Palmer Bruyn and Parker Pty Ltd v Parsons

[2000] NSWCA 53

Reported Decision: [2000] Aust Torts Reports 81-562

New South Wales

Court of Appeal

CITATION:	Palmer Bruyn & Parker Pty Ltd v Parsons [2000] NSWCA 53
FILE NUMBER(S):	CA 40550/98
HEARING DATE(S):	9 March 2000
JUDGMENT DATE:	29 March 2000
PARTIES :	Palmer Bruyn & Parker Pty Ltd (Appellant) Keith Parsons (Respondent)
JUDGMENT OF:	Stein JA at 1; Heydon JA at 2; Foster AJA at 55

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	DC 283/96
LOWER COURT JUDICIAL OFFICER :	Taylor DCJ

COUNSEL:	C Evatt/G Hansen (Appellant) T K Tobin QC/ T Molomby (Respondent)
SOLICITORS:	Hunt & Hunt (Appellant) McDonald Johnson (Respondent)
CATCHWORDS:	Tort of injurious falsehood - improper motive - false, misleading, maliciously published material - disseminated by grapevine effect - natural and probable consequence of republication of false material - Patrick Nugawela v Reginald Crampton and Royal Australian College of General Practitioners (Supreme Court of NSW, Levine J, unreported, 31 January 1996) - no intent to injure without just cause or excuse - no actual damage or injury suffered by the plaintiff by reason of the malicious publication of false material - ND
CASES CITED:	Kaye v Robinson [1991] FSR 62 The Royal Baking Powder Co v Wright, Crossley & Co. (1900) 18 RPC 95 Ajello v Worsley [1898] 1 Ch 274 Ratcliffe v Evans [1892] 2 QB 524 George v Blow (1899) 20 NSWLR 395
DECISION:	Appeal dismissed; the appellant is to pay the respondent's costs of the appeal

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40550/98
DC 283/96

STEIN JA
HEYDON JA
FOSTER AJA

Wednesday, 29 March 2000

PALMER BRUYN & PARKER PTY LTD v
KEITH PARSONS
JUDGMENT

1    STEIN JA: I agree with Heydon JA.

2    HEYDON JA:

Background

The plaintiff company carried on a surveying business. One aspect of its activities was to conduct negotiations with councils on behalf of persons submitting development applications to those councils. In mid 1995 McDonald’s Australia Ltd engaged the plaintiff to act for it in relation to a proposal to establish a McDonald’s outlet at Wallsend. In that regard a rezoning application was to come before the Newcastle City Council on Tuesday 26 March 1996, and councillors representing the Australian Labor Party were to have a caucus meeting on that subject on Sunday 24 March 1996.

3    The defendant was a councillor of the Newcastle City Council and represented the Australian Labor Party. He had been lobbied for support by the plaintiff in that he had been telephoned a number of times by, but had not returned the calls of, Mr Christopher McNaughton. Mr Christopher McNaughton was a technical surveyor employed by the plaintiff, responsible for obtaining Council consent for the McDonald’s rezoning application. The defendant had also been sent a letter by Mr Christopher McNaughton seeking a meeting to discuss the rezoning, and the defendant believed that Mr Christopher McNaughton had attempted to persuade a local Federal Member of Parliament representing the Australian Labor Party to lobby the defendant and two other Labor councillors. This conduct of Mr Christopher McNaughton had irritated the plaintiff.

4    On Sunday 24 March the defendant sent a letter by facsimile transmission bearing the date 24 March and the transmission time 1.38pm to another councillor representing the Australian Labor Party, Mr John Manning, who knew of Mr Christopher McNaughton’s conduct towards the plaintiff. The letter sent by the defendant was composed in the following way. He took the letter which had been sent by Mr Christopher McNaughton in relation to the rezoning. He cut the letterhead and signature block off. He wrote the words complained of. He then photocopied the letterhead, the words complained of and the signature block as a composite document.

5    The words complained of were as follows:

“To the Newcastle City ALP Caucus.
Dad said to tell you his final offer 4 big Macs and 2 choc sundaes per week for the rest of your life AND 1 free Golden Arches birthday party per year with Mum available to play the accordion. If you don’t he’s gonna tell his best friend Robert Webster and Bob Carr and Ernie Page and Kim Beazley and Fred Nile and anyone else who’ll listen. They’re gonna pressure you to support the Wallsend McDonalds rezoning just like the good old days. Frank and Dennis said they’re disgusted with youse. Final warning, do a deal, fuck all residents, they’ll love it when it’s built OR Dad will remember something you said about him somewhere, sometime and you can expect a letter from Hunt and Hunt next Wednesday at the latest. You’ll be sorry.”

