R D Werner & Co Inc v Bailey Aluminium Products Pty Ltd

Re: SWITZERLAND AUSTRALIA HEALTH FUND PTY LTD (trading as HEALTH AUSTRALIA)
And: DEREK SHAW and THE HOSPITAL BENEFITS ASSOCIATION LIMITED
No. VG 250 of 1987
Defamation - Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward J.(1)

CATCHWORDS

Defamation - whether words used could be taken in a defamatory sense - whether occasion one of qualified privilege - whether evidence of express malice.

Trade Practices - whether words used in trade or commerce - whether amounting to misleading or deceptive conduct - whether damages or other remedy available.

Trade Practices Act 1974 s.52

HEARING

MELBOURNE

#DATE 26:4:1988

Counsel for the Applicant: Mr P. Heerey QC & Mr A. Southall

Solicitors for the Applicant: Holding Redlich

Counsel for the Respondents: Mr R. Mandie QC & Mr P. Bornstein

Solicitors for the Respondents: Slater & Gordon

ORDER

The application be dismissed.

The applicant pay the respondents' costs.

(NOTE: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.)

JUDGE1

The applicant ('Health Australia') is suing the second respondent ('HBA') and its general manager, the first respondent, for damages and other relief for breaches of s.52 of the Trade Practices Act 1974 and for defamation. The action turns in substance upon two words used in a letter sent by the first respondent to members of the Private Hospitals Association of Victoria ('PHAV').

Although the matter is in such a small compass, and the facts are not in dispute, it nevertheless raises several difficult questions of law. It is also necessary to describe in some detail the background to the sending of the letter in question and the events which immediately followed that sending.
HBA manages a large and well established health insurance fund which has a significant portion of the market in Victoria. Health Australia, on the other hand, is a newcomer to the industry and has so far only succeeded in obtaining less than 1% of the market, in spite of a vigorous and quite aggressive advertising campaign extending over the last year or so.
All health funds, including the applicant's and the second respondent's, provide three tables of health benefits for their members. These are known as basic, intermediate and top tables. The basic table is controlled by the Commonwealth government, which fixes the minimum level of benefits payable. The other 'supplementary' tables have both their contributions and their benefits fixed by individual funds which are thereby able to compete with each other.
In the last week of August 1987 the government announced an increase of 12% in the minimum benefits payable under the basic table. It then became necessary for each of the health funds to determine what it would do about its supplementary tables.
For some time before this, PHAV and its members had been becoming increasingly concerned about the growing gap between the benefits which patients received from health funds and the amount which it was necessary to charge those patients in order to cover the costs of health care. Accordingly the members of PHAV were anxious that health fund benefits should increase generally.
It was against this background that the applicant approached PHAV with a proposition. In substance this was that Health Australia would put up all its benefits by 12%, without increasing the contributions required from those people on the intermediate or top tables. In return, it asked PHAV to endorse its action and to publish an advertisement congratulating Health Australia on the steps that it was taking and, in effect, putting pressure on the other health funds to do the same. This proposal was conveyed by Mr John Bundy, the general manager of Health Australia, to Mr Neville Hughes, the executive director of PHAV, on the morning of 31 August 1987. As a result of the proposal being made, a meeting was called in the late afternoon of the same day, which was attended by representatives of both parties, in order to develop the proposal further. A regular meeting of the Executive of PHAV was scheduled for the following day, 1 September. It was decided at the late afternoon meeting that representatives of Health Australia would attend this Executive meeting of PHAV in order to put their case. This they did and, after the representatives of Health Australia had left the meeting, the Executive decided to put the proposal into effect. Executive members left it to the office-bearers of PHAV to work out the details of an advertisement, in consultation with representatives of Health Australia and a public relations firm already retained by Health Australia. It will be necessary at a later point to look in more detail at the conduct of this Executive meeting, but that is sufficient for present purposes.
The advertisement duly appeared in the "Age" and "Sun" newspapers on 8 September 1987. It began with the words "THE PRIVATE HOSPITALS ASSOCIATION OF VICTORIA THANK HEALTH AUSTRALIA FOR INCREASING BENEFITS FOR ITS MEMBERS". It continued,

"Health Australia has increased its benefits to members by 12% on all tables. This means Health Australia members have virtually no out of pocket bed costs for treatment in private hospitals."

Among the other material in a fairly detailed advertisement appears the following ,

"The Private Hospitals Association of Victoria appeals to the other health funds H.B.A., Manchester Unity, A.N.A., Medibank Private and others to do the same".

Also set out in the advertisement are lists of benefits comparing those offered by Health Australia from 7 September with those currently being offered by the other funds. In a small block contained within the advertisement appears the question

"What can you do if your fund is other than Health Australia?"

The answer given is,

"Ring your fund today and ask by how much and when it intends to increase your benefits."

The question is then asked,

"What if they won't help?"

And the answer is given,

"Call your nearest private hospital for further information or call the Private Hospitals Association of Victoria ... and we will help you."

The first respondent was naturally concerned when he saw this advertisement, and on the same day he sent off to each of the 82 members of PHAV a letter in the following terms, addressed in each case to the Administrator of the hospital:

"We enclose for your information a copy of an advertisement inserted in the 'Age and 'Sun' of September 8 by the Private Hospitals Association of Victoria.

