Sims v Jooste [No 2]
[2014] WASC 373
•10 OCTOBER 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SIMS -v- JOOSTE [No 2] [2014] WASC 373
CORAM: KENNETH MARTIN J
HEARD: 9-13 JUNE 2014
DELIVERED : 10 OCTOBER 2014
FILE NO/S: CIV 1991 of 2011
BETWEEN: DOUGLAS ARTHUR SIMS
Plaintiff
AND
JAMES CECIL INNES JOOSTE
Defendant
Catchwords:
Civil law - Defamation - Internet publication - Justification - Substantial truth - Criminal conduct - Reckless disregard of shareholders' interests - Corporations Act 2001 (Cth) s 184(2) - Turns on own facts
Legislation:
Corporations Act 2001 (WA), s 184(1), s 184(2)
Defamation Act 2005 (WA), s 25
Result:
Action dismissed
Category: B
Representation:
Counsel:
Plaintiff: In person
Defendant: Mr M L Bennett & Ms C L Donald
Solicitors:
Plaintiff: In person
Defendant: Bennett + Co
Case(s) referred to in judgment(s):
Briginshaw v Briginshaw (1938) 60 CLR 336
Dow Jones & Co Inc v Gutnick [2002] HCA 56; (2002) 210 CLR 575
Farah v Say‑Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Favell v Queensland Newspapers Pty Ltd [2005] HCA 52; (2005) 79 ALJR 1716
Findlay v Grimmer [No 2] [2013] WASC 247
Krecichwost v The Queen [2012] HCATrans 294
Krecichwost v The Queen [2012] NSWCCA 101
Kwok v The Queen [2007] NSWCCA 281; (2007) 175 A Crim R 278
Lewis v Daily Telegraph Ltd [1964] AC 234; [1963] 2 All ER 151
Macleod v The Queen [2003] HCA 24; (2003) 214 CLR 230
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Peters v The Queen [1998] HCA 7; (1998) 192 CLR 493
R v Adler [2005] NSWSC 274; (2005) 53 ACSR 471
R v Ghosh [1982] QB 1053
R v Lo [2007] NSWSC 105; (2007) 174 A Crim R 451
R v Robinson [2009] QCA 250; [2010] 2 Qd R 446
R v Williams [2005] NSWSC 315; (2005) 152 A Crim R 548
Reader's Digest Services Pty Ltd v Lamb [1982] HCA 4; (1982) 150 CLR 500
SAJ v The Queen [2012] VSCA 243; (2012) 36 VR 435
Sungravure Pty Ltd v Middle East Airlines Airliban SAL [1975] HCA 6; (1975) 134 CLR 1
Warnakulasuriya v The Queen [2012] WASCA 10; (2012) 261 FLR 260
KENNETH MARTIN J:
Background
Douglas Arthur Sims (Mr Sims) complains he was defamed by the defendant (Dr Jooste) on 10 June 2010 by words concerning him, appearing on the worldwide web - on a website known as 'HotCopper'.
For some years previous, between 21 December 1999 to 29 November 2001, then again from 2 March 2004 to 9 June 2009 Mr Sims had been an executive director of the corporation Eastland Medical Systems Ltd ('Eastland' or 'EMS').
Eastland is an Australian public company. It was listed on the Australian Stock Exchange from 2002 onwards and it is now known as Suda Ltd.
The words complained of
Mr Sims complains of words in the English language posted on the HotCopper website on 10 June 2010 (par 4 of the statement of claim filed 16 August 2011 - which is admitted).
The posted words complained of were:
I disagree Arthur. Corporate governance and transparency are better than ever under the current Board and Management. If anyone is responsible for reckless or even criminal disregard for shareholders' interests it would be the aforementioned Douglas Arthur Sims, as events in and around the Courts will show in due course.
The posting medium for the words complained of by Mr Sims appears to be an internet chat forum - where people post gratuitously offered comments online over the internet.
It is admitted the defendant posted the words complained of by Mr Sims in June 2010.
However, there is a real issue in the trial over whether or not the words, once posted on HotCopper, were actually ever read by anyone, other than Mr Sims. In other words, the issue of Mr Sims proving publication of the words to one or more persons beyond himself in order to make good a cause of action in defamation is very much a fundamental issue at this trial.
As will be seen, the publication issue has proven a fatal obstacle for Mr Sims, who has conducted his own defamation trial, as a litigant in person.
Beyond the basal issue of showing a relevant publication, two distinct meanings (innuendos) are alleged by Mr Sims to arise from the words on HotCopper, assessed in their natural and ordinary meaning (that is, popular or false innuendos) but, alternatively, as legal innuendos as well.
The two meanings as alleged by Mr Sims from the words are:
(a)Mr Sims had engaged in criminal conduct in the management of a corporation; and
(b)in his management of a corporation Mr Sims had acted with reckless disregard to the interests of shareholders.
These meanings are not accepted by the defendant, but if they do arise, the other major issue which arises in this trial is his justification defence, that is pleaded in the alternative to resist both imputations.
The defamation justification defence of Dr Jooste is, unsurprisingly, strongly resisted by Mr Sims. In terms of time, it occupied the major component of what was a four and a half day trial.
Most of the documentary evidence pertaining to the defendant's plea of justification is found in the trial bundle. Unusually for a CMC List matter, I directed that the trial bundle in this case be prepared primarily by the solicitors for the defendant, especially as the plaintiff, Mr Sims, was unrepresented.
In light of perceived difficulties in implementing the usual conferral process as between solicitors and counsel to produce an agreed (or substantially agreed) bundle of documents, I did not make orders to that effect. Rather, the solicitors for the defendant separated a proposed trial bundle of documents into six volumes - a five volume part A, and a single volume part B. Unless otherwise indicated, references to documents and pages in the trial bundle in these reasons (abbreviated as TB) are to the five volume part A.
As explained by Mr Bennett, trial counsel for the defendant, part A includes:
•annexures to witness statements filed;
•other documents the defendant relies upon, many of which were extracted from a compendious book of miscellaneous documents that had been earlier filed by Mr Sims, called 'papers for the judge'; and
•copies of all the witness statements filed (including, once again, by an 'abundance of enthusiasm', their annexures).
The defendant did not consent to a receipt in evidence of the plaintiff's witness statements, but included them in the bundle to create a set of working copies available for Mr Sims and the Court (ts 129 - 130).
The defendant expressly disputed the admissibility of two Part A documents in particular, documents 201 and 204. These objections as seen were ultimately upheld.
With those qualifications, documents 1 - 215 in volumes 1 - 4 of Part A of the trial bundle were received as exhibit 1 (subdivided by volume number and then the subsidiary tab number as exhibits 1.1.1 through 1.4.215) (ts 253). The content of exhibit 1 is further explicable by reference to the trial bundle's index, received as exhibit 2.
The single volume proposed Part B of the trial bundle was limited to documents on which Mr Sims relied, but which the defendant objected to as being 'wholly inadmissible' (ts 129 - 130). Ultimately, Part B was not received in evidence.
The defendant's plea of justification, as regards the two imputations raised by Mr Sims, is focused on the events of 8 June 2009 and particularly ramifications of an electronic payment made by Eastland that day to a corporation closely related to Mr Sims. The payment of $60,000 by Eastland was to the corporation Fee-Zone Pty Ltd (Fee-Zone).
At this point I pause to note one anomaly regarding the trial documents. At a strategic conference on 30 April 2014, the solicitors for the defendant helpfully volunteered to produce a book of papers for the judge, again in view of Mr Sims being unrepresented. This book of papers included Mr Sims' unamended statement of claim, his reply, and a 'further substituted defence (amended)' (FSDA) of 7 February 2012. This book became the working document the parties constantly referred to at the trial. Strangely, however, it emerges that the most recent iteration of the defendant's defence is a (further) 'further substituted defence (amended)' of 23 July 2012. In both these defence documents, the defendant in identical terms traverses whether the pleaded imputations are either capable of arising from the admitted statement, and if so whether they are defamatory. At this stage in the reasons, little turns on a discrepancy between the papers for the judge and the most recent defence pleading on the Court file. I need however, to return to the point when I come to address the defendant's plea of justification.
As will be seen, however, the justification defence provides a complete answer to Mr Sims' action had he been able to show a publication of the posted words to any person beyond himself.
A short evaluation of Mr Sims' two defamatory imputations
I have earlier set out the two imputations argued by Mr Sims as arising, either from the natural and ordinary meaning of the words (see par 6 and par 7, statement of claim) but, alternatively, as true or legal innuendos.
That further alternative plea is based upon extra knowledge asserted as held by some (unidentified) readers of the words complained of under par 7(b) particulars (i) - (iii).
The true innuendo plea by par 7 must ultimately be dismissed. There was no evidence led at the trial about anyone identified reading the HotCopper words at all (apart from Mr Sims) let alone a reader holding these extra levels of alleged knowledge.
As a result, I am concerned only with the natural and ordinary meaning of the words complained of (ie, popular or false innuendos).