The reference to “Dad” was an intended reference to the father of Mr Christopher McNaughton, Mr John McNaughton, one of the two directors of the plaintiff, and a former Labor Lord Mayor of Newcastle who had not been on good terms with the defendant. “Mum” was an intended reference to Mr John McNaughton’s wife.

6    When Mr Manning received the fax, he wrote on the bottom the following words:

“The moving finger writes and having writ moves on, nor all thy piety and wit shall lure it back to cancel half a line nor tears wipe out a word of it.”

Mr Manning then sent the document by fax bearing a transmission time of 1.41pm on 24 March 1996 at least to the offices of the plaintiff.

7    Later, after the caucus meeting of Newcastle city councillors representing the Australian Labor Party, Mr Manning sent a fax bearing a transmission time of 9.46pm on 24 March 1996. This third fax did not contain the additional words placed on the second fax, but consisted of the original fax together with the added words: “It appears there is a hoax on me. J.M.”

8    The second and third faxes were sent to the offices of the plaintiff. They were found on the fax machine at about 7am on Monday 25 March 1996.

9    Apart from the two faxes sent to the offices of the plaintiff, Mr Manning sent faxes containing the material complained of to four members of the Labor caucus on Council including the defendant, three councillors representing the Greens, and the general manager of the Council. The general manager showed it to the director of planning. All these persons destroyed the copies they received, save that a copy of the first fax sent by Mr Manning to the general manager of the Council remained on its files, though a fax bearing a transmission time of 9.25pm on 24 March 1996 was sent contending that the initial fax was a hoax.

10    The faxes sent to the plaintiff were delivered to the New South Wales Police Service by the plaintiff. The plaintiff also wrote to the Council on 26 March 1996 disassociating itself from the offending letter.

11    On 11 May 1996 an article appeared in the Newcastle Herald. It stated:

“ BOGUS LETTER OFFERED FREE FAST FOOD
Newcastle police confirmed yesterday they were investigating a bogus letter sent to ALP councillors on Newcastle City Council around the time the council was considering rezoning land at Wallsend for a McDonalds restaurant and service station. A rezoning was sought by Newcastle surveying firm Palmer, Bruyn & Parker whose managing partner is a former Lord Mayor of Newcastle Mr John McNaughton. The Newcastle Herald has learnt that the forged letter purported to be from Chris McNaughton, the son of the former Lord Mayor. It was written on a Palmer, Bruyn & Parker letterhead. The bogus letter offered the councillors a free supply of items from the McDonalds menu.”

The trial judge said there was insufficient evidence for a finding to be made as to how the letter, or information about the letter, came to the attention of the Newcastle Herald .

12    McDonald’s Australia Ltd learned of the Newcastle Herald article after one of its franchisees sent it a copy.

13    On 16 July 1996 McDonald’s Australia Ltd wrote to Mr Christopher McNaughton terminating the plaintiff’s retainer in relation to the Wallsend rezoning.

The Trial Judge’s Conclusions

14    At the trial the only cause of action for which the plaintiff contended was injurious falsehood.

15    The trial judge found, in relation to the allegation in paragraph 3 of the Statement of Claim that the material complained of was false in that it attributed to Mr Christopher McNaughton statements that he had never made, that it was false. He found that it was likely to injure the plaintiff in its business. He found that it was published maliciously.

16    The trial judge found that it was the natural and probable result of the original fax sent at 1.38pm on 24 March 1996 that it would be republished to the members of the Australian Labor Party caucus, the general manager of the Council, the Green councillors, the plaintiff, its solicitor and the New South Wales Police Service. However, he found that no actual damage occurred within that group of recipients. Hence the test had not been made out in relation to them, since actual damage is a necessary ingredient in the tort of injurious falsehood.

17    The trial judge found that it was not the natural and probable result of the defendant sending the facsimile at 1.38pm on 24 March 1996 to Mr Manning that it would be republished in the Newcastle Herald, and that prevented the defendant from being liable for that republication. The trial judge also found that the defendant was entitled to a verdict on the ground that there was a “very significant departure in sense and substance from the original publication” to be found in the newspaper article.

18    The trial judge found that the plaintiff lost its contract with McDonald’s as a result of Mrs Richards, a responsible executive, learning of the 24 March 1996 letter through the newspaper article. The trial judge appears to have found that a claimed loss of $38,000, though not evidenced wholly satisfactorily, was “reasonable actual compensation for the loss of” the McDonald’s contract. But he found that the defendant was not liable for that loss because of his findings as to the lack of nexus between the defendant’s letter and the newspaper article. He also said that even if the plaintiff had recovered a verdict, punitive damages would not have been awarded.