We do so because we understand that not all members of the Executive of PHAV were consulted on this matter, neither were the general members canvassed for their support.

The major health funds which underwrite the greater part of private hospital income were not invited to participate in a public announcement about increased hospital benefits.

PHAV has:

* endorsed a new fund with a tiny market share

* endorsed a fund which makes a very small contribution to private hospital income and is badly perceived by the public

* attacked major health funds without giving them the opportunity to announce their new benefits

Major health funds have repeatedly urged PHAV to argue for no change in the basic table so that benefits in higher tables could be improved. PHAV has ignored this advice and pressed the Commonwealth to make major changes in the basic table - relatively few basic table members are private hospital patients.

Does PHAV really represent your interests?

We would be very pleased to hear from you on any of these issues.

Yours sincerely,

Derek Shaw,

General Manager."

As will be seen, the passages in this letter about which the applicant now complains are those which refer to the understanding of the writer that "not all members of the Executive of PHAV were consulted on this matter," and that the PHAV has "endorsed a fund which ... is badly perceived by the public". The first that Mr Shaw heard from the applicant on this matter was a letter from their solicitors, dated 10 September 1987, which, among other things, said,

"In your said letter you have made an unwarranted and unqualified attack upon our client, its integrity and its business. That attack, which was clearly pre-meditated, includes highly defamatory allegations which are without any merit or substance whatsoever. Your letter furthermore contravenes the relevant provisions of the Trade Practices Act.

Our client will not tolerate what you have done, and we hereby call upon you to advise us in writing by 5.00 p.m. today that you will not further dispatch to any person or institution further copies of that letter and that you will write to each of the persons and institutions to whom and which that letter has already been sent by you withdrawing in an unqualified manner the allegations against our client contained in that letter, failing which please accept this letter as notice of our clients intention to take the appropriate action against you and your company."

The respondents' solicitors replied to this letter by telephone and, it seems, made clear that no further letters were intended by the respondents. They then wrote to the applicant's solicitors on 11 September saying, among other things,

"On the basis of our present instructions it is clear that our client's letter dated 8 September 1987 does not breach any of the relevant provisions of the Trade Practices Act. Nor is the letter defamatory.

Please advise specifically how it is alleged that the letter is defamatory and contravenes the relevant provisions of the Trade Practices Act."

Then on 14 September the respondents' solicitors wrote again to the applicant's solicitors saying that a letter was being prepared in response to the applicant's demand that allegations against it be withdrawn. The letter concluded,

"However we are not in a position to finalise the letter until you answer our ... letter to you dated 11 September 1987."

There was no response from the applicant's solicitors, but on 15 September the respondents' solicitors wrote again as follows,

"We are instructed that prior to receipt of your letter dated 10 September 1987 our client had decided not to send any further letters in the form of the letter dated 8 September 1987 - as the full mail out had been done.

We enclose copy of further letter being sent to the persons who received the letter dated 8 September 1987."

The enclosure was in the following terms,

"Dear

Last week I wrote to you about an advertising campaign by the Private Hospitals Association of Victoria, and I thought it appropriate to follow that up with some comment about HBA's place in private hospital affairs.

HBA has a reputation for service and security based on more than 50 years operation in Victoria.

HBA has a very significant share of the private health insurance market in this State and represents an important part of the income of Victorian private hospitals.

In my first letter I stated that Health Australia is badly perceived by the public by which I meant that, in my opinion, the public does not generally see Health Australia as attractive on the important mixture of price, benefits and service.

In our opinion the Executive of PHAV does not understand the issues vital to the longer term interests of private hospitals. Accordingly we have decided that we will no longer liaise with the current Executive of the PHAV, preferring instead to deal directly with individual hospitals.

At HBA we believe we can help to overcome the current difficulties of private hospitals through a combination of benefits, structures and marketing activities designed to meet the needs of individual hospitals. I shall be writing to you again soon on this issue, but in the meantime if you have any questions on matters of mutual interest, please contact me.

Yours faithfully,

D.A. Shaw,

General Manager."

To this the applicant's solicitors replied on 15 September saying,

"In our client's view, your letter under reply in no way meets our client's reasonable demands by way of belated response or otherwise. Further, and in any event, the letter being sent by your client not only does not meet with our client's requirements, but is seen by it as aggravating the situation and as compounding the breaches of the Trade Practices Act and the defamation previously complained of. Given that such proposed letter is obviously being sent based on your advice, your client can hardly be said to have acted out of ignorance.

In the circumstances please accept this letter as notice of our client's intention to apply to the Federal Court, tomorrow, Wednesday 16 September, 1987, at 2.15 p.m., for the appropriate injunctive relief."

The respondents' solicitors replied, again on the same day, in the following terms,

"We have previously requested that you specify in writing the alleged defamation and contravention of the Trade Practices Act. You have failed to do this. This morning we forwarded to you a copy of a letter which Mr Shaw proposed to send to the recipients of the letter of which you have complained. You have responded by indicating that injunctive relief will be sought tomorrow. We are now instructed that our client is prepared to add the following sentence to the fourth paragraph of the proposed letter:- 'I did not intend to reflect upon the character of Health Australia.'

