remains for another occasion to explore how far cases such as these should be taken to deny a bankrupt a substantive claim for non-pecuniary and personal damage which would otherwise fall within the description of the consequence of "personal injury or wrong" because of its connection to an otherwise indivisible cause of action, and whether, and if so to what extent, ss 60(4) and 116(2)(g) can be seen to operate to divide the value of an action between trustee and bankrupt, or the extent to which the approach of the Court of Appeal in Ord v Upton is to be, or might be, applied under the Act. In this respect, the following passage from Lockhart J's reasons in Faulkner v Bluett at 119 is relevant:
"There is still some doubt whether a right of action passes to the trustee where one and the same cause of action results in substantial damage to the property of the bankrupt as well as substantial injury to his person or annoyance to his feelings: Beckham v. Drake; Hodgson v. Sidney ; Morgan v. Steble . In England the accepted view seems to be that such a cause of action passes to the trustee so far as it relates to the property of the bankrupt, and remains with the bankrupt so far as it relates to his person or feelings: Wilson v. United Counties Bank Limited. Some of the problems that arise from this notion of a "mixed action" appear from cases such as Wilson v. United Counties Bank Limited and Beckham v. Drake ."
I would draw two important conclusions from that passage of the judgment in Moss. First, Allsop P plainly contemplated that a cause of action in defamation is severable from a different cause of action (there, contract) even though those two causes of action arose from what would be characterised as the same "controversy or matter" in a different juridical context.
The second point is that his Honour expressly preserved for another day the question of the divisibility of a claim for damages for personal injury or wrong connected to "an otherwise indivisible cause of action" and specifically adverted to the possibility that s 116(2)(g) may operate "to divide the value of an action between trustee and bankrupt".
Finally, it may be observed that there does not appear to be any authority binding on the present point.
The critical consideration is the fact that, whatever the common law holds, the question as to what "property" was divisible amongst Mr McMahon's creditors is governed by the statute. It follows, in my view, that the defendants' application must ultimately be determined by reference to the clear words of s 116. The section contemplates that the property of a bankrupt is divisible. The division is between property divisible amongst the creditors and property falling within subsection 116(2), which is not divisible amongst the creditors. Section 116(2)(g) provides that any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt does not fall within the property divisible amongst the creditors. The construction contended for by the defendants would require those words to be read with the gloss "except where those damages include a component for past or future economic loss". Mr McMahon has a right to recover damages for personal injury or wrong done to him, namely, the right to recover damages for defamation. If that right includes a right to "special damages" or economic loss or damages for loss of earning capacity, I do not see why that should alter the characterisation of the right as property excluded from the divisible estate. Nothing in the decision in Moss militates against that conclusion.
If it is correct as a principle of common law that a cause of action for defamation is "indivisible" in the sense that the right to recover damages for injury to reputation and hurt to feelings cannot be divided from the right to recover damages for economic loss, then in my view the statute plainly provides that the whole of that right is excluded from the property divisible amongst the creditors of the bankrupt.
If the cause of action is divisible, with the result that the trustee and not Mr McMahon was the proper plaintiff in the claim for economic loss, it does not matter in the present case, in light of the conclusion I have reached as to the claim for economic loss (considered below).
The only other possibility is that the cause of action is indivisible and vests in the trustee, carrying with it the right to recover damages for injury to reputation and hurt to feelings arising from the defamation. As already stated, in my view that analysis is contrary to the plain words of s 116 as informed by the history and principles carefully analysed by Allsop P in Moss.
For those reasons, I have concluded that the point sought to be made by the defendants is either wrong or of no practical significance in so far as it is directed to the defamation claim. In so far as it is directed to the claim in injurious falsehood, it is raised too late and can have no bearing on the outcome of the case except arguably as to costs. Accordingly, leave to make the further submissions should be refused.
Mr McMahon's claims
Both of the matters complained of were published in the "Legal Affairs" section of the Australian Financial Review, a column published each Friday in that newspaper. Mr McMahon described it as a "gossip column" (T216.44). I do not think that is a fair characterisation of the column or the work of the journalists who write in it. I would accept, however, that the legal profession is one in which unfounded and sometimes vicious gossip about other members of the profession can spread quickly, including in relation to the kind of matters reported in the articles sued on. Further, my assessment that "Legal Affairs" is a serious forum for the reporting of matters of interest and importance to lawyers if anything establishes the likelihood of greater harm to reputation than might be done by a column more readily dismissed as merely propounding gossip.