The Plaintiff’s Argument on Intention

19    The plaintiff commenced its arguments by relying on a statement in Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed (1923) p 208, to the effect that the tort of injurious falsehood is actionable if the plaintiff proves that the matter published was false, that it was actuated by malice, “that he has sustained actual damage by reason thereof, and that such actual damage was either the natural and probable result of the publication, or the result which the person publishing such matter intended.”

20    The argument of the appellant was that the loss of the McDonald’s contract was either the natural and probable result of the impugned letter, or the result which the defendant in publishing the impugned letter intended.

21    In relation to the argument that the loss of the McDonald’s contract was the result which the defendant in publishing the impugned letter intended, the plaintiff contended that the trial judge had found that the defendant “intended to injure the Appellant … in its efforts to persuade the Newcastle Council to approve the development application made on behalf of its client McDonald’s.”

22    There are several problems with the submission.

23    First, it is far from clear that the trial judge did make the finding alleged. The submission referred to the following passage:

“In the Court’s opinion the hoax letter was calculated to ridicule the plaintiff and injure it in its effort to persuade the council in favour of approving the development application.”

A little further on the trial judge said:

“In this way it was calculated to injure the plaintiff in its business.”

Later, in discussing malice, the trial judge said:

“The court, as already noted, has concluded the material complained of was false and it was likely to injure the plaintiff in its business.”

Taking those passages together, the trial judge’s conclusion appears to have been that the impugned letter was “calculated” to injure the plaintiff in the sense that it was objectively likely to do so, but not that the defendant necessarily intended that result. A pointer in the other direction is the trial judge’s quotation of the following words of Fleming , Law of Torts , 9th ed (1998), p 780:

“Today the dominant view seems to be that malice in the sense of some indirect, dishonest or improper motive or at any rate an intent to injure without just cause or excuse must be proved by the plaintiff.”

The trial judge then said:

“The Court has concluded that on this test the publication and republication to the limited number of people identified in this judgment (that is the full publication of the Newcastle Herald article) was malicious.”

If this is a finding that there was malice in the sense of intent to injure, it would support the plaintiff’s submission. But Fleming propounded two distinct tests, and it is not clear that the trial judge thought both were satisfied, or, if he thought only one was, which he thought was satisfied. The defendant could have had an improper motive without necessarily having an intention to injure.

24    Secondly, even if the trial judge did make a finding of the kind asserted, there is a disconformity between the damage supposedly intended and the damage actually found to have been suffered. The trial judge found that the damage suffered by the plaintiff was loss of the McDonald’s contract. There was no finding that the plaintiff suffered injury in its efforts to persuade the Council to approve the rezoning application by reason of the defendant’s conduct. The loss of the McDonald’s contract had nothing to do with that process.

25    Thirdly, the submission treats the defendant’s intention to cause damage as the sole criterion by which to determine whether damage actually occurred. While in certain circumstances an intention to achieve a result can assist in drawing a conclusion that the intention was successful, there is a fundamental difference between an intention to cause damage and the causing of damage in fact. Spencer Bower, assuming that that work propounded the law correctly, highlighted that by stating as a separate and distinct requirement that the plaintiff must have “sustained actual damage by reason” of the malicious publication of false matter. The references to the natural and probable result and to intention are references to remoteness of damage limitations, not to causation issues. Even if there were an intention to cause damage, there would have to be proof of causation of loss in fact.

26    Fourthly, this aspect of the plaintiff’s argument was supported by a reference to the following passage from a work on United States law, Harper, James and Gray, The Law of Torts, 2nd ed (1986) p 270:

“If the harm was intentionally caused by the defendant, there is no difficulty about the problem of legal causation, since all intended consequences are legal or proximate.”

However, that passage was preceded by the following words (pp 269-270):

“The usual rules of legal causation apply, of course, and the ‘special’ or actual damage must be shown to be a legal consequence of the defendant’s disparagement. In the Restatement’s view, the disparagement must be a ‘substantial factor in bringing about the loss’, and the disparager must not be eligible to benefit from rules that tend to limit liability, e.g., there can be no independent, intervening, unforeseeable force to interfere with the causal connection between the damage complained of and the defendant’s wrongful conduct.”

The passage relied on was succeeded by the following words (pp 270-271):

“The causal problem is considered identical, in actions for slander of title, as in actions for defamation when the words are not defamatory per se, and the principles governing both are those that are applicable in all cases of tort. Thus it has been held that it must appear reasonably probable that the disparagement in fact caused the damage, and if the action of third persons that resulted in the plaintiff’s loss was such that a reasonable person might have foreseen, it will not break the causal relation between the disparagement and the damage.”