We believe this addition should meet your client's objections. Please confirm you agree."

On 16 September the applicant's solicitors wrote again, saying,

"Once again your letter under reply does not make things any better, in our view, but only makes them worse.

The right and proper thing for your client to have done, but which it has deliberately failed to do (it now being too late for it so to do by virtue of our client's impending application) would have been for your client in a completely unqualified and unambiguous manner to have withdrawn unconditionally the wrongful allegations made about our client and to have unconditionally apologised to it in relation thereto."

At about the same time that the advertisement was first inserted in the daily press, the executive director of PHAV, Mr Neville Hughes, sent a circular to all members setting out the case which PHAV was arguing for increases in the supplementary tables of benefits. This circular was posted the day before the advertisements appeared and would have been received on either that day or the next. Having set out some details about past and likely cost increases for private hospitals, the circular continued by stating that,

"Health Australia advised PHAV last week that it intended to raise the benefit on its Supplementary Tables by an average of 12%.

Following extensive debate the Executive has determined that.

PHAV will:

(i) seek to alert the wider community to the inadequacy and adverse effects of the current benefit levels

(ii) seek to encourage other health funds to increase their Supplementary Tables in line with Health Australia

(iii) publicly express its support for the initiative shown by Health Australia and for other Funds which follow Health Australia's lead or exceeds it

(iv) place advertisements in the Sun and Age on the 8th, 10th, 15th and 17th September to implement these decisions

(v) release communications to the media which will give detailed background on this issue.

Members can expect some telephone enquiries to result from this project.

Members are advised to ensure an objective and balanced response is given to each enquiry.

It is strongly recommended that callers be advised to check with a variety of Health Funds to establish the health insurance cover that best suits them. Give the telephone numbers of the major Funds to callers to assist them. Do alert callers to the pre-existing illness rule."

On the same day that this circular was sent by Mr Hughes, Health Australia gave out a press release in the following terms:

"PRIVATE HEALTH BENEFIT COVER BOOSTED

Health benefits newcomer Health Australia will boost its private hospital cover by an average of 12% from today.

In a move which challenges the entire health insurance industry to trim operating costs and give back more benefits, Health Australia will launch a major advertising and promotion campaign highlighting the increased benefits offered on its scale of rebates.

Announcing the campaign today, Mr John Bundy, Health Australia's General Manager, said the move would, 'bring a real and tangible benefit to those who want to remain in charge of their medical destiny'.

He said there would be no increase in the rate of members' contributions.

Mr Bundy added that 'the gloves are now well and truly off' in the health benefits arena, and he expected his company's move would spark a rates and benefits 'war' amongst the health insurance institutions.

'If this happens, we will have achieved one of our major objectives - the delivery of health care at a more reasonable price', Mr Bundy said.

He added that he was doubtful whether the traditional non-profit health insurance bodies, with their cumbersome management, would be able to match Health Australia's lower insurance rates and increased benefits.

'The average 12% rise in benefits is a very significant increase. Health Australia can do it because it is very well managed with a lean and efficient administration team.'"

I think it is important to note that not only did Health Australia claim that the 'gloves' were 'well and truly off' in the 'war' which it predicted would develop between the health funds as a result of its actions; in addition PHAV was conscious of the fact that the advertisement it was placing was controversial. The official minutes of the meeting which decided to insert the advertisement records,

"The Executive considered that the advertising should aim to be controversial without being negative."

Mr Hughes' notes of the meeting of office bearers which followed the Executive meeting shows that there were references to the advertisement being 'contentious and hard hitting although accurate'. It was also recognised that the advertisement could alienate some funds and cause difficulties in future negotiations. It could even cause some withdrawals of hospitals from PHAV. Mr Hughes also noted the President as saying that there may be a 'rough fight' with the airing of a lot of dirty linen.

The first matter complained of by the applicant is the reference in the respondents' letter,

"We understand that not all members of the Executive of PHAV were consulted on this matter ..."

In its statement of claim the applicant says that these words in their ordinary meaning meant and were understood to mean that,

"... the advertisement referred to ... had not been published with the proper authorisation of the Private Hospitals Association of Victoria."

In order to reach a decision on this submission, it is necessary to consider the evidence as to attendance at the meeting. It appears that, at the time in question, there were 13 members of the Executive of PHAV. Of these, twelve were notified of the meeting - the other member being overseas and so on leave. Two members sent their apologies, which meant that there were ten at the meeting. One of these members, a Mr Prouse, gave evidence that this was his first meeting and he was only notified of it by telephone a few days before the meeting was held. There was evidence that other members of the Executive had known of the meeting for some time, but had no formal notification that the question of collaborating with Health Australia by way of inserting the advertisement would be on the agenda. Some members of the Committee had been informed of the proposal by telephone on the eve of the meeting.
Evidence was given by Mr Hughes, which I accept, to the effect that there was a full discussion of the Health Australia proposals, first of all in the presence of representatives of that company, and later after they had left the meeting. There were one or two members of the Executive who expressed some doubts about the course proposed, but there was a general consensus in favour of it. Mr Hughes said that towards the close of the meeting the Chairman, Mr Pavone, summed up the gist of what had been agreed and asked members of the Executive if they had any further matters which they wished to raise.