The first article was published under the headline "Drought and tax sinks mid-tier firm". The key points of the article were summarised under the headline as follows:
McMahons National Lawyers went into voluntary administration after a $750,000 claim against the firm and its managing partner.
The firm had been incorporated under Corporations Law reform.
The administration will be a test of how to handle client files.
The article opened with the assertion that "the taxman has claimed a major scalp in his bid to crack down on unpaid tax in the legal profession", reporting that McMahons National Lawyers had gone into voluntary administration "after the Australian Taxation Office hit the firm and its managing partner with a $750,000 demand".
The article wrongly named Gerard McMahon as the managing partner. However, it was common ground at the trial that the plaintiff was in fact the managing partner of the firm and would have been known as such to at least some within the legal profession.
The matters reported in the article included the fact that current and former staff were amongst the firm's creditors, due to unpaid superannuation. The article also asserted that, on the day the firm went into administration and Mr McMahon went into bankruptcy, he and another partner at the firm had established a new law firm "just blocks away from their existing office where the old firm was placed in administration".
Mr McMahon was quoted as having attributed the collapse to the fact that the firm had done "too much work for clients who had been unable or unwilling to pay". This was despite his "continuous exhortations to the contrary". He was quoted as having said that he and the firm were owed almost $2 million in outstanding fees from clients including financially distressed rural clients. He was also reported to have claimed that, if staff were due bonuses, there would be sufficient funds to meet those and all other employee entitlements. The article continued with a discussion of the complexity of the administration since, as this was the first collapse of an incorporated law firm, there was no precedent as to how the provisions of the Corporations Act 2001 (Cth) would apply, especially as to the handling of client files.
In the last part of the article, it was reported that the structure of the firm meant that senior lawyers had acted almost independently and that, as a result, it was understood that staff had only become aware of the firm's financial problems "on Tuesday".
The second article was published three weeks later under the headline "McMahons' managing partner faces investigation". It reported that Mr McMahon was "facing an investigation by the Legal Services Commissioner of New South Wales, while his firm's administrator has revealed creditors are likely to be left out of pocket". The article asserted that a spokeswoman for the New South Wales Attorney-General John Hatzistergos had confirmed that the Legal Services Commissioner, Steve Mark, was looking into the troubled mid-tier firm. The article said:
It is understood Mr Mark is investigating whether to prosecute Mr McMahon. While Mr Mark declined to comment, he can seek to remove or suspend a lawyer's practising certificate, or fine a lawyer up to $50,000 if they are found to have breached the Legal Profession Act. Mr McMahon said he was unaware of any investigation.
The article repeated the contention in the earlier article that Mr McMahon had become a consultant with a new law firm, McMahon Charleston Lawyers, just across the road from the McMahon offices in Sydney which had been closed down. The article also said:
Mr McMahon set up a complicated structure for his firm just months before it went into administration. Mr Cussen said outstanding employee entitlements were still being calculated and he was still trying to understand which McMahons entity was responsible.
The article proceeded to explain the structure of McMahons National Lawyers, being a "limited partnership", which the article described as unusual. The article described arrangements between employees and the limited partnership, noting that if the new limited partnership could not cover employee entitlements, they would be covered by the original partnership. However, the article noted that a separate agreement provided that a management company which was the general partner of the limited partnership (and of which Mr McMahon was the sole director) had indemnified the limited partnership for all amounts owing, including employee entitlements. That had raised alarm among former staff because the management company had just over $60,000 in cash assets, while some individuals were reported to have been owed bonuses of up to $70,000 and also owed leave pay.
The article concluded:
On Monday, Mr Cussen will recommend to creditors that the management company go into liquidation. His report states there may be a "prima facie case for insolvent trading" and a liquidator, if appointed, must investigate the company's guarantee to determine if it breached the Corporations Act.
Mr McMahon denied any wrongdoing, saying the limited partnership was solvent when it went into receivership.
Defences
In response to the claim in defamation, the defendants relied at trial upon the defences of substantial truth and contextual truth under s 25 and s 26 respectively of the Defamation Act. The truth defence was pleaded by reference to the truth of each individual imputation. During the trial, on the application of the plaintiff, I ruled that the defence would not go to the jury as to some imputations.