Neither innuendo is admitted by the defendant, either as to their asserted derivations as meanings from the posted words or, if one or other of the two meanings did arise, as to either being defamatory of Mr Sims. See, in this regard, par 6 of the FSDA of 23 July 2012.
It was argued the words of the post do not convey, either expressly or inferentially, that Mr Sims engaged in any criminal conduct. It is said that Mr Sims' imputation had overlooked an important qualifying phrase in the post, 'or even', and also that the words used in the post were 'criminal disregard'.
It is further argued the phrase 'criminal disregard' had only been used in a context of suggesting Mr Sims had engaged in conduct which had a gradation of seriousness culminating in the phrase 'or even criminal disregard for shareholders'. This phrase was said to qualify the words used, suggesting the defendant was unsure whether the plaintiff's conduct had reached any higher level of seriousness. From there, it was argued the imputation as to the plaintiff having engaged in criminal conduct in the management of a corporation did not arise. Moreover, it was (correctly) observed that no corporation had been identified in the posted words, where the corporation, Eastland, is not expressly mentioned.
It was accepted that the words complained of do refer to a current board and to management (ie, of a corporation). But it is then said that there is nothing in the post to suggest any misconduct by Mr Sims in that capacity, as regards management of a corporation.
I reject the above contentions of the defendant. In my view, both imputations arise in the natural and ordinary meaning of the words complained of. Supporting that conclusion, I refer to the observations of the plurality in the High Court in Favell v Queensland Newspapers Pty Ltd [2005] HCA 52; (2005) 79 ALJR 1716. In Favell, the High Court, by reference to the celebrated decision of the House of Lords in Lewis v Daily Telegraph Ltd [1964] AC 234; [1963] 2 All ER 151 said again that a non-legalistic approach should be followed when evaluating allegedly defamatory words. The standard template of a hypothetical ordinary reasonable reader was to be assessed as someone prepared to draw reasonable inferences and who may be suspicious. There followed the plurality's reference in Favell to the caution needed to be exhibited by somebody who writes about 'smoke' in order not to be taken to be suggesting 'fire'. In Lewis, Lord Devlin said, relevantly, that words
can convey a suspicion short of guilt; but loose talk about suspicion can very easily convey the impression that it is a suspicion that is well founded.
The 'fire' analogy from Lewis was applied in Favell at [11].
Here the phrase in the post 'or even criminal disregard' was strong language. In my view, it is not an unduly strained or unwarranted process for a reasonable person to assess such words as either indicating or implying serious misconduct in the management of a corporation by the infringement of the criminal law of the land. The gravity in that chosen phrase was heightened, in my view, by the extra words in the post 'as events in and around the Courts will show in due course'. That reference to events forthcoming around Courts certainly implies a breach of a legal standard of conduct, on my assessment.
Likewise, as regards a corporate mismanagement meaning and Mr Sims, in my view, a juxtaposition of the sentence after the first sentence's reference to the current board and management, is more than enough for an inference to be drawn that reckless or (even) criminal disregard for shareholders' interests was misconduct of Mr Sims - whilst he was acting as part of the management of a corporation. This emerges from words highlighting a contradistinction between Mr Sims and the praiseworthy current board and management, under which corporate governance and transparency were said to be better than ever.
On my assessment, both imputations do arise from the natural and ordinary meaning of the words.
Moreover, I assess them both as pejorative of Mr Sims' character: see Reader's Digest Services Pty Ltd v Lamb [1982] HCA 4; (1982) 150 CLR 500 (Brennan J).
The defendant submits that merely asserting someone has acted with reckless disregard to the interests of shareholders is not enough and that it is necessary to go further to say that this was done for a selfish motive such as for personal benefit, or when it was not in the interests of the company. I disagree. The words 'criminal' and 'reckless' as seen used in the post in association with 'disregard' - essentially speak for themselves as far as inflicting upon the perception of a reasonable reader a reputational wound against Mr Sims.
Both imputations closely follow the text of the words complained of in the post which displays the words 'reckless' and 'criminal'.
It is invariably necessary for a defamatory imputation to be formulated with considerable precision. This will usually require more than simply repeating again the words of the text complained of. It is necessary to capture the essential 'sting' of a defamation: see in that respect Stephen J's observations in Sungravure Pty Ltd v Middle East Airlines Airliban SAL [1975] HCA 6; (1975) 134 CLR 1, which I discussed in Findlay v Grimmer [No 2] [2013] WASC 247.
However, there are some limited words which really do speak for themselves as being defamatory: see, for instance, from Lewis v Daily Telegraph Ltd, the illustration used by Lord Reid regarding the word 'fornicator' - an expression not capable of being distilled to a more precise imputation; see also my own observations to that end in Findlay v Grimmer [No 2] at [137].
So then on my assessment, both the imputations do arise in the natural and ordinary meaning of the words complained of, and are, unless justified, defamatory of Mr Sims.
Publication
Paragraph 4 of the FSDA of 23 July 2012 responds to par 4 of Mr Sims' statement of claim in terms that the defendant admits using the words complained of, but:
4.1makes no admission in relation to the extent of the publication; and
4.2relies on the matters pleaded at paragraph [sic] 10 to 19 below as affording a defence to the Plaintiff's claim.
Those paragraphs articulate the common law defamation defence of justification plus, to the same substantive end, invoke a reliance upon s 25 of the Defamation Act 2005 (WA), by the plea of substantial truth.
By particulars provided to par 4 of his statement of claim, Mr Sims contended as to the extent of the HotCopper internet publication that:
The best particulars that the plaintiff can presently provide is that the words were published to persons unknown not less than 54 in number. Further particulars of the extent of the publication will be provided. (my emphasis in bold)
No further particulars as to the extent of publication were provided.
At par 5 of his statement of claim, Mr Sims alleged:
Further and alternatively to paragraph 4 hereof:
(a)On or about 10 June 2010 the defendant uploaded or caused to be uploaded the words onto the website and thereby published the words to the operator of the website.
Paragraph 5(a) was admitted by the defendant. However, there was no admissible evidence during the trial concerning the operator of the HotCopper web site. No evidence emerged in relation to explaining the nature of the HotCopper website, or as to its possible location, somewhere in the world: see Dow Jones & Co Inc v Gutnick [2002] HCA 56; (2002) 210 CLR 575 [44] (Gleeson CJ, McHugh, Gummow & Hayne JJ).
During the trial two unsuccessful efforts were made by Mr Sims (met by strong objection from counsel for the defendant) to adduce some documentary evidence bearing upon the fundamental issue of Mr Sims proving publication of the posted words on the HotCopper web site, to some third party.
First was Mr Sims' effort to adduce into evidence a series of three letters, at TB vol 4 tab 204. The rejected tender of this material was the subject of my ruling on day two of the trial - upholding Mr Bennett's objections to the admissibility of those documents.
KENNETH MARTIN J: Okay. The point that we have to address is whether these three documents under tab 204 go into evidence or not. Now, normally, you would call a witness. You would put Esse Schoteeldreier, Mieke Göekel, or Eva Maria Kropp in the witness box, and they would say, 'I was sitting at home one evening. I was on the website HotCopper, and here's what I read about Douglas Arthur Sims.' Now, you don't have that evidence. The question is can these documents go into evidence in substitution for the people coming along to court and giving evidence. There are certain occasions upon which the court has got the power to let that sort of evidence in by way of documentation, but this doesn't seem to be one of them. They're not business records. They're undoubtedly hearsay.
…
Well, I'm afraid I have to rule against you because the points that Mr Bennett makes, particularly as to hearsay, the lack of specificity in terms of referring to the 'I disagree, Arthur' statement, which is what you complain about on the HotCopper website, the fact that they are not business records, the fact that they are not even authenticated, these are all telling objections which have to be upheld.
Even apart from the fact that they don't appear to demonstrate a publication or by way of reading to a person within the jurisdiction of Australia, that would constitute a tort of defamation giving rise to actionable damage that I could deal with. So just put that last legal submission to one side, all the other points in their own right seem to me to be unanswerable as a matter of law. And on that basis, I must rule that the objection to the documents at 204 is upheld. So those documents won't be received.
… I will reserve my ruling in terms of the document at 201 until I see what evidence Mr Sims might give about that during the course of his evidence, but I note that that is objected to as well. All right. Mr Sims, you have an opportunity to reply to Mr Bennett before you give your evidence if you want to address any matters. Did you want to make a submission, Mr Sims? No submission. (ts 250 - 252)
In amplification of that trial ruling, I would add that the (translated to English) documents seen at tab 204 appeared to emanate from non‑English speaking persons (from Germany). The documents could not be admitted into evidence without a better and more reliable recourse to their alleged authors. Furthermore, the communications were highly non‑specific towards the assumed authors of each letter actually seeing the words complained of on HotCopper.
The second significant document objection and ruling concerned the copy document at TB vol 4 tab 201.