Mr Hughes was not entirely convincing about the way in which the decision was arrived at. At first he was inclined to say that there had been a formal motion moved by the President and seconded by another member which had been duly passed. There was no support in his own notes for any moving of a formal motion such as finally appeared at some length in the official minutes of the meeting. I am left in some doubt as to just how much detail was gone into before the close of the meeting, and how much was tidied up by the officer-bearers after the main meeting had finished. I am, however, prepared to accept that there was a general consensus in favour of the placing of the advertisement, as proposed by Health Australia, and that the detailed working out of the campaign was left to the office-bearers of the Association.
Mr Shaw gave evidence that, after reading the advertisement, he rang Mr Prouse and asked what he knew of it, and that Mr Prouse told him that he had not been at the meeting and did not approve of the action that had been taken. Mr Prouse, on the other hand, said in evidence that he had attended the meeting but had expressed concern about the proposed course of action, and had not understood that any firm decision had been reached on the matter by the time the meeting concluded. He said that he had passed this information to Mr Shaw. It is somewhat surprising that Mr Prouse should have told Mr Shaw that he was not at the meeting when it is clear that he did attend it; but, in view of the rather uncertain way in which Mr Prouse gave his evidence, I am prepared to accept Mr Shaw's recollection of what was said. I am more ready to do so because this was the material upon which he acted in making the assertion in his letter that not all members of the Executive had been consulted. Before making this statement he had also spoken to a Mr Roger Greenman, another member of the Executive, who had told him that he had been notified of the meeting by telephone and had been given a general outline of what might be involved at the meeting, but had not attended it.
In the light of these facts I turn to consider the various questions of law which have been raised by the pleadings.

Defamation
This was the issue to which most attention was directed at the hearing. The statement of claim deals with the question of defamation in the following terms:

"12.Further or in the alternative, the Respondents published the letter of and concerning the Applicant, and of and concerning it in its business as a provider of health insurance benefits and services.

13.The letter in its natural and ordinary meaning meant and was understood to mean that the Applicant and its Fund had a bad public reputation.

14.By publication of the letter the Applicant has been injured in its credit, reputation, and in the way and manner of its business, and has suffered loss and damage."

The statement actually made in the letter was that the applicant is a new fund which "is badly perceived by the public". It is, I think, clearly arguable that this statement could be read in a defamatory way. I believe that an uninformed person reading the statement out of context could quite easily believe that it was intended to mean that the general public did not have a good opinion of the applicant company or, as the statement of claim alleges, that the applicant and its fund had a bad public reputation.
Counsel for the respondents attempted to explain the meaning of the words by reference to their dictionary definitions. It is true that the Shorter Oxford Dictionary gives as its first meaning for the word "perceive" "to take in or apprehend with the mind or senses. ...; to become aware or conscious of; to observe, understand." The same dictionary defines the word "badly" as meaning "in a manner below the proper standard; poorly, insufficiently, defectively." Putting selected parts of the two definitions together, counsel argued that the true meaning of what had been said was that the general public was poorly or insufficiently aware or conscious of the applicant fund.
Evidence was given of opinion polls which had been commissioned by the HBA which had shown that the applicant was not well known to the general public. For example, only 8.4% of the persons surveyed said that they would be "happy to use" the applicant's fund, 4.6% said that it offered all benefits needed and 4.9% said it offered fair contribution rates. It was clear that, in spite of an aggressive publicity campaign, it was not yet well known. There was uncontradicted evidence that these polls, which had recently been taken, were present to the mind of Mr Shaw when he wrote the letter, and I think it is possible that the meaning put forward by his counsel was the meaning which he intended to convey. On the other hand I note that the draft letter of correction, which was offered to the applicant a few days after the original letter was sent, contained the paragraph,

"In my first letter I stated that Health Australia is badly perceived by the public by which I meant that, in my opinion, the public does not generally see Health Australia as attractive on the important mixture of price, benefits and service."

It would seem from this that Mr Shaw did indeed intend to convey that Health Australia was not well regarded by the public - for what might be described as purely commercial reasons, having nothing to do with the applicant's business practices or general integrity.

Later Mr Shaw offered to add the words, "I did not intend to reflect upon the character of Health Australia".
I think that the test I should apply is whether the statement made by Mr Shaw could reasonably be taken in a defamatory sense by reasonable, informed, private hospital administrators. See Lord William Neville v The Fine Art and General Insurance Co Ltd 1897 AC 68 at 72-3.
As Holroyd Pearce LJ said in Lewis v The Daily Telegraph Ltd (1963) 1 QB 340 at 374,

"When persons publish words that are imprecise, ambiguous, loose, fanciful or unusual, there is room for a wide variation of reasonable opinion on what the words mean or connote. The publisher can hardly complain in such a case if he is reasonably understood as having said something he did not mean."