It is not easy to reconcile all that the learned authors have written. However, the passage relied on does assume that harm has been caused, and focuses on issues of remoteness.

27    The plaintiff’s argument based on the supposed finding of intention to cause harm is rejected.

The Plaintiff’s Argument Based on Natural and Probable Result

28    The plaintiff contended that since the trial judge had found that it was a natural and probable result of the impugned letter that it would be republished to various persons connected with the Council, the plaintiff, its solicitor and the police, the trial judge erred in failing to find that the defendant was responsible for republication of the impugned letter to Mrs Richards.

29    The trial judge’s reasoning was that the plaintiff’s loss of its contract with McDonald’s was the result of a recommendation by Mrs Richards, and Mrs Richards based her recommendation on the 11 May 1996 article in the Newcastle Herald:

“She was confident of the honesty of those she dealt with in the plaintiff company but the incident appeared to her to contaminate the application and affect it in ways which she could not predict. Naturally neither she nor her company do not want to be associated with anything that could cause a doubt with residents and create a perception that the company would be associated with anything that was not straightforward and honest.”

30    At one level, the plaintiff’s argument was that the trial judge erred in the following passage:

“The original communication was from one person to another. Its republication thereafter was limited to a very small number of people who were, on the face of it, addressees or had an interest in the contents. By ‘interest’ is meant a legitimate interest not mere curiosity. The thrust of the letter is to have immediate impact on the recipient and perhaps a small number of other people. Its content is not such that leads the Court to think that by a grapevine effect it would be disseminated more broadly referred to by Justice Levine in Patrick Nugawela v Reginald Crampton and Royal Australian College of General Practitioners Supreme Court of New South Wales Levine J unreported 31 January 1996.
Whilst the Court does not accept that it was meant as a joke it does appear to be in house and for the attention of a small number of people. For these reasons the Court has concluded that it was not the natural and probable result of the defendant sending a facsimile to Mr Manning that it would be republished in the Newcastle Herald.”

31    The first criticism launched by the plaintiff was that the inquiry into what was “the natural and probable result” was “not the appropriate test”. However, the plaintiff below had at least twice argued to the contrary in that part of its opening which was recorded. For example, the plaintiff’s counsel said:

“the law of republication is the same in defamation as it is for injurious falsehood, and the defendant is always liable for the natural and probable consequences of his original publication, if that publication be republished.”

32    A second criticism launched by the plaintiff was that there was a contradiction between the passage from the trial judge’s reasons set out above in relation to the grapevine effect and an earlier passage. The contradiction was said to lie in the fact that the first class of readers was described as comprising “a very small number of people who were, on the face of it, addressees or had an interest in the contents”, whereas earlier the trial judge had said it was republished to members of the Australian Labor Party caucus, the Green councillors, the General Manager of the Council, the plaintiff, its solicitor and the police. There is no contradiction. All these people were either addressees (i.e. members of “The Newcastle City ALP caucus”) or had an interest in the contents of the letter (being the Greens as potential allies of the Australian Labor Party councillors, the other councillors, the General Manager, the plaintiff who was affected, its solicitor and the police).

33    A third criticism was that the class, whether it can be called “a very small number of people or not” was large enough to engender the “snowball or grapevine effect”. This was said to mean “the spreading of the contents or effect of the letter by gossip and rumour”. It was submitted that “Council meetings are open to the public and when the letter was discussed there was opportunity for members of the public present to pass on to others what they had heard. Likewise, news of the letter would have spread among Council staff through to their friends and relatives.” It was also submitted that “it is sufficient if Mrs Richards learned of the forged letter by the grapevine effect. In a city the size of Newcastle the letter must have caused a minor sensation. The Council even referred it to the ICAC … .”