The jury's determinations
As already noted, the jury's task was divided into two stages. First, they considered a combined set of questions addressing both the claim in defamation and the claim in injurious falsehood. The issues addressed in those questions were whether the meanings relied upon by Mr McMahon were conveyed (relevant to both claims); whether they were defamatory (an issue in the defamation claim only); as to some imputations, whether they were substantially true (an element of the defence of truth to the defamation claim); whether they were false (an element of the claim in injurious falsehood); whether in publishing the articles the journalists were actuated by malice (an element of the claim in injurious falsehood) and whether Mr McMahon had suffered actual financial loss as a result of the publications (an element of the claim in injurious falsehood).
It was proposed in the second stage to address the questions raised by the defence of contextual truth and damages for injurious falsehood (not for defamation). However, the jury's answers in the first round obviated the need for them to quantify any damages for injurious falsehood. The effect of their answers in the second round was that the defence of contextual truth was not made out.
It is necessary to record the detail of the jury's determinations.
First article
Mr McMahon relied upon four imputations in respect of the first article. The first (imputation (a)) was:
The plaintiff so failed to meet his tax obligations that he was a major scalp in a crackdown on unpaid tax by the Australian Taxation Office.
The jury found that imputation (a) was conveyed and was defamatory of Mr McMahon. The defendants had pleaded the defence of truth to that imputation but I withdrew that defence from the jury: McMahon v John Fairfax Publications Pty Limited (No 6) at [8]. For the purpose of the claim in injurious falsehood, the jury was asked whether Mr McMahon had established that imputation (a) was false. They found that he had.
Imputation (b) alleged to arise from the first article was:
That the plaintiff behaved in a dishonourable way by permitting his old firm to go into administration and, on the same day, opening a new firm.
The jury found that imputation (b) was conveyed and was defamatory of Mr McMahon. However, by majority, they found that it was substantially true. Consistent with that finding, they found (by majority) that Mr McMahon had failed to established that imputation (b) was false (an issue that arose for the purpose of the claim in injurious falsehood).
Imputation (c) alleged to arise from the first article was:
That the plaintiff cheated the staff of his firm by failing to pay the superannuation monies which they were owed.
The jury found that imputation was not conveyed.
Imputation (d) alleged to arise from the first article was:
That the plaintiff had behaved in a devious and underhand way by concealing the true financial position of his firm from his staff.
By majority, the jury found that imputation was not conveyed.
The injurious falsehood claim failed because, although the article was found to have conveyed one false meaning (imputation (a)), the jury found that Mr McMahon had failed to establish that the defendants were actuated by malice, which is an element of that cause of action.
Thus only the claim in defamation survived the first round of questions to the jury and only in respect of imputation (a). The second round of questions (MFI 44) was directed to whether the defence of contextual truth to that imputation was established. There were two additional meanings relied upon by the defendants. They were that the plaintiff is a bankrupt solicitor and that the plaintiff's legal practice collapsed partly because he was unable to pay a substantial debt owed to the Australian Taxation Office. The jury found that each of those additional meanings was conveyed by the article and was substantially true (as to the second, that finding was by majority). However, the jury found (by majority) that the defendants had failed to establish a further element of the defence of contextual truth: that imputation (a) did not further harm Mr McMahon's reputation because of the substantial truth of the additional meanings.
It follows that, in accordance with the jury's findings, the first article was defamatory of Mr McMahon in that it conveyed the imputation, to which no defence has been established, that he so failed to meet his tax obligations that he was a major scalp in a crackdown on unpaid tax by the Australian Taxation Office. Mr McMahon is entitled to an award of damages in defamation on that basis.
Second article
Mr McMahon relied upon four imputations arising from the second article (a fifth, imputation (c), was not left to the jury: McMahon v John Fairfax Publications Pty Limited (No 6) at [10]. In this judgment I have preserved the original identification of the imputations for ease of reference).
Imputations (a) and (b) may be considered together. They were:
That the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should be prosecuted for offences;
That the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should lose his practising certificate and be fined for breaches of the Legal Profession Act.
The jury found that those two imputations were conveyed and were defamatory of the plaintiff. I withdrew the defendants' truth defence in response to those two imputations from the jury: see McMahon v John Fairfax Publications Pty Limited (No 6) at [9]. For the purpose of the claim in injurious falsehood, the jury was asked whether the plaintiff had established that those meanings were false. The jury found that he had.
Imputation (d) complained of in respect of the second article was:
That the plaintiff deliberately set up a complicated structure for his firm so as to avoid paying employee entitlements.