In my view the recipients of this letter could reasonably have taken it to mean that the writer had some knowledge which led him to say that the applicant's fund was held in poor regard by, or had a bad reputation with, the general public. Understood in this sense, I think the words used were defamatory.
It is true that the administrators to whom the letters were addressed do not seem to have taken much notice of the respondents' statements. There was no suggestion in the evidence that any more than two of them had challenged their Association's placing of the advertisement or had in any other way been critical of the conduct of their executive body. And those two questioned the wisdom rather than the accuracy of the advertisement. Mr Hughes said that, when he heard of it, he telephoned 80% of the administrators to whom the letter had been addressed, and only the two referred to expressed any concern. There was no other adverse comment. He also wrote to all members.
I think it is probable that, however the different recipients may have read the particular words used, they did not take them very seriously - regarding them as simply another shot in a sniping war between the applicant and HBA. However this consideration is relevant only to the question of damages. Once a defamatory statement has been established, then in the absence of any recognised defence, the applicant is entitled to some damages even though the hurt sustained may have been small.

Qualified privilege
This leads me to the defence of qualified privilege. Paragraph 14 of the defence of the two respondents reads as follows,

"Alternatively, if the said letter or any statement contained therein was defamatory as alleged (which is specifically denied), the letter was published on an occasion of qualified privilege in that:-

(a) the letter was published and the statements therein made for the reasonable and necessary protection of the legitimate interests of the secondnamed Respondent and the recipients had a legitimate interest to receive the same.

PARTICULARS

(i) Before the publication of the said letter, the Association had caused an advertisement in the form of the copy advertisement annexed to the letter to be published in both 'The Age' and 'The Sun' newspapers on 8th September 1987.

(ii) In the said advertisement, the Association thanked the Applicant for increasing benefits for its members and compared the performance of and benefits provided by other health funds, including the secondnamed Respondent, unfavourably with the performance of and benefits provided by the Applicant.

(iii) At the time of publication of the said advertisement, the Association had not invited the secondnamed Respondent to participate in any public announcement about increased hospital benefits, had not given the secondnamed Respondent any opportunity to announce new benefits and had repeatedly ignored the advice of major health funds as to appropriate changes in tables of benefits.

(iv) Prior to publication of the advertisement, the Applicant had incited and procured the Executive of the Association to publish an advertisement supporting the Applicant and comparing benefits provided by the Applicant with those provided by other health funds including the secondnamed Respondent. The Applicant also issued its own press release dated 7th September, 1987.

(v) The advertisement, if unanswered had the potential to be extremely damaging to the secondnamed Respondent's business and the letter was written to the administrators of private hospitals being members of the Association in order to inform them of the secondnamed Respondent's concern about the advertisement and in defence of the legitimate commercial interests of the secondnamed Respondent.

(b) the letter was published and the statements therein made upon subjects in which the Respondents and the recipients shared a common legitimate interest;

(c) the letter was published and the statements therein made without malice and in the honest belief that the statements were true."

In its reply, the applicant denied that the letter was published on an occasion of qualified privilege and went on to say,

(a) "it denies that the Applicant published the said advertisement;

(b) it says that the words contained in the said advertisement were neither untrue nor defamatory of the Respondents or either of them or otherwise wrongful;

(c) it ways that the letter, and the statements contained therein, were not relevant to -

(i) the reasonable and necessary protection of the legitimate interests of the Respondents;

(ii) any legitimate interests of the recipients in receiving the same;

(iii) any subject in which the Respondents and the recipients shared a common legitimate interest."

In argument, counsel for the respondents relied on two separate limbs of the defence of qualified privilege - response to an attack, and statements made on a subject of common interest. In my view the first limb can be disposed of quite quickly. I do not believe that this was an occasion of attack on HBA such as to bring into operation the right of vigorous reply which has been recognised in a number of decided cases; see, for example, Laughton v Bishop of Sodor and Man (1872) LR 4PC 495 and Mowlds v Fergusson (1940) 64 CLR 206 at pp.214-5 and 219.
There was, rather, an advertisement, inspired by the applicant, which praised the services the applicant offered and suggested that those offered by HBA and others were lagging behind. This is not the sort of 'attack' which could justify a defamatory response.
On the other hand, I believe that the second limb of the respondents' defence does have substance.
In order to establish the defence of qualified privilege in a case of 'common interest', it is necessary to consider by whom, to whom, and in what circumstances the defamatory statement has been made. In this case it was made by or on behalf of a company which is a business competitor of the company defamed, and it was made to persons having an indirect business connection with both companies - in the sense that they deal closely with the potential clients of those two companies.
The defamatory statement was made in circumstances in which the executive body representing the persons to whom the communication was made had sided with one of the two competitors in a way which could potentially give that competitor a significant commercial advantage. In these circumstances HBA was concerned to protect its business interests by putting its side of the story directly to the members of the body which had acted against its interests. It was responding to an initiative which had been taken by the applicant and which the applicant admittedly saw as part of a 'rates and benefits war' between it and its competitors, including HBA.
I therefore believe that the necessary elements of qualified privilege were present in this case, in that

(a) the communication was on a subject directly touching the legitimate interests of the respondents,

(b) it was made to persons having a corresponding legitimate interest in the general subject of the communication, and

(c) it was made at a time when, and in circumstances where, the respondents had legitimate cause to act in defence of their interests.