This document presented as a one page photocopy of a computer screen print off by someone unidentified (but established as not Mr Sims) from the HotCopper website, containing three so-called posts, including what was said to be the post of the defendant containing the words complained of.
The second post seen on the page of the copied screen printout does display the words complained of. There is as well some further information (seen in the margin) including the name of a person ('toosoon') making the post and a number for 'views' of the post being seen as 55.
What remained (after objections) within Mr Sims' witness statement (exhibit 3) did not assist me at all as regards concluding Mr Sims ever himself held any degree of personal knowledge about the legitimacy of the derivation of the tab 201 copied screen printout. Paragraph 85 in Mr Sims' witness statement, exhibit 3, was objected to and ultimately disallowed. It had read, prior to the successful objection, upheld on the irrelevant and conclusionary character of the evidence:
On the 10th June 2010 the Defendant published further defamatory blogs against me.
But even if that inadmissible statement had been allowed to stand as evidence, it would not help Mr Sims to show a publication of the words complained of.
My ruling in respect of tab 201 was (starting at ts 508):
Currently, I'm ruling on the submission [sic] into evidence by Mr Sims of a document objected to in volume 4 of the trial bundle at tab 201 at page 596. What I have before me is a page which has obviously been photocopied at some point and within the middle of it, it contains the words complained of, that is, the words 'I disagree, Arthur'. There's also some further information both before and after and indeed adjacent to those words.
This document has not got into evidence to date by the evidence of someone who has said, for instance, 'I was looking at the HotCopper website. I saw the words that now appear on that printed page and looking at them at some particular point in time, I then pressed a button on my computer which caused what was seen on the screen to be then printed onto a piece of paper and this is that piece of paper.' Now, when Mr Sims adduced his witness statement which became exhibit 3, I made an evidentiary ruling in respect of paragraph 85. Plainly, what he had written at paragraph 85, for many reasons that I mentioned at the time, was inadmissible. It read and has not got into evidence:
On 10 June 2010, the defendant -
that is Dr Jooste -
published further defamatory blogs against me.
Manifestly, for many reasons in terms of addressing the issue of publication, the self-fulfilling legal characterisation of 'defamatory', the plurality in terms of the reference to 'blogs' and the preface to 'defamatory' of the word 'further' indicating material beyond the scope of the current grievance as articulated in the statement of claim. That left what was the document that Mr Sims wanted to mention which was DAS36 which was, indeed, the document at tab 201 that I'm now addressing.
I reserve[d], essentially, the question of whether that document could get into evidence in its own right. Of course, documents which are business records on a daily basis in this commercial court easily find that they are admitted into evidence pursuant to the provisions of section 79C(2)(a) of the Evidence Act and, effectively, speak for themselves. My ruling, however, is that what I'm looking at, tab 201, is not a business record and can't draw any inferences from the nature of the document itself to that end.
The admission into evidence of that document which is pressed for by Mr Sims now is objected to by the defendant. First of all, it's objected to on the basis that it's not a business record and manifestly that must be so. Secondly, it doesn't seem to meet any of the other criteria under section 79C of the Evidence Act, particularly, by reference to section 79C subsection (2) where what actually gets into evidence is not a document but, rather, it is the statement by a qualified person which finds its way into evidence.
Now, in this particular case, there is no contention about the words complained of from a defamation perspective. What there is contention about is the document getting into evidence at tab 201. At minimum, by reference to section 79C, if I was contemplating admitting into evidence a statement from a document such as, for instance, the words on that document had been viewed by 55 people, that statement would need to be made by a qualified person. A 'qualified person' is, in turn, defined in section 79B of the Evidence Act but, essentially, is a reference to a person who one might reasonably be supposed to reliably know the nature of the information in the statement that is sought to be put into evidence.
Can I say that when Mr Sims gave his evidence-in-chief before he was cross-examined I was alive to the question of the potential lacunae in his case concerning proof of publication of the statement complained about to persons other than himself. Indeed, my recollection is that I have mentioned that point explicitly to him at a previous directions hearing in May [2014] prior to this trial, starting by telling him that if he couldn't prove that someone other than himself had seen the words that, essentially, his action would be in jeopardy of failing because that's an essential ingredient of the tort of defamation.
That's confirmed, if there's any doubt about it, in Gatley on Libel and Slander, the 12th edition, by its present joint editors, Professor Mullis and Richard Parkes QC at chapter 6 under the heading Publication Item 6.1, No Civil Action. So the learned authors can be maintained for libel or slander unless the words complained of have been published:
…
A cannot sue B for defaming him to A himself to B himself. That is to say where B reads to himself his libel on A and then locks it away, A must prove that B defamed him to C. Defamation protects a person's reputation, and his reputation is not the good opinion he has of himself, but the estimation in which others hold him. A defamatory statement about the claimant communicated to the claimant alone may injure his self esteem, but it cannot injure his reputation.
The requirement that there be publication to a third party is also a requirement of malicious falsehood. It's not sufficient that the matter has been merely communicated to the third party; it is also necessary that it be communicated in such a manner that it may convey the defamatory meaning, and that persons acquainted with the claimant could understand it to refer to him. If, therefore, a defamatory letter was handed to a person who could not read, or who could not read the language in which it was written, there would be no publication, nor would there be where words were spoken in a foreign language not understood by those who heard them, and where a defendant sent to a third person, on a privileged occasion, a post card defamatory of the plaintiff, though his name was not mentioned and no stranger unacquainted with the circumstances would have identified him as the person referred to, was held there was no publication to the postman or other persons whose hands the post card passed.
So I was going to mention footnote 5 in which the learned authors illustrate - and I won't quote it - situations of limited publication between persons. So that principle is a basic and fundamental principle of defamation law. It's not affected by the provisions of the Defamation Act 2005 of Western Australia. When Mr Sims gave his evidence on day 2 of the trial, I endeavoured to ask him some questions about circumstances in which he had come to know about the content of the words complained of, including by reference to the document at tab 201.
His answers may be seen between pages 284 and 286 of the transcript ‑ sorry, through to 288 at the top.
…
Mr Sims then proceeded to indicate that he was devastated by the words. Doesn't really address, however, the question of anyone other than Mr Sims reading those words. I suppose the question arises as to whether I could draw some sort of inference from the evidence about a blog or chat line on the internet, in terms of the website under the name of HotCopper, such as, for instance, an inference that these things don't get set up by themselves and there must be some person, perhaps sitting in some part of the world, acting as an administrator and therefore, by analogy perhaps to a postman, might have read the words complained of at some point.
I'm not prepared to draw that inference. I've got no evidence before me about HotCopper, about how it operates in terms of who set it up, what part of the world it has a base in. These websites on the World Wide Web are complex. They are international, and I can't draw any inferences in terms of there being some person out there in charge of overall administration who might necessarily have seen those words, or indeed whether they read English, whether they understood English, or indeed whether they were in Australia or, as Mr Bennett submitted at one point in the trial, whether they might have been in Uzbekistan or some other place.
I simply don't know. I shouldn't have to speculate. This court operates on evidence, not speculation. There are other issues raised by Mr Bennett by way of firm objection against the receipt into evidence of the document under tab 201. The provenance is unknown. I accept that submission. I don't have any clear evidence at any stage, notwithstanding Mr Sims had a fair opportunity to elicit it, in terms of him or someone that he knows printing that off on a printer at some particular point in time, and, as I've indicated, the provisions of section 79C of the Evidence Act don't seem to be engaged.
I've also made some previous rulings in respect of documents at tab 204 which bear upon this, but only in a negative way in the sense that that material did not - for the reasons I gave and as are reflected on the transcript on 10 June at 11.54 am - make it into evidence. Accordingly, my ruling is that the document at tab 201 is correctly objected to and will not be received into evidence.
No publication
Mr Sims entered the witness box on day two of the trial. Whilst he was there I attempted to elicit, before he was cross‑examined, any personal knowledge he might have held concerning the words complained of, including by reference to the document at TB vol 4 tab 201. Mr Sims' evidence, as seen below, was not at all helpful to his cause - see ts 285:
KENNETH MARTIN J: … What can you tell me of your own personal knowledge about you seeing those words 'I disagree, Arthur', down to 'show in due course'?
MR SIMS:Well, from memory I believe that - I think it was Mr Strahan who said, 'Have you seen.'
…
KENNETH MARTIN J: I don't want to know about Mr Strahan. I want to know about you.
MR SIMS: It was brought to my attention.
KENNETH MARTIN J: Okay. When?
MR SIMS: It was after that. He - naturally, it was after that and I did - I believed it was someone else, your Honour.
…
MR SIMS: Well, no, I didn't have a conversation. I was just pointed to hear and I went in and I - - -
KENNETH MARTIN J: When you say you went in, what do you mean you did?
MR SIMS: Went into the HotCopper site.
KENNETH MARTIN J: By doing what? You got on a computer somewhere?
MR SIMS: Yes. I went to the forum, yes.