34    The third criticism did not rest on any allegation of leaking by the police, so that may be put aside.

35    As to councillors, the history is as follows. Two faxes of 24 March were received in the General Manager’s office. The first was sent by Mr Manning to Mr Grant, General Manager. It enclosed the impugned letter and said it “needs to be discussed with Greg Heys [the Lord Mayor] first thing - for possible legal advice.” This is suggestive of a goal of confidentiality. That would have been reinforced by the plaintiff’s letter of 26 March 1996, received on 27 March 1996, denying authorship of the fax. It was forwarded to all councillors on 27 March 1996. On 2 May 1996 the Lord Mayor raised the question of confidentiality. He was advised of very limited circulation within the staff (the General Manager and two others) and advised that since the plaintiff had referred the matter to the police it was inappropriate to refer it to the Council. At the Urban Development Committee of the Council meeting on 21 May 1996 it was recommended that a report be received from the General Manager on the impugned letter. That report was provided on 9 July 1996 on a confidential basis; and it may be inferred that equal confidentiality prevailed on 21 May 1996. An inference also flows from the fact that though Mrs Richards said that she attended a “council meeting … at the end of May”, which may well have been the 21 May 1996 meeting, she gave no evidence of what happened at it. This suggests that nothing happened of which she obtained knowledge, and is consistent with confidentiality having been preserved at the 21 May 1996 meeting. In the course of preparing his report, Mr Grant sought legal advice from Sparke Helmore on 20 June 1996 and received it on 27 June 1996. That legal advice was one reason why the Council considered Mr Grant’s report in confidential session on 9 July 1996. At that meeting the Council resolved that confidentiality should remain in place until a public statement was issued (which it was on 12 July 1996): this confirms that Council’s policy all along had been to preserve confidentiality. It only referred the matter to the Independent Commission Against Corruption because it received legal advice to do so.

36    The only other persons aware of the impugned letter were the plaintiff and its solicitors, Hunt & Hunt. The latter were under an obvious duty to preserve confidentiality, and there is nothing to suggest that that duty was not performed. On the whole the plaintiff’s interests would have been best served by preserving confidentiality, and it evidently did so. It did not approach McDonald’s on the matter until after the Newcastle Herald article of 11 May 1996.

37    There are two difficulties with the argument that Mrs Richards learned of the impugned letter by the grapevine effect. The first is that there is no evidence that she did. The evidence is that she learned of the impugned letter before Mr Christopher McNaughton discussed it with her only from an article in the Newcastle Herald; the only article in the Newcastle Herald which was in evidence was that published on 11 May 1996. The evidence is silent on what Mr Christopher McNaughton actually said to her. He gave no evidence about it. She gave no evidence about it in chief; in cross-examination all she said about what she was told about the letter was as follows:

“I do recall getting a phone call from Chris McNaughton explaining in detail what had happened and we did talk about how it was going to affect the application … .”

The second difficulty with the argument that Mrs Richards learned of the impugned letter by the grapevine effect is that the background circumstances are against it. The classes of recipient were narrow. Either they were bound by obligations of confidentiality or they were affected by self-interest making confidentiality desirable. These factors make it difficult to infer communication of the impugned letter via the grapevine. On occasions the plaintiff’s submissions about the grapevine effect were put as though the grapevine effect was some doctrine of the law, or phenomenon of life, operating independently of evidence - it was said that McDonald’s were bound to find out about the impugned letter “as sure as night followed day, once [it] got into the public domain”. It never did get into the public domain, and to the extent it was circulated, some evidence would be needed to support a conclusion of wider circulation. There was none.

38    The fourth criticism propounded by the plaintiff turned on a theory of how Mrs Richards found out about the impugned letter in a manner different from the grapevine effect. It was put thus:

“there was re-publication to Mrs Richards for which the Respondent is liable, such re-publication being by way of the Appellant’s conversations and correspondence with Mrs Richards, newspaper reports and Mrs Richards’ attendance at the Council meeting.”

The reference to “conversations … with Mrs Richards” appears to be a reference to the one telephone conversation which Mrs Richards said she had with Mr Christopher McNaughton after 11 May 1996 and before the “Council meeting” she attended later in May. The reference to “correspondence with Mrs Richards” appears to be a reference to a letter of 9 July 1996 discussed below. The “newspaper reports” referred to comprise the 11 May 1996 Newcastle Herald article and possibly another article not in evidence. As stated above, one problem with this submission (assuming the correctness of the trial judge’s reasoning about the 11 May 1996 article, discussed below) is that there was no evidence of what the conversation or the 21 May 1996 meeting or any article other than that of 11 May 1996 disclosed about the impugned letter. Another problem with the submission is that the only letter from the plaintiff to McDonald’s before the retainer was terminated, being a letter of 9 July 1996, which mentioned the impugned letter, revealed nothing of its contents. The plaintiff’s short criticism of the trial judge on this argument was that the trial judge “wrongfully assumed the only knowledge Mrs Richards had of” the impugned letter was through the 11 May 1996 article. The short answer to that criticism is that there was no evidence that Mrs Richards had knowledge gained from any other sources.