The statement complained of was, in my view, clearly within the classic description of a statement attracting qualified privilege because of common interest, as being one by the person concerned,

"fairly made ... in the conduct of his own affairs, in matters where his interest is concerned. In such cases the occasion prevents the inference of malice, which the law draws from unauthorised communications and affords a qualified defence depending on the absence of actual malice. If fairly warranted by any reasonable occasion or exigency, and honestly made, such communications are protected for the common convenience and welfare of society; and the law has not restricted the right to make them within any narrow limits".

This passage from the judgment of Baron Parke in Toogoode v Spyring 1 CM&R 181 has, as Lindley LJ said in Stuart v Bell 1891 2 QB 341 at 346, "been frequently quoted and always with approval". See also Howe v Lees 1910 11 CLR 361 at 367-8. At 369 Griffith CJ said,

"With regard to the privilege founded upon what is called interest it is contended that the person who makes the communication and the person to whom it is made must have a common interest. 'Community of interest' is, I think, a more accurate term. ...

The term 'community of interest' does not connote a joint pecuniary interest in property. Any legitimate object for the exercise of human faculty pursued by several persons in association with one another may be sufficient to establish community of interest. Again: 'interest' does not mean an interest in the particular subject matter as to which the communication is made but an interest in knowing the fact communicated, in other words, an interest in the subject matter to which the communication is relevant ..."

See also the judgment of O'Connor J at pp.376-7.

Having established that this was an occasion of
qualified privilege it is now necessary to ask whether that privilege has been lost by proof of actual malice. In its reply the applicant alleged such malice and gave particulars as follows,

"(a) The said advertisement was published by the Association in both 'The Age' and 'The Sun' newspapers on 8th September 1987, and by no other means.

(b) The Respondents did not

(i) publish an advertisement in 'The Age' or 'The Sun' newspapers;

(ii) make any other public statement subsequent to 8th September 1987 by way of reply to, or explanation of, the subject matter of the said advertisement.

(c) Instead, the letter, with a copy of the said advertisement attached thereto, was forwarded directly by the Respondents to numerous private hospitals within the State of Victoria, none of which had a common or legitimate interest in receiving them.

(d) In the said advertisement, the Association thanked the Applicant for increasing benefits for its members and compared the performance of and benefits provided by other health funds, including the secondnamed Respondent, with those provided by the Applicant.

(e) Neither the letter nor the statements contained therein related, or purported to relate, to the subject matter of the advertisement, namely the matters referred to in sub-paragraph (d) hereof.

(f) At the time of publication of the letter the Respondents did not have in their possession any material to warrant a reasonable conclusion that the Applicant and its Fund

(i) were badly perceived by the public;

(ii) had a bad public reputation.

(g) Subsequent to the publication of the letter and the commencement of these proceedings, the Respondents have sought evidence to justify what the letter asserts as an existing state of fact or belief as at the date of the letter.

(h) At the time of publication the Respondents did not hold an honest belief in the truth of the letter or the statements contained therein.

(i) Neither Respondent has retracted or withdrawn the letter, nor the statements contained therein, nor have they offered any apology or correction thereof.

(j) The Applicant will further rely on the matters set forth in paragraph 6 hereof." (Paragraph 6 dealt with the proposed letter of correction.)

As Lindley LJ said in Stuart v Bell, (above, at 351)

"If the occasion is privileged the plaintiff must prove malice in fact; the burden of proving this is on him, as was settled in Clark v Molyneux 3 QBD 237. Malice, in fact, is not confined to personal spite and ill-will, but includes every unjustifiable intention to inflict injury on the person defamed, or, in the words of Brett LJ, every wrong feeling in a man's mind: Clark v Molyneux (above, at 247)."

In my view this question of malice is to be approached in a broad fashion and not in a narrow analytical manner. As the Privy Council said in Laughton v Bishop of Soda and Man at p.508,

"To submit the language of privileged communications to a scrutiny, and to hold all excess beyond the absolute exigency of the occasion to be evidence of malice would in effect greatly limit, if not altogether defeat, that protection which the law throws over privileged communications."

As Lord Diplock said in Horrocks v Lowe 1975 AC 135 at 149,

"The public interest that the law should provide an effective means whereby a man can vindicate his reputation against calumny has nevertheless to be accommodated to the competing public interest in permitting men to communicate frankly and freely with one another about matters in respect of which the law recognises that they have a duty to perform or an interest to protect in doing so. What is published in good faith on matters of these kinds is published on a privileged occasion. It is not actionable even though it be defamatory and turns out to be untrue. With some exceptions which are irrelevant to the instant appeal, the privilege is not absolute but qualified. It is lost if the occasion which gives rise to it is misused. For in all cases of qualified privilege there is some special reason of public policy why the law accords immunity from suit - the existence of some public or private duty, whether legal or moral, on the part of the maker of the defamatory statement which justifies his communicating it or of some interest of his own which he is entitled to protect by doing so. If he uses the occasion for some other reason he loses the protection of the privilege.

So, the motive with which the defendant on a privileged occasion made a statement defamatory of the plaintiff becomes crucial. The protection might, however, be illusory if the onus lay on him to prove that he was actuated solely by a sense of the relevant duty or a desire to protect the relevant interest. So he is entitled to be protected by the prvilege unless some other dominant and improper motive on his part is proved. 'Express malice' is the term of art descriptive of such a motive. Broadly speaking, it means malice in the popular sense of a desire to injure the person who is defamed and this is generally the motive which the plaintiff sets out to prove. But to destroy the privilege the desire to injure must be the dominant motive for the defamatory publication; knowledge that it will have that effect is not enough if the defendant is nevertheless acting in accordance with a sense of duty or in bona fide protection of his own legitimate interests."