KENNETH MARTIN J: Whereabouts?
MR SIMS: Pardon?
KENNETH MARTIN J: Whereabouts? At your home?
MR SIMS: My place.
KENNETH MARTIN J: Okay. You got on the computer.
MR SIMS: I opened - into HotCopper.
KENNETH MARTIN J: Thank you. And what did you do?
MR SIMS: Well, I was upset at the reaction and I started to put together out of this DDX and a number of people that were defaming me, and I took legal advice.
KENNETH MARTIN J: … Before you get on that, did you, yourself, out of your own eyes when you got on the HotCopper website at some point - - -
MR SIMS: Well, I then - no, I - - -
KENNETH MARTIN J: Did you see these words on the internet?
MR SIMS: Yes, but I - it wasn't this one that was brought to my notice. It started, your Honour, on 11 December. 11 December 2009.
KENNETH MARTIN J: Well, the case is not about that.
MR SIMS: Which caused me - - -
KENNETH MARTIN J: The case is not about that.
MR SIMS: Caused me to go onto and follow HotCopper.
KENNETH MARTIN J: Yes.
MR SIMS: And on 10 June, I had returned from Germany with an extensive meeting with Mr Stewart, Mr Jooste, lawyers for Berlin Farma, lawyers Lovells for EMS over two days, 26 and 27 May - - -
KENNETH MARTIN J: Okay. Well, just stay on the point.
MR SIMS: And when I returned, I went back into HotCopper and on the 10th this disappeared [sic] and I read this on HotCopper.
KENNETH MARTIN J: When?
MR SIMS: Well, some time after I returned from - - -
KENNETH MARTIN J: Some time after 10 June 2010.
MR SIMS: I can't say it was on the 10th but it was somewhere around there. I went in and accessed HotCopper, as I regularly did since December, and I read this and then it was deleted.
Mr Sims was then cross-examined about the words he complains of, by counsel for the defendant (see ts 439 - 440). Again, Mr Sims' responses were mostly vague and unhelpful, in terms of eliciting anything reliable or admissible about what he ever saw on the HotCopper website (if anything).
The issue of words complained of needing to be read and understood by at least one other person (that is, a person other than Mr Sims) is fundamental to Mr Sims showing an essential ingredient of a cause of action in defamation against this defendant.
Mr Sims, as a litigant in person, was not taken by surprise by this legal issue. A need to show publication of the words to a third person other than himself was clearly explained to Mr Sims, as early a pre-trial directions hearing of 26 May 2014 (see ts 90 - 91).
For Mr Sims, showing a publication of the words from HotCopper to a third person would have been as easy as calling as a witness to the trial some member of his family, or from a group of his friends who might have attested to actually having seen and read the words complained of on the HotCopper website. Yet no-one at trial testified to doing that.
Even Mr Strahan, a witness called by Mr Sims at the trial, did not give that evidence.
Mr Sims' defamation action must fail in consequence.
Notwithstanding that outcome for Mr Sims I will, since it was fully argued and consumed a great deal of the trial, deal with the defendant's justification defence, raised against the two imputations Mr Sims extracts from the words complained of.
Evaluation of justification defence
By way of overview I can say at the outset that:
(a)The assertion of criminal conduct by Mr Sims in the management of a corporation can be sensibly read as a reference to the management of the corporation Eastland (now known as Suda Ltd).
(b)This is also the case, as regards the assertion of reckless disregard to the interests of shareholders, being Eastland shareholders.
(c)The essential facts relied upon by the defendant to sustain the pleas of justification to both imputations are found under the particulars he provided to par 10 of the FSDA (and which was not amended by the 23 July iteration). With some minor clarifications, I find all those facts to have been established at the trial. Overwhelmingly, they have been established and proven by admitted documentation, subject to the minor qualifications I will mention.
Factual findings
Although Mr Sims has factually failed to prove a relevant publication of the words, it is desirable to resolve the justification aspect of the case. To facilitate the exercise I need to render more findings of fact. I will do that in a broadly chronological order.
In large part the facts emerge from the documents which were put before the court in exhibit 1.
Some facts also emerged from Mr Sims' own evidence, in‑chief via the surviving parts of his witness statement (exhibit 3) - to which there were numerous upheld objections, ruled upon during trial.
There was also the evidence of Mr Trevor Strahan, whose witness statements were tendered as exhibits 6A and 6B. He was called as a witness for Mr Sims.
I must observe, as regards the evidence of Mr Sims, that, save where I render findings expressly accepting his evidence, I cannot otherwise generally accept his evidence, unless independently corroborated.
I do not render the finding that Mr Sims was a dishonest witness. However, his evidence was, in my assessment, highly unreliable, not just under cross‑examination. Taking account of Mr Sims' hearing difficulties, he nevertheless displayed what I assessed was a constant inability to ever answer a question put with a direct answer. By way of illustration, see ts 302 - 303, showing Mr Sims' answer of some 350 words or so to the question '5th of what month?'
Findings of fact: background to 2007
Mr Sims is an inventor and businessman. He was founder and a major shareholder in Eastland, which was incorporated in 1999.
Mr Sims was a director of Eastland in the periods between 1999 to 2001 and again from 2004 to 9 June 2009.
During periods relevant to this action, Eastland was listed on the Australian Stock Exchange (ASX). During this time Mr Sims was not a signatory to the operation of Eastland's bank accounts (ts 219, 391).
Over time Mr Sims was engaged by Eastland in some different capacities, including as a consultant and as a director. Mr Sims was Eastland's director in charge of product development as well as the manager and director of global business development.
At the time of his resignation from the board of Eastland on 9 June 2009, Mr Sims had been employed as 'International Business Director' under an executive employment agreement from 2 October 2007, which is exhibit 1.1.3. Relevantly for aspects of the defendant's plea of justification, this agreement specifies some duties of Mr Sims in this capacity. But it casts no light on his powers or authority.
Mr Sims' work on behalf of Eastland included arranging an acquisition of what was called the ArTiMist sub-lingual anti-malaria treatment. He was the creator of that trade name: see exhibits 1.1.16 and 1.1.17. As part of the commercialisation of this product technology, EMS had invested in a company HC Berlin Pharma AG, which it had licensed to manufacture ArTiMist as part of a venture which apparently concerned, at various points, charities associated with the family of South African statesman Nelson Mandela, and the current German Chancellor, Angela Merkel: exhibits 1.1.17 and 1.1.18. Background corporate history in this area is summarised in the 'Operations Review' in the Annual Report 2008, which is in exhibit 1.1.20 TB 71. Mentioned there is Eastland Medical Systems South Africa Pty Ltd, which was being wound up. Overleaf, the report gives a profile of Eastland's then directors, including Mr Sims, and also Eastland's chairman, Mr Peter Innes Jooste QC, the father of the defendant, Dr Jooste.
According to Mr Sims' witness statement (exhibit 3, pars 6 and 7), he had known Mr Jooste QC, since about 1998. At that time Mr Jooste QC had represented a corporation in which Mr Sims held shares. In May 2006, Mr Sims invited Mr Jooste QC to join the board of Eastland. This resulted in December 2006 in Mr Jooste QC becoming chairman, as well as a remunerated legal adviser to Eastland.
At that time the board of Eastland included Mr Francis (Don) O'Sullivan, Mr David Whitelaw, Mr Sims and Mr Jooste. Its company secretary was Mr Trevor Strahan. This is all uncontroversial fact.
Minutes of Eastland directors' meetings from time to time display a very common corporate governance procedure. The minutes of a preceding directors' meeting are generally circulated prior to the following directors' meeting. If accepted, they are signed off by the chairman (usually, but not invariably) at that next meeting and dated. I refer in illustration, for instance, to exhibit 1.1.13, the Eastland board minutes for a meeting of 1 December 2006, then signed off by the chair of the meeting, Mr Jooste QC, on 8 January 2007.
Prior to commencing this litigation, Mr Sims asserts he had never met Mr Jooste QC's son, the defendant, Dr James Jooste. There is no reason not to accept that.
The defendant did not provide a witness statement, or give any evidence at this trial.
Mr Sims says that in June 2007, he invited Mr Jooste QC to join the advisory board of HC Berlin Pharma AG and also to act as that body's remunerated legal advisor concerning African affairs. Mr Sims says (par 10 of his witness statement) that Mr Jooste QC resigned from his position with HC Berlin Pharma AG in October 2009. I accept that.
In his witness statement, Mr Sims describes his close friendship at the time with Mr Jooste QC. He says, and I accept, he placed a great deal of trust in Mr Jooste QC, 'up until December 2008'.
At par 12, Mr Sims also says and, again, I accept:
In November 2005 I offered [Mr Jooste QC] 2,000,000 International Medical Devices PLC (IMD) shares, which shares were listed on the London alternative market, for his past legal services.
Mr Sims says that after their listing, those IMD shares became tradeable for a time and had a realisable value of AU$250,000.
Again, I would accept that.