39    The plaintiff repeatedly submitted that Mrs Richards “said she discontinued the services of [the plaintiff] because of the bogus letter”. This submission overlooked the fact that she never saw the letter and the fact that there is no evidence that she was ever told of its contents. The submission also fails to grapple with Mrs Richards’ evidence-in-chief on the point. The evidence was as follows:

“Q. Well now if you look at the article headed ‘Bogus letter offered free fast food’, that’s the article in the Newcastle Herald, it mentions a bogus letter, it mentions McDonalds, it mentions the forged letter and it mentions offering council a free supply of items from McDonald’s menu, what effect did that article when you saw it, have on you?
….
A. Well a great concern obviously because McDonalds have never given any inducements to councillors or any officials anywhere to get approvals even if it takes a long time, we’re quite prepared to go through the normal channel, so to be - feel that initially that that might affect our reputation it certainly gave us cause for concern about the reputation of our consultant Palmer, Bruyn and Parker and in the long - you know, it took - I think it was probably a month or two later that we decided that we couldn’t become involved in this and we didn’t want to be - we wanted to disassociate ourselves then from a company that might - we were reasonably confident from our meetings with the principals of the firm that they seemed honest but we didn’t want to be in any way sort of contaminated by, or affected by it, so we discontinued their services.
Q. And that’s you say because of the letter, the bogus letter?
A. Absolutely.
….
Q. Well had there been no forged letter would you have continued with the services of the plaintiff company in this matter?
A. Yes.”


The long answer links the discontinuation of the plaintiff’s services with the article, not the letter. The next two questions quoted are egregiously leading, which, in the context of the long answer, deprive the answers to those leading questions of much force, beyond establishing the rather neutral fact that if there had not been a letter, there would never have been an article. For similar reasons other variants of the plaintiff’s arguments are erroneous, for example the argument that “In giving her reasons for the cancellation of the Appellant’s contract Mrs Richards did not refer to” the 11 May 1996 article, and the argument that Mrs Richards “did not say the newspaper article had anything to do with the cancellation of the contract”.

The Plaintiff’s Arguments Based on the Similarity of the Letter and the Article

40    A further group of arguments put by the plaintiff related to the trial judge’s conclusions as to the difference between the impugned letter and the 11 May 1996 article. He stated his conclusions as follows:

“So far as the sense and substance of the reporting in the Newcastle Herald is concerned it is certainly stripped of all the - to use the defendant’s phrase ‘over the top’ and ‘Ludicrous’ references and carries a much more direct and forceful sting than the original publication. The report goes beyond simply recasting the terms of the letter but is a totally different style and communicates a much stronger message than the facsimile. The letter is described in the Newcastle Herald not as a ‘hoax’ but as a ‘forgery’. This is not meant to be a criticism of the Newcastle Herald because after all it is not known to this Court what information was made available to it before the report appeared in the newspaper.
If it were not the case that the chain of publication and republication had been broken as the Court has found the defendant would be entitled to succeed because of the very significant departure in sense and substance from the original publication and the article in the newspaper.”

(The breaking of the chain of publication is a reference to the finding that it was not the natural and probable result of publication of the impugned letter to the initial small group of people that there would be republication in the Newcastle Herald .) The trial judge also said:

“The sense of the original publication is to influence the minds of the expected recipients concerning an immediate political issue before the council. The original publication could not be taken to be a bribe or inducement but rather as a crude attempt to influence members of the caucus in responding unfavourably to the application. This is particularly so as the plaintiff had obvious difficulty in being given the opportunity to advocate the benefits of the application to at least some members of the caucus. In raising offers of a free supply of items as a bribe or inducement in a forged letter in the article the sense is much broader and deeper.”

41    The ludicrous references referred to by the trial judge include linguistic usages such as “gonna” (twice) and “youse”. Some people speak, but very few write, in that fashion. Some people swear while speaking, but very few in writing. It is ludicrous to suppose that Mr John McNaughton’s wife would play the accordion at a Golden Arches birthday party. It is also ludicrous to say that a person connected with the Australian Labor Party like Mr John McNaughton would have as a friend an Independent like the Reverend Nile. It is also ludicrous to suggest that the Federal leader of the Australian Labor Party, or for that matter the Labor Premier of New South Wales, would listen to someone seeking to affect the outcome of a Council decision concerning rezoning of a restaurant at Wallsend.

42    The plaintiff’s argument was that the Newcastle Herald article truthfully stated that the impugned letter offered Councillors a free supply of items from McDonald’s menus, that the trial judge’s different characterisation of the two documents was “a semantic exercise”, and there was little if any difference between the imputations conveyed by the two.