His Lordship went on to say, at p.150, "... what is required on the part of the defamer to entitle him to the protection of the privilege is positive belief in the truth of what he published or, as it is generally though tautologously termed, 'honest belief'.

...

Even a positive belief in the truth of what is published on a privileged occasion - which is presumed unless the contrary is proved - may not be sufficient to negative express malice if it can be proved that the defendant misused the occasion for some purpose other than that for which the privilege is accorded by the law. The commonest case is where the dominant motive which actuates the defendant is not a desire to perform the relevant duty or to protect the relevant interest, but to give vent to his personal spite or ill will towards the person he defames. If this be proved, then even positive belief in the truth of what is published will not enable the defamer to avail himself of the protection of the privilege to which he would otherwise have been entitled. There may be instances of improper motives which destroy the privilege apart from personal spite. A defendant's dominant motive may have been to obtain some private advantage unconnected with the duty or the interest which constitutes the reason for the privilege. If so, he loses the benefit of the privilege despite his positive belief that what he said or wrote was true.

Judges and juries should, however, be very slow to draw the inference that a defendant was so far actuated by improper motives as to deprive him of the protection of the privilege unless they are satisfied that he did not believe that what he said or wrote was true or that he was indifferent to its truth or falsity. The motives with which human beings act are mixed. They find it difficult to hate the sin but love the sinner. Qualified privilege would be illusory, and the public interest that it is meant to serve defeated, if the protection which it affords were lost merely because a person, although acting in compliance with a duty or in protection of a legitimate interest, disliked the person whom he defamed or was indignant at what he believed to be that person's conduct and welcomed the opportunity of exposing it."

In the light of these authorities I have no hesitation in finding that the respondents in this matter were not motivated by express malice and there was no misuse of the occasion of qualified privilege. Having observed Mr Shaw in the witness box, and considered both his evidence and the impression which he made upon me, I am satisfied that he was doing no more than he believed to be proper in putting the case for HBA to persons who were in a position to prevent any further damage to HBA's interests by the repetition of advertisements such as those which the applicant had persuaded the Executive of PHAV to place. I think that Mr Hughes believed that HBA generally offered a better service than the applicant to its clients, when all things had been considered, and that he was concerned only to stress that PHAV was 'backing the wrong horse' in giving its support to the applicant. In doing so he intended to convey the idea that Health Australia was not well and favourably known to the general public, since surveys had shown limited recognition and had also shown that Health Australia's services were not perceived by as many people as being as attractive as those of HBA and other health funds.
I think that the phrase "badly perceived by the public" has to be read in the context of the whole letter and that, when this is done, it cannot be said that the words were maliciously intended, in the sense necessary to defeat the defence of qualified privilege.
Counsel for the applicant argued that it was not enough to show that there was no malice in the use of the words as Mr Shaw had intended them. He said that all the applicant had to establish was that the words, when taken in their defamatory sense to mean that the applicant was of bad reputation, could not be justified as being an honest use of the occasion. He relied in this submission on the New Zealand decision of Stewart v Biggs (1928) NZLR 673. The headnote to that case reads, in part,

"... the evidence having established that respondent had no honest belief in the truth of the statement taken in this (defamatory) sense, the jury was entitled to find malice, notwithstanding that respondent may not have intended the words in such sense, but only in a secondary non-defamatory sense which he honestly believed to be true."

I find it difficult to see, when examining the motives of a respondent and the honesty of his use of an occasion, that he can be found to have been activated by express malice because of a meaning which others may have attributed to his words which was never intended by him. It is not necessary to go in any detail into the facts of the New Zealand decision but, having read it with care, it is my view that the headnote is not supported by the judgment of the majority in that case. The substance of what they said, at p.701, was that when a person who knows the true facts of a case uses words in an ambiguous way which could reasonably be taken to have a defamatory meaning, it is "open to a jury to find that he did not honestly believe what he said to be true".
I should perhaps add that I have reached the conclusion that the defence of qualified privilege succeeds in this case without any uncomfortable residual feeling that the applicant has been unfortunate or hardly done by; cf. Stuart v Bell (above, at 352). On the contrary, it seems to me that this is a case where the applicant has tried to steal a march on its competitors, and one of them has responded in a way which it thought reasonable. The applicant obviously expected a vigorous response and it received one. Its attempt to invoke the law of defamation, in all the circumstances, was misconceived.
In view of the findings which I have made, it is not necessary for me to deal in any detail with the defence of tendered apology as raised by the respondents. I need only say that, because of the rather grudging nature of the suggested letter of correction and the eventual failure to send it, I do not believe that any defence of apology has been made out in a formal sense. Even if it had, it would of course have been relevant only to the question of damages. On that topic, had it been necessary to do so, I would equally have had regard to the rather high-handed tone of the correspondence which was sent to the respondents and their solicitors, and the applicant's refusal to give any details as to the matters in the letter which were being complained about.
Indeed, if I had reached a different conclusion about qualified privilege, the damages which I would have awarded in this claim for defamation would have been nominal only. In saying this I do not overlook the entitlement of a defamed corporation, in an appropriate case, to damages by way of vindication of its reputation; see Lewis v Daily Telegraph 1964 AC 234 at 262.
But, bearing in mind the absence of any evidence of actual damage, the view which I take that the letter would have had very little effect on the minds of those who received it, and thus no indirect effect on the applicant's potential clients, and having regard to the circumstances in which the letter was written, I believe nominal damages would have been appropriate.