The jury found that imputation (d) was conveyed and was defamatory of Mr McMahon. The defendants' truth defence in respect of that imputation went to the jury. The jury found that the defendants had failed to establish that the imputation was substantially true and, consistent with that finding, found that Mr McMahon had established that it was false.
Imputation (e) complained of in respect of the second article was:
That the plaintiff had conducted his firm's affairs dishonourably and so as to permit it to avoid payment of the debts which it owed.
The jury found that imputation (e) was conveyed and was defamatory of Mr McMahon. The jury found, by majority, that the defendants had established that imputation to be substantially true. Consistent with that finding, they found that Mr McMahon had failed to establish that it was false, also by majority.
As with the first article, the jury found that Mr McMahon had failed to establish that the defendants were actuated by malice, which was fatal to the injurious falsehood claim.
In the second round of questions directed to the defence of contextual truth, the jury was asked to consider two additional meanings relied upon by the defendants. They were that the plaintiff so conducted himself as a solicitor as to warrant the Legal Services Commissioner of NSW, Steve Mark, to investigate whether to prosecute the plaintiff and that the plaintiff so conducted himself as a solicitor as to warrant the Legal Services Commissioner of NSW, Steve Mark, to undertake an investigation into the affairs of the plaintiff. The jury found that each of those additional meanings was conveyed by the article but (by majority) was not substantially true.
It follows that, in accordance with the jury's findings, the second article was defamatory of Mr McMahon in that it conveyed the three imputations to which no defence has been established: that the plaintiff was being investigated by the Legal Service Commissioner to determine whether he should be prosecuted for offences; that he was being investigated by the Legal Services Commissioner to determine whether he should lose his practising certificate and be fined for breaches of the Legal Profession Act 2004; and that he deliberately set up a complicated structure for his firm so as to avoid paying employee entitlements. Mr McMahon is entitled to an award of damages in defamation on that basis.
Damages
Leaving aside any claim for particular economic loss, the purposes of an award of general damages for defamation are threefold, as explained by the High Court in Carson v John Fairfax & Sons Limited & Slee [1993] HCA 31; (1993) 178 CLR 44 at 60 (citations omitted):
The three purposes no doubt overlap considerably in reality and ensure that "the amount of a verdict is the product of a mixture of inextricable considerations". The three purposes are consolation for the personal distress and hurt caused to the appellant by the publication, reparation for the harm done to the appellant's personal and (if relevant) business reputation and vindication of the appellant's reputation. The first two purposes are frequently considered together and constitute consolation for the wrong done to the appellant. Vindication looks to the attitude of others to the appellant: 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.
In determining the amount of damages to be awarded for those purposes, the court is to ensure that there is an appropriate and rational relationship between the harm sustained by the plaintiff and the amount of damages awarded: s 34 of the Defamation Act. The maximum amount that may be awarded for those purposes is capped at $355,500: Gazette No 65 of 31.5.2013, p 2307. That is the cap that applies to the whole claim in the proceedings even though the plaintiff has been successful in respect of two separate publications: see Davis v Nationwide News Pty Limited [2008] NSWSC 693 per McClellan CJ at CL at [8] to [9]. Mr McClintock formally submitted otherwise, but accepted that I would follow the decision of the former Chief Judge in Davis.
The plaintiff also claims aggravated general damages and special damages for loss of past and future income which it is alleged would have been earned but for the publication of the matters complained of.
Vindication of the plaintiff's reputation
The defendants did not dispute that, prior to the publication of the two articles, Mr McMahon had a good reputation, being widely regarded as a decent person and a competent solicitor. Although it was not necessary to adduce evidence to that effect, there was ample evidence of his good professional reputation from his professional peers and business clients.
I accept without qualification that, as submitted on his behalf, Mr McMahon had an extremely high reputation as a decent, honourable and highly competent solicitor. The evidence to that effect (summarised in the plaintiff's outline of submissions on damages) was not challenged at the hearing and indeed the defendants conceded Mr McMahon's good reputation.
Mr David Arnott SC expressed the view that he and others in the legal community thought the plaintiff to be "a person of high character, good fame...[and]...integrity", further adding that he regarded the plaintiff to be "a decent and...very nice man" (T180.22).
Former Lumley CEO, Mr David Matcham, gave evidence that the plaintiff was "regarded well" by his colleagues at Lumley's in his capacity as managing director of McMahons National Lawyers (T794.19). Another insurance industry executive, Mr Glenn Ross, spoke of the plaintiff as having been "held in fairly high regard in the [insurance] industry and particularly as a specialist in insurance litigation" (T889.16).