Events of early 2008
By May 2008, the IMD corporation had failed. Its shares were withdrawn from trading. Those shares were, for all intents and purposes, at that time worthless.
Mr Sims said the IMD shares were initially transferred by him to Mr Jooste QC, as a mark of respect arising out of the loyalty and friendship which existed at the time between the two men (see ts 306 ‑ 307). Again I accept that. But given the failure in 2008 of IMD, the gifted shares had by then proven, at least by May 2008, worthless.
Mr Sims relates (par 15 of his witness statement) that on 20 July 2008 there was a meeting between himself and Mr Jooste QC at the Caesar Hotel, in Johannesburg, South Africa. As Mr Sims relates events, Mr Jooste QC had broached the subject of his worthless IMD shares.
As explained under Mr Sims' witness statement (at pars 16 and 17):
16.Discussion took place on the IMD Shares being replaced with [Eastland] shares.
17.The projected price of [Eastland] Shares was being touted by Brokers at the time to reach $0.35 in the near future and rising to $2.00 arising from [Mr Sims'] efforts in bringing new projects to [Eastland], namely the Children's malaria treatment project and [an] Anti smoking treatment.
Mr Sims was cross‑examined over this evidence at the trial. This exchange occurred at ts 307 - 308:
You gave him two million shares?---IMD shares.
IMD. They ultimately proved to be worthless when that company failed?‑‑‑He could have sold them for 250,000.
They proved to be worthless when that company failed?---That company went down in the global financial crisis. I was not on the board when it went down.
In 2008?---Yes. I was not on the board.
He raised with you in Johannesburg that those shares were worthless and you offered him EMS shares instead?---Conditionally. Now - no, hang on.
Yes?---We put a value - - -
You offered him those shares?---No, hang on. We put a value at the top trading price of those shares at 250,000, okay. Bearing in mind that the workload has gone through the roof so we're sitting in Caesar's Hotel, Johannesburg, with a bottle of red wine discussing how we go forward at dinner and Mr Jooste brought up the issue of the IMD shares being a failure and I had opened trading accounts and everything and paid for that opening - for him to trade them but he preferred not to. So at that time it came up, well, replacement shares of IMD with a value of - EMS with a value of two million. Now, that was a separate deal. Yes, replace the 250,000 value and it moves to two million because now we've grown from - we're still a minnow doing a white pointer's job but we've become a global conglomerate which Mr Jooste was so important with his experience of South African law which is on German law so there had - there was a top-up. So when the issue came $2 million into personal income - wow.
(The last answer provides an illustration of the rambling way Mr Sims dealt with many questions put to him under cross‑examination.)
But what emerged from all that was, essentially, another person‑to‑person 2008 share transfer transaction by way of gift, as between two men who were, at the time at least, very close friends.
Mr Sims told Mr Jooste QC at their Caesar's Hotel meeting in Johannesburg and he was, essentially, going to bring about, I find, a replacement in value for Mr Jooste of the now worthless IMD shares.
Mr Sims would do that by having other companies associated with him that owned Eastland shares (such as the corporation Fee‑Zone Pty Ltd, in which Mr Sims was a director and effectively exercised control) transfer two tranches of Eastland shares to Mr Jooste QC.
Mr Jooste QC was to receive from Mr Sims, two million Eastland shares under these friendly gift arrangements.
However, as events unfolded, Mr Jooste QC did not wish to receive any Eastland shares personally. His eventual direction to Mr Sims was that the Eastland shares should be received by a corporation that was associated with him and his wife. This was the corporation Zulu (WA) Pty.
Mr Sims also had a close tie with another corporation that owned Eastland shares. This was Eastland Technology Australia Ltd.
Eventually, to these overall ends, a deed of acknowledgement of trust was entered (see exhibit 1.1.28 TB 137 ‑ 139).
The subject matter of the deed was only one million Eastland shares (not two million, a point requiring some later clarification). They were to be received by Zulu (WA) Pty. The terms of this instrument, executed as a deed poll, are very short.
The document is expressed to be dated 29 August 2008. It is self‑described as a 'recordal of prior declaration of trust … by Douglas Sims of Perth, Western Australia'.
The deed contains five recitals followed by three substantive provisions, prior to execution as a deed by Mr Sims (and witnessed by Mr Strahan). The recitals state:
WHEREAS:
A.Related Entities of Sims (Fee-Zone Pty Ltd & Eastland Technology Australia Ltd) hold EMS shares including the 1,000,000 EMS shares referred to below;
[The face page of the deed refers to one million shares in Eastland Medical Systems Ltd ABN 35 090 987 250 - seen above the words 'EMS'. Hence it is clear this is a reference to Eastland. There was no issue over any of this at the trial.]
B.The 1,000,000 shares have been held on trust on conditions and an escrow and subject thereto, at the direction of Peter Jooste QC;
C.The Trust is now unconditional and free from escrow;
D.Peter Jooste QC has now directed transfer of the shares to Zulu (WA) Pty ACN 058 281 244;
E.Sims will procure transfer of the shares;
[The deed's substantive clauses followed]
THIS DEED WITNESSES AS FOLLOWS:
1.That Sims (Executive Director of the Related Entities) will procure signed transfers of the shares and deliver those to Peter Jooste QC as soon as practicable;
2.Transfer will be effected to Zulu (WA) Pty;
3.It is recorded that the value per share at Trust was Aus$0.03.
The same day the deed was executed by Mr Sims, Mr Jooste QC (on 29 August 2008 - see exhibit 1.1.29 TB 141) directed Mr Sims as Executive Director of Fee-Zone Pty Ltd and Eastland Technology Australia Ltd in these terms:
Dear Mr Sims,
I would like to bring to your attention the Eastland Medical Systems Ltd shares held by your companies in Trust for my direction.
As the escrow and conditions on transfer of these shares have been met, I instruct you to have 1,000,000 of these shares transferred to ZULU (WA) PTY ACN 058 281 244 of c/- Rose‑Innes Chambers, 1202 Hay Street, Perth, WA.
May I also bring to your attention that the value of these shares at agreement was Au$0.03 per share.
I look forward to receiving the signed transfer within 7 days from the date of this notice.
By Mr Sims' witness statement, par 19:
[Sims] offered to replace the IMD Shares with [Eastland] Shares with a value of $2,000,000 and the additional value would properly pay [Mr Jooste QC] for the dedicated services to [Eastland] and the assistance required by [Sims], as Officer, in concluding the business of [Eastland] in Germany and Africa for and on behalf of [Eastland].
Accordingly, a key particular of justification contended for by the defendant under par 10(b) of the FSDA is proved, save that the only deed refers to one million Eastland shares, not two million.
According to par 2(b)(i) of Mr Sims' Reply lodged at a time when he had legal representation, 'another deed was executed in similar terms relating to a further 1,000,000 EMS shares.' However, no evidence emerged at the trial about a second deed.
Unfolding arrangements between Mr Jooste QC and Mr Sims progressed, I find, from 29 August 2008, on a basis that a further one million Eastland shares would also be provided - and for Mr Jooste QC to direct in terms of their ultimate recipient. Again, the million further Eastland shares were to be transferred by the corporations associated with Mr Sims, being Fee‑Zone Pty Ltd or Eastland Technology Australia Ltd.
In none of these Sims/Jooste QC/Fee‑Zone Pty Ltd/Zulu (WA) Pty/Eastland Technology Australia Ltd share receival transactions is there any suggestion, let alone some trial evidence, that Eastland's board at the time had:
(a)been apprised of, or approved, arrangements as between Mr Jooste QC and Mr Sims for the receipt of two million shares in Eastland by entities nominated by Mr Jooste QC; and
(b)that Eastland, through its board, or at some meeting of its shareholders, had ever agreed to reimburse Mr Sims or his related corporations - as transferring entities - for any Eastland shares that were caused to be received by entities at the direction of Mr Jooste QC by shares or money. To the contrary, the Sims/Jooste QC Eastland share receipt arrangements all present as being more of a privately effected (replacement) gift scenario, being undertaken at the initiative of Mr Sims, for the benefit of Mr Jooste QC. This was all in the wake of Mr Jooste QC's IMD shares having become worthless in 2008 with Mr Sims' beneficent objective of providing in value a replacement gift of Eastland shares in the circumstances.
At points along the way during trial, Mr Sims sought to suggest that Mr Jooste QC had agreed with him to some sort of 'milestone' arrangement governing the receipt of two million Eastland shares (see Mr Sims' Reply, par 2(c)(i), referring to 'certain trading price milestones of EMS shares'; also Reply (par 2(c)(iv)). But it is clear that there is no reference at all to any such 'milestones' found in the deed of 29 August 2008 concerning the first one million Eastland shares.
I am not able to reach a finding concerning the existence of any milestone arrangements with Mr Jooste QC, as regards a further one million Eastland shares, given the overall unreliability of Mr Sims' evidence. In the end, that outcome probably matters little in the overall scheme of things.