Trade Practices
I have been dealing so far with the common law claim of defamation. However it was the alternative claim under s.52 of the Trade Practices Act 1974 ('the Act') which gave this Court jurisdiction in the first place and enabled the claim of defamation to be brought as part of the accrued jurisdiction of the Court.
In order to bring its claim within s.52 of the Act, it was necessary for the applicant to plead and to establish that the statements were made by the respondents "in trade or commerce". This allegation was denied by the respondents in their defence, but I do not believe that this defence can succeed. The expression must be given a broad interpretation; see Menhaden Pty Ltd v Citibank NA 1984 55 ALR 709 at 712, and the cases there cited. In the present case the respondents were concerned to defend HBA's share of the health insurance market against competition from the applicant. In doing so they wrote a letter to a number of hospital administrators who, they believed, were in a position, directly or indirectly, to influence the choices which might be made by potential clients between the various funds which were offering health insurance. Although I think it is unlikely that hospital administrators would often exercise a direct influence on the choice of health funds by patients or potential patients, I can envisage that the general reputation of health funds in the health industry would be of importance to those funds and, over time, could indirectly affect their market shares. In these circumstances, and bearing in mind that the letter was written in order to contain the adverse effects of a damaging advertisement by a competitor, I have no doubt that the letter was written in the course of trade or commerce.
In the case of a claim under the Act the Court is not, of course, concerned about the intention of the respondent company. If the statements made were likely to mislead or deceive the persons to whom they were made, then the applicant would be entitled to any remedy which could be shown to be appropriate.
For reasons which I have given while considering the claim in defamation, I believe that the letter did, unintentionally, convey the impression that the applicant had a poor or bad reputation with the general public. This was not true. If there had been any suggestion that this statement might have been repeated by the respondents, I believe that an injunction would have been appropriate. However the respondents made it clear at a very early stage that the particular statement complained of would not be repeated, and there has been, in my view, nothing in the respondents' conduct to suggest the need for a general injunction.
Whereas for defamation it is sometimes appropriate to give damages by way of vindication of reputation, there is no such claim available under the Act. Section 82 of the Act provides only that a person who suffers loss or damage by reason of a contravention of s.52 "may recover the amount of the loss or damage by action". It is true that damages will often be awarded in cases where it is not possible to establish exactly what harm has been done by misleading or deceptive conduct. However in this case I am not satisfied that any loss or damage has been caused to the applicant.
The letter was addressed, as I have already pointed out, to hospital administrators who could be expected to know the nature of competition between health funds, who were aware that their own organisation was at the time favouring the applicant's cause, who would, I believe, be likely to treat with scepticism any statement made by one health fund about another, and to prefer to judge for themselves the respective merits of the different funds. When it is remembered that the connection between these senior hospital administrators and the persons who would be deciding whether or not to use the applicant's services was likely to be quite remote, as I have already described, I think that there is little possibility that the applicant sustained any damage at all as a result of the use of the phrase complained of in the respondents' letter. Accordingly that claim for damages under the Act must also fail.
I have considered whether any order should be made for a published correction pursuant to s.87 of the Act, but in view of the absence of damage, the unintentional nature of the misleading statement and the uncompromising character of the applicant's reaction to it, I do not propose, in the exercise of my discretion, to make such an order.
I find even less substance in the applicant's other claim under the Act. The statement of claim alleged that,

"The letter in its natural and ordinary meaning meant and was understood to mean that-

(a) the advertisement referred to therein had not been published with the proper authorisation of the Private Hospitals Association of Victoria ('the Association'); ...."

In considering this allegation, it must be remembered that all that the letter said was,

"... we understand that not all members of the Executive of PHAV were consulted on this matter, neither were the general members canvassed for their support."

In my view this statement would not have been understood, by the reasonably informed private hospital administrators to whom it was addressed, in the misleading sense alleged. There can certainly be nothing misleading about the accurate statement that the general members of PHAV were not canvassed for their support. The recipients of the letter would have known that this was a fair and accurate statement. To say, "we understand that not all members of the Executive were consulted" is not to allege that the advertisement was unauthorised, but merely to imply that there may have been some members of the executive who might have taken a different view had they been able to express it. I can see nothing in this statement which alleges any impropriety or unlawful conduct on the part of the officials of PHAV, let alone any wrong-doing by the applicant. If any of the recipients had read more into the words used than appeared on their face, they could easily have checked with their association's executive officer. The idea that the applicant could have suffered any damage arising from this statement in the letter is fanciful.
For the reasons I have given, the application will be dismissed with costs.

[1988] FCA 142

26 APRIL 1988