Mr Ken Kanjian, a solicitor and friend of the plaintiff, stated that, so far as he was aware, the plaintiff had enjoyed a "first rate" reputation up until the publication of the first matter complained of (T899.46). Another senior solicitor and friend of the plaintiff, Mr John Dawson, also proffered the view that the plaintiff was "well regarded" within the legal fraternity, having established a "good reputation in a particular area of work", namely in the provision of legal services to insurance companies (T905.1).
Further, as submitted on behalf of Mr McMahon, there was unchallenged evidence (if evidence is necessary on such an issue) as to the importance of a solicitor's reputation to him or her. I accept that reputation is extremely important in the legal profession, where so much turns on what passes by word of mouth. Damage to a lawyer's reputation concerning his professional standing is likely to have a particularly substantial and lasting impact.
Mr McMahon noted that the matters complained of in the present case were published in a national daily newspaper with a wide circulation and an even wider readership. The defendants submitted that, as to the first matter complained of, damages should be assessed on the basis of the limited publication proved, since Mr McMahon was not named in that article. It was submitted that damages will normally be lower in a case where there is an issue as to identification than in one where the plaintiff is named, due to the narrower ambit of publication, citing Nationwide News Pty Limited v Rogers [2002] NSWCA 71 at [131] per Stein JA.
In that decision, the Court of Appeal held that an award of damages in the amount of $250,000 (in a case in which the plaintiff was not named) was excessive. The High Court subsequently overturned the Court of Appeal's decision and reinstated judgment in the amount assessed at first instance by Tupman DCJ. Whilst accepting that damages should be limited having regard to the extent of identification of the plaintiff, the High Court observed, conversely, that the assessment of damages had to take account of the subjective response of the plaintiff (which was significant in that case): Rogers v Nationwide News Pty Limited [2003] HCA 52; (2003) 216 CLR 327 at [81] per Hayne J; Gleeson CJ and Gummow J agreeing at [35]; and see [134] to [142] per Callinan J; Heydon J agreeing with Callinan J at [174].
The evidence in the present case established that Mr McMahon was identified as being the person referred to in the first matter complained of by nine people: see evidence of Mr Arnott SC (T181.37), Mr Peter Batch (T776.26), Mr Glen Ross (T 890.20), Mr Kanjian (T900.28), Mr Dawson (T906.46), Mr Ken Woods (T920.50), Mr Peter Hunt (T226.39), Mr Arthur Carney (T227.46) and Mr Tony Martin SC (T228.13).
The defendants would concede only that it may be inferred that a small number of additional persons would have had knowledge of the identifying fact relied upon by Mr McMahon (that he, and not Gerard McMahon, was the managing partner of McMahons National Lawyers). They submitted that it would be an inherently unreliable inference that the plaintiff was identified by the whole readership of the Australian Financial Review.
Whilst I accept that it is unlikely that Mr McMahon would have been identified by the whole of the readership, I am comfortably satisfied that the group of persons who knew the extrinsic fact and understood the first matter complained of to refer to Mr McMahon extended well beyond the limited number of persons identified in the evidence. Importantly, I infer that Mr McMahon was probably identified by a broad circle of those persons amongst whom his reputation counts most, probably including other solicitors, clients, barristers and judges: cf Mundine v Brown [2010] NSWSC 1285 at [121] to [122] per Harrison J.
Mr McMahon also gave evidence of specific occasions on which he was shunned and avoided. Having acted for Allianz Australia Insurance Limited for approximately 10 years, the plaintiff asked a representative of that company, Alex McMaster, whether he should take a file that the company had with McMahons along with him to his new firm. He was "rudely" told that he should "certainly not" and that they would instead be in contact with the liquidator (T260.14). Another instance involved the demise of the plaintiff's friendship with one Peter Hunt, an old family friend and former accountant of the plaintiff who, after the publication of the first matter complained of, had become "taciturn" towards the plaintiff and eventually ceased to maintain contact with him (T260.22-34).
As to people who spoke to Mr McMahon in terms revealing their awareness of the imputations, of particular relevance are the comments of Mr Hunt, who wanted to know if the plaintiff was "in trouble" (T226.39 - T227.5) and Justice Bergin (now CJ in Eq) who remarked to the plaintiff at a Christmas party that he had had "a lot of troubles".