The significant point to take out of all this is that wholly private arrangements as between Mr Sims and Mr Jooste QC (and their associated corporate entities) had been reached in 2008. That was in the circumstances of a strong prevailing friendship between the two men, as regards Mr Jooste QC's receipt (or his nominated receipt) of Eastland shares via entities related to Mr Sims. There were private arrangements as between the two men only. In other words, they were not arrangements approved by or, for that matter, formally disclosed to, I would find, the board of Eastland. Of course, I do not overlook that Mr Sims and Mr Jooste QC were then two members of the Eastland board. But their private arrangements were not ever minuted as having been discussed, let alone approved, by Eastland's board.
Subsequently, some transfer forms for the first one million Eastland shares were personally delivered. The transfer of the first million Eastland shares was recorded in the share register of Eastland for 1 December 2008: see exhibit 1.1.31 TB 143, 1.1.32 TB 144; 1.1.33 TB 145 and 1.1.34 TB 146.
The second tranche of one million Eastland shares was transferred by Fee‑Zone to Zulu (WA) Pty. It was receipted in the Eastland share register on 1 July 2009: see exhibit 1.2.96, email communications between Mr Sims and Mr Jooste QC of 17 April 2009.
Under his witness statement (exhibit 3), Mr Sims relates:
28.During the period of working with [Mr Jooste QC] I accepted his friendship and bond to complete the saving of children from malaria as a genuine friendship of trust.
29. [By] October 2008, [Eastland] was suffering financial hardship and [Mr Jooste QC] and I spent considerable time in South Africa at my expense, negotiating the business of [Eastland] and the completion of shifting the manufacturing rights of the malaria project from [Eastland's] subsidiary in Eastland Medical Systems Ltd (EMSSA) into [Berlin Pharma].
So much may again be accepted. It clearly became necessary for Eastland to urgently raise more funds towards the end of 2008 and into early 2009. Various fundraising proposals were under consideration at that time by its board.
On 11 November 2008 (see exhibit 1.1.47 TB 223), Eastland's chief financial officer, Mr Peter Tiede, had bluntly advised Eastland's board:
Gentlemen,
As of this morning the MIA is overdrawn on its bank account approx. $111K and requires urgent capital in order [to] rectify this and other outstanding amounts (EMS account balance $59K, with wages due this week $49K inclusive of tax due).
The group's cash position is now critical and serious consideration must now be given to the ability of the company to continue trading … We must draw a line in the sand and given the current situation this has to be the end of business today.
We do have other options going forward, however these will take time and there are no guarantees that these will [stay] open, we have 24 hrs not weeks.
In the last quarter of 2008 the downturn effects of the global financial crisis were being felt internationally. At that time, the Eastland board comprised Mr Jooste QC as chairman, Mr Dermot Patterson, who was chief executive officer, Mr Sims and two more executive directors, Mr Tiede (also the CFO) and Mr David Whitelaw.
In late 2008, Eastland had been advised by its major secured lender, the ANZ Bank, that it needed to repay its loans: see exhibit 1.1.50, minutes of an Eastland board meeting of 3 December 2008 - signed off by the chairman, Mr Jooste QC, on 26 February 2009 (items: ANZ facility and general business).
Under consideration by Eastland at that time as one of a number of fundraising options was a rights issue of shares to existing Eastland shareholders - on the basis of one new ordinary share for every eight shares held at the last 10‑day average weighted share price (10 cents), plus a free attached listing option exercisable at 20 cents, expiring at the end of May 2011.
Early 2009: Financial pressure building upon Eastland
Around 2008 a Perth stockbroking firm, Pattersons Securities, was acting as Eastland's underwriters and stockbrokers. From that quarter there emerged a proposed capital raising via RM Capital Pty Ltd and a Mr Michael Stewart. He was a private investor known to RM Capital Pty Ltd and possibly interested in investing up to $2,000,000 in Eastland: see exhibit 1.2.67 TB 226 - 227, and also exhibits 1.2.59 and 1.2.60.
Exhibit 1.2.67, the minutes of an Eastland board meeting shows the earlier (one for eight) rights issue proposal was poorly received in the market. Only about $130,000 had been subscribed at 26 February 2009. A refund of subscriptions was being contemplated as necessary.
The refund was announced to the market on 3 March 2009 and completed on 9 March 2009: see exhibits 1.2.70 (ASX Release) and 1.2.97 (minutes of Eastland board meeting on 20 April 2009).
There now emerged a new proposal for another capital raising by Eastland on the basis of a much lesser issue price of 3 cents a share, with a view to then raising $4,000,000.
There had also been at around this time a convertible note capital raising by Eastland via RM Corporate Finance: see minutes item 'Proposed capital raisings' in exhibit 1.2.67. The demonstrable truth, however, around this time was that money was very tight for Eastland despite the contemplated capital raising possibilities.
By April 2009, Eastland was actively working on a prospectus for a non‑renounceable rights issue of its shares to raise up to $3,000,000. To facilitate that end, the Eastland board had nominated a due diligence committee to prepare and settle the prospectus.
The external committee was chaired by an independent lawyer nominated by Pattersons. As part of this prospectus and rights issue proposal, it was necessary that Eastland's directors each complete a questionnaire and make appropriate disclosures concerning the state of their respective shareholdings in Eastland plus any moneys or debts owed by Eastland to them: see exhibits 1.2.97 and 1.2.99 (due diligence committee minutes).
In conjunction with the rights issue and prospectus proposal, some negotiations were continuing with RM Capital's James Richardson and Mr Michael Stewart. Together these two men were undertaking due diligence enquiries in respect of Eastland. That extended to enquiries about the status of the ArTiMist Project in Europe. To that end, some investigations were made of HC Berlin Pharma AG in Germany: see exhibits 1.2.75 and 1.2.81.
The relationship between Mr Sims and Mr Stewart began to seriously deteriorate around April 2009. At this time Mr Stewart stated he was having considerable difficulty proceeding with any investment in Eastland, if Mr Sims remained on the board as a director.
There was now some internal pressure on Mr Sims to resign from the Eastland board: see exhibits 1.2.94, 1.2.95, 1.2.101 and 1.2.102.
On 24 April 2009, Mr Stewart advised Eastland's board, which clearly needed Mr Stewart's investment capital, that his investment was conditional on the immediate resignation of Mr Sims as an executive director plus Mr Stewart's own appointment to the Eastland board.
To raise limited but urgently required short term funds, Eastland placed more shares with some clients of Pattersons Securities. This was to raise $585,000 as a limited share placement - permitted under the ASX listing rules (Listing Rule 7.1).
The ASX rules allowed Eastland to issue up to 15% of its capital without seeking the approval from its shareholders. However, a share placement below the 15% mark under this ASX rule was not permitted where it would allow a director or an associate of a director to take up shares under such a placement: ASX Listing Rule 10.11 - exhibit 7(b).
Mr Sims' resignations and other conduct
In the period from early March 2009 onwards, Mr Sims proffered a series of resignations to the Eastland board.
He first offered to resign in early March 2009, but that offer was not accepted.
He agreed to a counter‑proposal that he remain a director, but assume a non‑executive board role until completion of clinical trials for the ArTiMist project. An announcement to the ASX of 10 March 2009 to that end was made by Eastland: see exhibit 1.2.79 TB 271. [Notwithstanding that announcement it will be seen below that on 8 June 2009 Mr Sims signed a letter of instruction on Eastland letterhead, but referring to his position as an 'executive director': see [174] below.]
Between 10 March and 27 May 2009, as a draft prospectus for a non‑renounceable rights issue was evolving, the position in respect of Mr Sims' departure from the Eastland board also evolved. The proposed rights issue draft prospectus document was only to say that Mr Sims would resign after the successful completion of the rights issue at 1 July 2009: see exhibit 1.2.104.
In the first half of 2009, Mr Sim prepared a series of invoices. The invoices claimed that moneys were due by Eastland - either to Mr Sims himself or to his related corporation, Fee‑Zone Pty Ltd: see exhibits 1.2.108, 1.2.109, 1.2.111, 1.3.123, 1.3.124, 1.3.149 and 1.3.151.
Significantly, these invoices included an Invoice No 00024 (exhibits 1.2.108 and 1.2.109) of 10 May 2009, asserting a claim against Eastland for $60,000 by Fee-Zone Pty Ltd. This is a critical document that Mr Sims presses payment for at 8 June 2009, as I explain later.
There is no doubt, and I find, that at the time these and the other invoices were caused to be issued by Mr Sims to Eastland, he knew of the strained financial position of Eastland and financial vulnerability by reason of Eastland's urgent need to successfully complete a significant non‑renounceable rights issue. This objective was the subject of ongoing prospectus preparations by Eastland's board, and so was crystal clear to all members of the Eastland board, including, of course, to Mr Sims.
On Tuesday 26 May 2009, the Eastland board met. By then, the board had shrunk to comprise then only Mr Jooste QC as chairman, Eastland's then CEO Mr Dermot Patterson and Mr Sims.