43    The trial judge’s reasoning survives these criticisms. The impugned letter could be treated as a joke, or as an offer of a bribe, or as a depiction of Mr Christopher McNaughton as a clownish and grossly incompetent negotiator. No-one could seriously treat it as the offer of a bribe in view of its ludicrous aspects. Some treated the letter as a joke: for example, the Council eventually resolved that it had “clear humorous intent”. But the trial judge concluded it was not a joke, and neither party complains about that. In essence the trial judge’s conclusion was that what the letter did was to ridicule its supposed author as an inept and bumbling lobbyist. By ridiculing the lobbyist who was seeking to bring about a rezoning, the author of the letter was attempting to influence the Australian Labor Party caucus against the cause urged by the lobbyist. That is, it was “a crude attempt to influence members of the caucus in responding unfavourably to the [rezoning] application.” The newspaper article, on the other hand, is not to be read in that way: whether or not the letter can be treated as successful ridicule, omission from the newspaper article of all the elements that made the impugned letter a form of ridicule has the result that the article contained starker allegations.

The “Substantial Factor” Test/The “Reasonable Foreseeability” Test

44    The plaintiff submitted that the trial judge “should have determined whether the Respondent’s letter was a substantial factor in bringing about the loss and whether such loss was reasonably foreseeable by him”. The applicability of the “substantial factor” test was justified by reference to para 632 of the Restatement of the Law Second - Torts 2d, approved by Harper, James and Gray, The Law of Torts, 2nd ed (1986) p 270 (quoted above). It is unclear whether these passages were cited to the trial judge. No authority was cited to suggest that the reasonable foreseeability test was part of New South Wales law. However, the reasoning employed by the trial judge in concluding that the defendant was not liable for the loss of the McDonald’s contract because it was not the natural and probable consequence of the impugned letter that the 11 May 1996 article would be published and because of the very significant departure of the article from the original publication prevents the letter from being held to be either a substantial factor in bringing about the loss or a reasonably foreseeable cause of the loss. The plaintiff in oral argument said that the natural and probable consequence test was only another way of putting the foreseeability test.

Correctness of the Tests Propounded by the Plaintiff

45    The plaintiff’s submissions to some degree propounded, as has been seen, different legal tests in relation to the link between the impugned letter and the loss of the McDonald’s contract. Apart from making very brief references to English and American treatises and to the Restatement, the plaintiff did not present sustained legal argument in favour of the selection of any of these tests over other tests as a matter of the law of injurious falsehood as distinct from other torts. The cases offer a variety of verbal formulae: “the direct and natural result” (Kaye v Robinson [1991] FSR 62 at 67); “suffered special damage thereby” (The Royal Baking Powder Co v Wright, Crossley & Co (1900) 18 RPC 95 at 99); “necessary consequence” and “flows naturally” (Haddan v Lott (1854) 15 CB 411 at 426 and 429); “attributable” (Ajello v Worsley [1898] 1 Ch 274 at 281); “falsehood … [which] are calculated in the ordinary course of things to reduce … and do produce, actual damage” and “directly and in the ordinary course of things” (Ratcliffe v Evans [1892] 2 QB 524 at 527 and 529); and “arising” (George v Blow (1899) 20 NSWLR 395 at 399). The treatises offer an even wider range of choices. Some of these formulae appear to propound causation tests, and others appear to propound remoteness tests operating as limits on the recoverability of losses even though they were caused by the defendant.

46    It would not be easy to reach a concluded view as to whether the tests propounded by the plaintiff do in fact represent New South Wales law, because of the notoriously uncertain and conflicting condition of the relatively rare authorities on injurious falsehood. The somewhat extraordinary circumstances of the present case do not make it an attractive vehicle for arriving at a conclusion as to the correct tests. More importantly, it is not necessary to reach a conclusion as to the correctness of the tests suggested by the plaintiff because on any of them the plaintiff’s case fails on the facts.

Causation as a Question of Law

47    The plaintiff cited a passage from Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed (1923), p 216, suggesting that the questions whether there was falsity, whether there was malice, whether there was damage, whether there was intention to cause damage and whether damage to the plaintiff was the natural and probable result of the disparagement were questions of law. The footnote to that passage refers to some cases contradicting those propositions, and to another footnote also containing cases contradicting those propositions. The propositions were relied on by the plaintiff to meet an apprehended argument by the defendant that if the questions were factual questions, the findings of the trial judge had a greater immunity from appellate reversal. That argument was not put by the defendant in any developed way. In the circumstances of this case, even if the questions were factual, they did not enjoy any greater immunity, since they did not turn on questions of credit or impression. Accordingly it is not necessary to decide whether the Spencer Bower proposition is correct, though it appears highly questionable both in principle and on authority.