I accept that the force of such evidence is to some extent modified by the fact that it is not clear whether such remarks derived from the publication of the defamatory imputations to which no defence has been established, or wholly or partly in response to the publication of the true imputations (or, indeed, the existence of the facts discussed in the two articles including the failure of the firm and Mr McMahon's bankruptcy). There is a further difficulty in that it is difficult to differentiate, from the specific evidence led on behalf of the plaintiff, between the damage caused by the first article and the damage caused by the second article.
The defamatory imputations giving rise to an entitlement to damages are set out above but, for convenience, are repeated here. As to the first article, the award is to be based on the publication of the imputation that the plaintiff so failed to meet his tax obligations that he was a major scalp in a crackdown in unpaid tax by the Australian Taxation Office.
I accept, as submitted on behalf of Mr McMahon, that the imputation is highly defamatory, imputing that Mr McMahon's conduct was such as to cause the Australian Taxation Office to target, pursue and ultimately triumph over him in a contested battle over his failure to pay tax.
Mr McClintock further submitted that the imputation associates Mr McMahon with the conduct of those members of the legal profession who brought it such shame by the misconduct of their tax affairs. Having regard to the terms of the article and particularly the opening paragraph, I accept that the imputation is likely to have been understood in that way by many of those who are likely to have understood the article to refer to Mr McMahon.
Separately, Mr McClintock submitted that the degree of misconduct alleged in the imputation is emphasised by "the grisly image of scalping". I do not accept that submission. In my view, the term "scalp", whilst of grisly origin, no longer carries the image of such brutality in its ordinary, natural meaning.
The three defamatory imputations to which no defence has been established arising from the second article are:
(a) That the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should be prosecuted for offences.
(b) That the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should lose his practising certificate and be fined for breaches of the Legal Profession Act.
(d) That the plaintiff deliberately set up a complicated structure for his firm so as to avoid paying employee entitlements.
It cannot be doubted those imputations are highly defamatory. As submitted on behalf of Mr McMahon, the first imputes that he was being dealt with by a regulatory authority because of his own misconduct. The imputation that his conduct was such as may require prosecution is among the more serious of meanings that may be levelled at a legal practitioner. The same may be said of the imputation that Mr McMahon's entitlement to hold a practising certificate was under investigation.
Mr McClintock submitted that imputation (d) "borders on the fraudulent". Whilst I would not accept that characterisation, I accept that it is an allegation of sharp practice and of a calculated plan hatched in advance in order to deprive entitlements to the very people whose efforts provided Mr McMahon with his income. It is a very serious imputation.
I do not think it can be disputed that the injury caused to Mr McMahon's reputation by the publication of those defamatory imputations was extremely grave and must sound in substantial damages.
Are the damages mitigated by the truth of other imputations?
The jury found that the two articles conveyed a number of substantially true imputations in addition to the false defamatory imputations on which the plaintiff succeeded.
As to the first matter complained of, in addition to conveying the false imputation that the plaintiff so failed to meet his tax obligations that he was a major scalp in a crackdown on unpaid tax by the Australian Taxation Office, the jury found that the article conveyed the following substantially true imputations:
that the plaintiff behaved in a dishonourable way by permitting his old firm to go into administration and, on the same day, opening a new firm (plaintiff's imputation (b));
the plaintiff is a bankrupt solicitor (contextual imputation);
the plaintiff's legal practice collapsed partly because he was unable to pay a substantial tax debt owed to the ATO (contextual imputation).
As to the second matter complained of, in addition to conveying the false imputations that:
(a) that the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should be prosecuted for offences;
(b) that the plaintiff was being investigated by the Legal Services Commissioner to determine whether he should lose his practising certificate and be fined for breaches of the Legal Profession Act; and
(d) that the plaintiff deliberately set up a complicated structure for his firm so as to avoid paying employee entitlements;
the jury found that the article conveyed the following substantially true imputation:
(e) the plaintiff had conducted his firm's affairs dishonourably and so as to permit it to avoid payment of the debts which it owed.
The defendants submitted that the damages to which Mr McMahon is entitled should be mitigated by the fact that those imputations were found to be substantially true. No reference was made in that context to the two contextual imputations found to have been conveyed but not true.