At that May 2009 directors' meeting, Eastland's company secretary Mr Trevor Strahan was absent. That was unusual as he normally attended board meetings. The CFO, Mr Peter Tiede, was an invitee. He attended (see exhibit 1.3.118 TB 380) and took the minutes of that meeting.
The 26 May 2009 Eastland directors' meeting
Minutes of the Eastland directors' meeting of 26 May 2009 were prepared and later signed off by Mr Jooste QC as Eastland chairman at the next in time board meeting, held on 8 June 2009 in accord with s 251A(1)(b) and (2)(a) and (b) of the Corporations Act. The signed minutes were accepted as being true and correct.
During the course of the trial, I did not detect any issue arising at all as to the correctness of these minutes for the 26 May 2009 directors' meeting. That was the case, unlike for the subsequent board meeting of June 2009, as I will explain.
A revised draft prospectus for the rights issue had been circulated for the 26 May directors' meeting. With some changes it was then anticipated to issue the following day, 27 May 2009.
At that time, the objective was for the rights issue to close on 23 June 2009.
A due diligence 'checklist' had been finalised by Eastland's due diligence committee. The final checklist can be seen in exhibit 1.3.120 TB 395 - 411.
Concerning the Eastland directors' completed questionnaires for the purposes of completing the rights issue, the minutes of the 26 May 2009 board meeting record:
Directors' Questionnaires from Messrs Jooste, Sims & Patterson tabled for review. All Directors present agreed that no recent changes made to the Final Prospectus document has changed the answers in their Directors' Questionnaires.
As became apparent at the trial, Mr Sims places much reliance upon what he disclosed by his answers under the answers which he gave to his questionnaire (found at exhibit 1.3119).
Mr Sims submits that by the answer which he provided to question 4, under a heading, 'Benefits', he had disclosed to the Eastland board, and that the Eastland board had, in turn, either approved, or acquiesced in acknowledging that Mr Sims was to be reimbursed by Eastland (in some manner) for the shares which Mr Sims' corporations had given to Mr Jooste QC (or his directed corporate nominee) under the arrangements between the two men that I earlier described. As will be seen, this suggestion, on analysis, is wholly threadbare.
The particular question on the Directors' Questionnaire and Mr Sims answer was:
Will you receive any payment or other benefit in connection with the issue?---Yes/
Nosettlement of Loan Au$77,000 & outstanding loan to my Super Fund.Repayment of funds and Shares advanced on behalf of EMS which repayment I will accept in round table passing of cheques for this debt and issue of New Shares in the Rights Issue.
Clearly, there were minimal details discernible in the above written answer. The key aspect of the answer is the phrase 'Yes, settlement of Loan AU$77,000 & …'. Nevertheless, that answer is strenuously pressed upon by Mr Sims to contend that the reference to shares advanced on behalf of Eastland is enough to disclose the underlying arrangements involving Mr Jooste QC, Fee‑Zone Pty Ltd and Zulu (WA) Pty. As Mr Sims would have it, there was a full disclosure by him in that answer to Eastland's board of his claim and the entitlement (more correctly, Fee‑Zone Pty Ltd's claim and entitlement against Eastland) to $AUD77,000.
That $77,000 amount (apparently, according to Mr Sims) is derived by multiplying 3 cents by two million Eastland shares (received by Zulu Pty) in order to reach the sum which Fee‑Zone was said by Mr Sims to be due from Eastland as a 'loan'.
That is according to the version of events as contended for by Mr Sims. As we shall see, this assertion is misconceived. I simply point out at this time that the amount nominated by the questionnaire answer was $77,000, not $60,000.
May 2009: the bogus Fee-Zone Pty Ltd invoice(s)
It is now necessary to deal with exhibits 1.2.108 and 1.2.109.
The documents each bear a Fee-Zone Pty Ltd letterhead. Both present as an 'Invoice No 00024 … Dated 10‑05‑2009', although Mr Sims' evidence appeared to be that the ordinal number was effectively meaningless and '[t]hey don't have to be in sequence'.
Mr Sims also said that the first Invoice No 00024 may have been prepared on 9 May 2009 (ts 348). The two Fee-Zone invoices also differ in certain other respects.
The body of the first Invoice No 00024, exhibit 1.2.108, reads:
Two million EMS Shares transferred to Zulu (WA) Pty @ AU$0.03 by companies associated to the Sims Group.
Au$60,000.00
These Shares were transferred on behalf of EMS to ensure the support for Mr Jooste QC in delicate legal matters outside of his role as Chairman.
The support of Mr Jooste resulted in EMS securing 100% of the African Territories for EMS.
As Africa is considered 80% of the world market for malaria and it is projected that a successful trial could add $100,000 million to the value of the project, then it could be conservatively estimated that this support assisted in adding $80,000 to EMS.
It is resolved by the Directors and Shareholders of Fee-Zone Pty Ltd that they accept a round table passing of cheques and take the invoice value with replacement Shares within the forthcoming Rights Issue of EMS Ltd.
SignatureFee-Zone Pty Ltd
Common SealIt can be seen that $60,000 is the claimed amount specified within exhibit 1.3.135 above. As will be seen later, Mr Sims' instruction to Mr Tiede of 8 June 2009 refers to a 'transfer [of] $60,000 in settlement of Invoice No 00024 Dated 10-05-2009'. Mr Sims' evidence was that this (ie, $60,000) was the total value of two million shares at 3 cents each (ts 348).
Somewhat bizarrely, a second Fee-Zone Invoice No 00024, which is exhibit 1.2.109, omits any reference to $60,000. Indeed, it specifies no claimed amount at all. It refers to a 'current', rather than 'forthcoming' rights issue.
The second Invoice No 00024 displays further paragraphs
At the time of passing the first 1,000,000 EMS Shares to Zulu (WA) Pty these Shares were trading @ Au$0.12.
On the passing of 1,000,000 Shares to Zulu (WA) Pty these shares were trading @ Au$0.047.
It was the advice of Chairman Jooste QC that as a result of the volume of the transfers, the off market value could be set at Au$0.03.
Signature
Douglas A Sims
(Director)
The trial evidence by Mr Sims about these two invoices was that he had prepared the first Invoice No 00024. He was then told by a Mr Rick Sharland, his accountant, that he did not need to affix a common seal to it, as he had. Mr Sims says he then prepared the second Invoice No 24, but omitting the Fee‑Zone common seal. He says he left it (ie, presumably the second Invoice No 00024) on Mr Patterson's desk (ts 268 ‑ 269, 347).
The internal payment authority for Eastland to pay $60,000 is exhibit 1.3.136. The payment authority proper, roughly an A5 sheet, displays as superimposed on top of and photocopied with the lower part of the first Invoice No 00024, showing in particular at the final paragraph ('It is resolved …'), an unattributed signature and the common seal of Fee-Zone. In other words, this is the first Invoice No 00024. Mr Bennett confirmed that this was not the product of some error in preparing the trial bundle (ts 561).
Mr Sims' trial evidence accepts that there was no Eastland 'board resolution or any agreement' on the part of Eastland as to the payment of either of the two Invoice No 00024s at the time he prepared and presented them. Rather, he merely said, it was 'up to the company to … whether they want to pay it' (ts 348 - 349). Mr Sims also acknowledged that the invoiced sum (ie, $60,000, as seen at least on the first Invoice No 00024) was not recorded in the books of Eastland as a debt as at 9 or 10 May 2009 (ts 350).
Early June 2009
The period between Friday 5 June 2009 and Monday 8 June 2009 presents as a particularly intense time for Eastland and its board members. Mr Sims was now pressing Eastland hard and, in particular, the CFO, Mr Tiede, for the payment by Eastland of all invoiced amounts which he had claimed by then as due either to himself or to his related corporations.
In this period, with a prospectus and rights issue circulating in the market, Eastland was particularly vulnerable to any statutory demand under the Corporations Act. Knowledge of such a demand, irrespective of the demand's underlying merit, might potentially be a negative for the pending rights issue in the market. There were also difficulties now presented to Eastland's board from Mr Stewart. He was seeking to impose conditions upon the use of any funds raised under the placement: see exhibit 1.3.132.
On Friday, 5 June 2009, Mr Stewart wrote by email to Mr Jooste QC, Mr Patterson, Mr Strahan and a Guy Le Page and James Richardson in these terms:
Shares are not to be issued/allotted until preconditions have been met. These being, execution of Convertible Note on acceptable terms to RM Capital, completion of Due Diligence, and raising of the minimum level of capital being 5.2 m.