Punitive Damages

48    The plaintiff abandoned two grounds of appeal in relation to punitive damages.

Damages: Notice of Contention

49    The defendant gave notice of a contention that even if the other ingredients of the tort had been made out, the action ought to have failed because the trial judge “could have found at most only nominal damages”. Since nominal damages are awarded where a legal right has been infringed without actual loss, and since actual loss is the gist of injurious falsehood, this contention in truth amounted to a submission that the evidence did not support a finding of any loss at all and hence that no tort had been committed.

50    In view of the conclusions stated above that the appeal should fail because the plaintiff’s attacks on the trial judge’s conclusion that the causal ingredient of the tort has not been made out have not succeeded, it is not necessary to deal in detail with the defendant’s contention of no actual loss. The trial judge said:

“The plaintiff’s claim is for $38,000, representing two and a quarter years of an actual loss of $17,235. This figure is derived from calculations made by the plaintiff’s accountant Mr Coughlan. He is an experienced accountant and worked on a number of assumptions. The first was that the plaintiff’s revenue was calculated on an historical basis. He assumed that the level of activity would not fluctuate. He also assumed that, again on his instructions, no work came in to replace that from McDonalds. He calculated the loss, having regard to the reduction in the company’s core business, with the loss of the McDonalds contract and produced a nett figure, having regard to administration costs, bearing in mind that these would necessarily be less with a reduction in work being carried out by the surveyors. The approach taken by Mr Coughlan in his calculations were the best that could be done with his instructions.
However, a truer position in reality could have been derived if the Court had been informed as to what Mrs Richards would have expected to have taken place had the contract not been lost. It would also have been of interest to know what the company’s plans were and what the plaintiff’s projections were as to what would be involved in pursuing the application with council. For these reasons there is a certain artificiality in the damages claimed but nevertheless the amount does appear as reasonable actual compensation for the loss of a significant contract to the business.”

The defendant argued that Mr Coughlan’s assumption that work under the McDonald’s contract would have continued at the same level as in the past was only an assumption and was wholly unsupported by evidence from Mrs Richards, the two directors of the plaintiff who were called, and Mr Christopher McNaughton, the employee of the plaintiff responsible for the rezoning. The plaintiff submitted that the assumption was supported by evidence in the form of an “Economic Loss Report” by Lawler Davidson, but that was simply in truth the report by Mr Coughlan.

51    The defendant submitted that there was little left to do in relation to the rezoning and referred to various pieces of evidence supporting that conclusion. There is force in the defendant’s arguments, but despite the rejection of the rezoning proposal by Council on 26 March 1996, the proposal was not necessarily at an end, and the opportunity for the plaintiff to earn more fees from work on the proposal may have existed. For example, the McDonald’s letter of 16 July 1996 terminating the plaintiff’s retainer said that McDonald’s best interests would now be served by running the rezoning itself, which implies that there was still work to be done on the rezoning. However, there was no evidence on how much work remained to be done and how much the plaintiff might have charged for it. Thus the trial judge’s conclusion that $38,000 was “reasonable actual compensation” was wrong, and the correct finding would have been that there was no proved actual loss.

52    The defendant also submitted that the trial judge found there was “no identifiable actual loss”. That is a misreading of the reasons for judgment. All that the passage containing those words meant was that there was no such loss within the class of persons to whom there was “publication and republication for which the defendant could be held liable”, as distinct from the publication to McDonald’s, for which it could not be held liable.

Balance of Notice of Contention

The defendant raised two other grounds in its notice of contention. In view of the conclusions set out above in relation to the appeal it is not necessary to deal with them.

Points Not Taken at Trial?

53    There was some controversy between the parties as to whether certain of the plaintiff’s submissions on appeal had been put to the trial judge, and, if not, whether the submissions in question should be considered on appeal. The transcript of argument in the Appeal Books was not complete. After oral argument concluded the submissions of the parties below were sent to the Court. The plaintiff’s submissions below are not so narrow as to preclude consideration of any of the plaintiff’s submissions on appeal.

Orders

54    The proposed orders are as follows:

1. Appeal dismissed.

2. The appellant is to pay the respondent’s costs of the appeal.

55    FOSTER AJA: I was, at first, attracted to the arguments in favour of the proposition that the article in The Newcastle Herald was the natural and probable consequence of the forwarding by the respondent to councillor John Manning of the false letter. Further consideration of the unusual circumstances of this case, however, has satisfied me that the trial judge’s decision in this regard was, as has been found by Heydon JA, correct.

56    I agree with the orders proposed by Heydon JA.

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