Whilst a great deal of argument was spent on this issue, I think it ultimately reduces to a relatively simple analysis. Mr McClintock acknowledged the unexceptionable proposition that an imputation proved to be true, whether it be one of the plaintiff's imputations or a contextual imputation, cannot provide a basis for compensation, citing Besser v Kermode [2011] NSWCA 174 at [86](c) per McColl JA; Beazley and Giles JJA agreeing at [1] and [2] respectively and John Fairfax Publications Pty Limited v Zunter [2006] NSWCA 227 at [51] to [52] per Handley JA; Spigelman CJ and McColl JA agreeing at [1] and [54] respectively.
In a supplementary outline of submissions provided after the hearing (with leave), Mr McClintock noted that the plaintiff does not quarrel with the defendants' submission to that extent and accepts that he is not entitled to damages for such harm to his reputation as may have flowed from imputation (b) and the two contextual imputations in respect of the first article and imputation (e) in respect of the second article.
Mr Batch was the general manager of Lumley. He said that the final decision as to whether to move all existing work from Mr McMahon was his, not Mr Abrahamse's (T777.26). However, in cross-examination, he acknowledged that what that really meant was that if he had wanted to override Mr Abrahamse, he could have, but he did not intend to. He agreed that he had no intention of overriding Mr Abrahamse's decision (T790.49 - T791.7). Accordingly, even if as a matter of hierarchy within Lumley, Mr Batch had authority to make a final decision in such circumstances, it was clear to me from Mr Abrahamse's evidence that his (Mr Abrahamse's) decision determined the issue and that Mr Batch's seniority over him made no practical difference in this instance.
The plaintiff further relied upon the fact that, on 5 October 2007, Mr Abrahamse discussed the contents of the first matter complained of with Mr Batch, who had already had the article drawn to his attention by Mr Matcham (T796.3). Mr Batch suggested to Mr Abrahamse that he see Mr Swinton, a public relations executive from Wesfarmers, the ultimate parent of Lumley. Wesfarmers were known to Lumley staff as being extremely sensitive to adverse publicity.
Mr McClintock relied upon the fact that Mr Abrahamse saw Mr Swinton and probably discussed the matter complained of with him as conclusive evidence that Mr Abrahamse's contention that he had already decided to withdraw the Lumley work from Mr McMahon must be rejected. He submitted that, "to suggest that Mr Abrahamse saw Mr Swinton for any purpose other than to seek advice on whether to terminate the relationship with the plaintiff is frankly absurd. There is no other possible explanation. If Mr Abrahamse had the power he now claims and the decision had in truth been made prior to 5 October there would simply be no reason to see Mr Swinton at all."
I do not accept that submission. There is no logical inconsistency between Mr Abrahamse's having already made a decision and his acceding to Mr Batch's suggestion or direction that he speak to Mr Swinton. Once again, the submission overlooks the inevitable impact of the failure of the old law firm and Mr McMahon's bankruptcy on his practice. Mr Abrahamse's concession that he perceived the article as being "validation of the decision we had made" is not inconsistent with the decision having been made before publication of the article. Contrary to the submission put on behalf of the plaintiff, I do not think that concession "affords a causative role" to the article.
Nor do I accept the plaintiff's contention that the chronology is only compatible with the decision being taken after, and with knowledge of, the matter complained of.
Mr McClintock further relied upon a series of alleged prior inconsistent statements made by Mr Abrahamse which he submitted contradict his evidence. Where a party bears the onus of proof, reliance upon prior statements inconsistent with evidence contrary to the matter required to be proved is often difficult. None of the prior allegedly inconsistent statements relied upon on behalf of the plaintiff has persuaded me that Mr Abrahamse's evidence in the witness box as to the timing and authoritativeness of his decision to withdraw all Lumley work from McMahons was untrue or even unreliable.
Mr McMahon relied in particular on the fact that Mr Abrahamse had at times told other people that the decision to withdraw the Lumley work was made by Mr Batch. Even if Mr Abrahamse said that to others, it does not in my mind cast any doubt on his evidence in these proceedings as to the definitiveness of his own determination before 5 October 2007 that the work would have to be withdrawn, or as to his power to see that decision implemented. Throughout his evidence, Mr Abrahamse steadfastly maintained his position on that issue. He explained it in terms that accord with common sense and common experience of decision-making processes in such institutions, as revealed in the following exchange (at T1101.11 TO 1101.43):
Q. You see it says, "I'm instructed"; who instructed you?
A. That turn of phrase has been used euphemistically, as I explained to you previously. Mr Batch would not have had the daytoday knowledge of the matter, to issue such an instruction. It was never in his jurisdiction, although he had overall authority over me to do so. He had never given me instructions to withdraw from any other contractors in the past, and when previous law firms have been jettisoned from our panel
Q. Please, you are not answering my question?
OBJECTION
DAWSON: I think he is: "When previous law firms have been jettisoned from the panel", which is the precise fact that we are talking about here, he should be permitted to go on.
MCCLINTOCK: He is not answering my question. I'm content for him to go on, but he is not answering my question.
HER HONOUR: If you are content for him to go on.
MCCLINTOCK
Q. Go on, Mr Abrahamse?
A. When previous contractors, including law firms, have been jettisoned, removed, curtailed, wound down, from the panel, Mr Batch was informed that that is what I was doing, and it was my undertaking to do so. It was in my control to effect those decisions. I did not require Mr Batch's input. I merely was obliged to let him know of the reasoning of it. And if he saw fit to suggest that I speak to someone else, like Mr Swinton, then I'd probably go and have a chat with Mr Swinton. But the sum total of Mr Swinton's input into such a decision would be minimal, not having daytoday control of legal matters and contractors.
Particular mention should be made of a contention that Mr Abrahamse's evidence was inconsistent with what he told Mr McMahon in a meeting convened at Mr McMahon's request in September 2008. Ostensibly approaching Mr Abrahamse with a view to seeking to be accepted back onto the Lumley panel, Mr McMahon used that meeting to obtain information for use in these proceedings. He did not tell Mr Abrahamse that he had commenced proceedings, nor did he ask him to say what his evidence would be if he were called as a witness. After the meeting, he sent a letter to Mr Abrahamse stating the version of the conversation he attributes to him (Ex AO). Without descending to detail, the letter records that Mr Abrahamse decided to "pull" the files from McMahons after discussing the first matter complained of with the public relations officer of Wesfarmers (wrongly named in the letter as Mr Simpkin: it was Mr Swinton).
Mr Abrahamse did not recall receiving the letter and said that, if he had, he would not necessarily have read it (T1096.43). As already noted, he later warned Mr McMahon that his evidence would be to the effect of that given in these proceedings. Mr McMahon actively decided to hold the letter back at that stage for forensic advantage (T1157). Whatever view one may hold as to such an approach, it has not delivered the forensic advantage evidently hoped for. I am not confident that the version of the conversation attributed to Mr Abrahamse in Mr McMahon's self-serving letter to him is accurate. Even if it is, I am not persuaded that the version there recorded reflects what actually happened. If Mr McMahon wanted an accurate version of events, he ought to have told Mr Abrahamse the true purpose of the meeting. If Mr Abrahamse said the things attributed to him in that letter to Mr McMahon, I would conclude that he did so in order to distance himself from responsibility for the decision he in fact made in order to maintain face with Mr McMahon. I do not accept that the letter shows his evidence in these proceedings to have been false.
For those reasons, I am not persuaded, on balance, that the loss of the Lumley work was caused by the publication of either matter complained of. The claim for special damages must accordingly be rejected.
Conclusion as to damages
Notwithstanding my conclusion as to the claim for special damages, it remains appropriate in quantifying general damages to have regard to the value and importance to a solicitor of his good professional reputation. In determining the amount to be awarded to Mr McMahon by way of general damages, I have given substantial weight to my finding that the damage to his reputation caused by the articles was profound and ongoing.
Although s 39 of the Defamation Act makes provision for the assessment of damages for multiple causes of action as a single sum, I have acceded to Mr McClintock's suggestion that it is preferable in the present case to identify a separate award for each of the two defamatory publications. In so doing, I am mindful of the fact that there was probably some overlap in the readership of the two articles, each being published in the same special-interest column of the same newspaper three weeks apart. Conversely, I accept that the second article compounded the hurt caused by the first and exacerbated the damage to the reputation Mr McMahon had previously enjoyed.
In all the circumstances, I determine the amount of damages that should be awarded to the plaintiff, including aggravated damages, as follows:
(a) in respect of the first matter complained of, the amount of $75,000;
(b) in respect of the second matter complained of, the amount of $225,000.
Orders
I make the following orders:
(1) That the defendants' application for leave to re-open be dismissed.
(2) That the plaintiff's claim in injurious falsehood be dismissed.
(3) That judgment be entered for the plaintiff on the claim in defamation on the basis of an award of damages in the amount of $300,000.
I direct the plaintiff to bring in short minutes of order within 3 days for the entry of judgment.
I will hear the parties as to costs.
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Decision last updated: 19 July 2013
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