On Saturday 6 June 2009, Mr Stewart wrote again by email to Mr Jooste QC, Mr Patterson, Mr Strahan and others: see exhibit 1.3.133. His communication ended:
Gentlemen I confirm that all funds arranged by myself (on behalf of my clients) under either the Convertible Note or Placement are to be held in Trust until the Conditions set out above are fulfilled or waived by myself, and I have issued a written instruction to such effect. (emphasis omitted)
That communication posed considerable difficulties for Eastland in inhibiting its access to the limited funds that had been raised to that time. I refer to the Eastland CEO Mr Strahan's memorandum of Monday, 8 June 2009, regarding placement shares, sent to Mr Jooste QC, Mr Sims and Mr Patterson, which is exhibit 1.3.148. Mr Strahan concluded:
I am sure that Pattersons' sophisticated Investors who have paid some 246k of this Placement will not take lightly to having other participants being offered different terms and conditions than they were.
Terms Mr Stewart sought to impose were not acceptable, as explained by Mr Strahan.
Also on Saturday, 6 June 2009, Mr Sims sent his email at 5.23 pm (on behalf of Fee‑Zone) to Mr Patterson, exhibit 1.3.133. He now wrote:
Dermot,
Please sign and we can clearly move forward.
In the event that EMS estoppel you from acknowledging all debt I intend to apply for an administrator on Tuesday morning. Enough is enough.
Doug Sims.
That communication with its threat of an Administrator appears to be linked to Mr Sims' other communication to Mr Patterson of Saturday, 6 June 2009: see exhibit 1.3.134. By that communication Mr Sims offered a 'forced' resignation and retirement, 'subject to Eastland acknowledging that all debt owed to me or my companies will be repaid at call including the Notice of Termination required six months salary'.
Monday, 8 June 2009: Mr Sims' conduct
What was an unsettled, financially strained and uncertain future for Eastland is the context in which Mr Sims ultimately prepared and then delivered a highly contentious written instruction to Mr Tiede, Eastland's CFO, on Monday, 8 June 2009. This is exhibit 1.3.135.
The full text of Mr Sims' commands and his demand at that time to the Eastland CFO needs to be seen.
Eastland Medical Systems Ltd
ACN 090 987 250
Mr Peter Tiede
CFO
Eastland Medical Systems Ltd
54 Lindsay Street
Perth WA 6000
Dear Peter,
I hereby instruct you to immediately and without delay by Telegraphic Transfer, transfer $60,000 in settlement of Invoice No 00024 Dated 10-05-2009 in favour of Fee-Zone Pty Ltd Account No 036-048 37 1032 C/- Westpac Banking Corporation St Georges Terrace Pert [sic] W.A. and furnish me with a true copy of that transmission.
On receipt of a copy of that transaction Fee-Zone Pty Ltd will submit a cheque for $60,000 together with a Share Application to Mr Trevor Strahan for the issue of 2,000,000 EMS Fully Paid Shares as part of the present placement under the 15% rule and Mr Strahan will instruct Advanced Share Register to issue those shares to Fee-Zone Pty Ltd.
As a result of conditions placed on the present issuing of shares by certain investors this placement remains unfilled and Fee Zones [sic] application is non conditional.
You are also instructed to immediately transfer by telegraphic transfer the balance of The Doug Sims Superannuation Fund loan which has been called and furnish me with a true copy of that transaction.
There is a capital balance of $36,817.78 + all outstanding interest to date.
If you refuse my instruction you are in breach of your engagement contract.
Yours sincerely
Signature
Douglas A Sims
Executive Director
8th June 2009
Mr Sims' written instruction was very swiftly actioned by Mr Tiede. He held a Westpac online banking token that was useable in conjunction with Mr Strahan.
There followed the receipt by Fee‑Zone that day of $60,000 by funds electronically transmitted from Eastland. The funds were paid to Fee‑Zone's account that day at 1405 AEST: exhibit 1.3.138.
The same day Fee‑Zone Pty Ltd subscribed for $60,000 worth of Eastland shares at 3 cents each (two million Eastland shares) with a cheque by Fee‑Zone in the amount of $60,000, drawn that day: exhibit 1.3.137.
There was an Eastlands directors' meeting that evening at 6.00 pm. None of these matters concerning the day's events is mentioned.
At noon on Tuesday, 9 June 2009 Mr Sims retired as an executive director of Eastland. The written resignation is found in the minutes of the meeting of the Eastland board of 8 June 2009 as an attachment, see item noted under a heading 'Resignation of D. Sims': exhibit 1.3.142.
Summary as to findings of fact
The facts as recited between [67] - [179] are clearly established. They are not controverted by Mr Sims' evidence.
Arising out of those facts largely emerge the legal contentions of the defendant as regards Fee‑Zone Invoice No 00024 and what happened on 8 June 2009.
The facts have largely been extracted from the closing submissions of the defendant (see pars 37 ‑ 43 and, as regards the events of 8 June 2009, pars 44 to 46).
In consequence, Dr Jooste contends that his particulars of justification provided under par 10 of its FSDA filed 7 February 2012 (which were not amended on 23 July 2012) are all established.
Justification plea: underlying facts are proven
The underlying facts advocated as supporting the defendant's plea of justification arise out of Mr Sims' conduct before, but particularly across the course of 8 June 2009, and whilst still holding the office of an executive director of Eastland. As can now be seen, Mr Sims delivered a forceful written command to Eastland's chief financial officer (CFO), Mr Peter Tiede, to immediately transfer $60,000 to a corporation related to and controlled by Mr Sims, namely Fee-Zone Pty Ltd. The written command of 8 June 2009 was given in respect of an Invoice No 00024.
Mr Tiede swiftly acted upon that instruction. He was a joint access token operator upon the company's bank accounts with Westpac Banking Corporation at the time. He caused himself and Mr Strahan (Eastland's then company secretary, who was the other (second) token holder of the Eastland account with Westpac) to perform an internet banking transfer of $60,000 of Eastland's funds to Fee‑Zone Pty Ltd.
This took place at 1405 AEST (12.05 pm Western Standard Time) on 8 June 2009: see exhibit 1.3.138 TB 470 (Westpac payments summary receipt). I mention as well exhibit 1.3.146 (Fee-Zone Pty Ltd cash management account). These documents show a receipt of $60,000 on 8 June 2009 by Fee‑Zone, increasing the credit balance of Fee-Zone's account at that time to $67,941.89.
Trial exhibit 1.3.165 is a bank statement for the working cheque account of Eastland, showing a receipt of $60,000 into that account by an electronic transfer of funds from '388797'. That was followed by a payment out the very same day (by online transfer) of the $60,000 amount to 'Fee-Zone'. Exhibit 1.3.164 shows Eastland's 'Rights issue capital account' as being the initial (ie, '388797') source of the $60,000, ultimately received by Fee-Zone that day.
To the same end, I note exhibit 1.3.136, being a payment authority prepared by Mr Tiede (identified in evidence by Mr Strahan) dated 8 June 2009. It identifies an 'invoice number 24' for a creditor (of Eastland) as Fee-Zone Pty Ltd. The description for the $60,000 online payment is stated to be '[s]hares issued to Peter Jooste on EMS Behalf'.
However, it is clear from the trial evidence, and I find, there was never any lawful or valid Eastland debt or obligation in the amount of $60,000 (or $77,000, or any other amount for that matter) due by Eastland to Fee-Zone Pty Ltd in respect of Eastland shares received by Mr Jooste QC (or a corporate nominee at his direction).
Mr Sims had earlier prepared and personally delivered to Eastlands the Fee-Zone Invoice No 00024 and bearing date 10 May 2009, on Fee‑Zone's behalf: see exhibits 1.2.108 and 1.2.109 TB 349 - 350. But the Invoice No 00024 to Eastland lacked any legitimate underlying foundation. It is hardly surprising then that the second iteration of the invoice did not even state any amount of money as being claimed. Neither Fee-Zone Invoice No 00024 was supportable in law.
Invoice No 00024 therefore did not support or provide any legitimate basis for a creation or acknowledgement of any indebtedness by Eastland to Fee-Zone, in respect of Eastland shares received by or on behalf of Mr Jooste QC or Zulu (WA) Pty.
At no time did Eastland's board (of which Mr Sims always remained a member until noon on 9 June 2009) either:
(i)accept or acknowledge the existence, let alone the legitimacy, of an indebtedness of $60,000 (or any other amount) to Fee-Zone - in respect of Eastland shares that had been or were to be received by Mr Jooste or at his direction, the nominated corporation Fee‑Zone; or
(ii)authorise the payment, let alone urgent payment, of $60,000 to Fee-Zone Pty Ltd, in respect of any Eastland debt to Fee-Zone.
Regular monthly board meetings of Eastland were held during April, May and June 2009. They were all attended by Mr Sims. The meetings were the subject of minutes prepared then approved at subsequent board meetings and signed off by the chairman, Mr Peter Jooste. The only issue over the accuracy of any of these minutes relates to the minutes for the 8 June 2009 meeting. Towards that meeting's minutes, Mr Sims raised two concerns - neither of which ultimately went anywhere: see Mr Sims' evidence-in-chief (ts 223 - 227).
At no board meeting of Eastland was either Fee-Zone Invoice No 00024, or the subject matter of a claim for payment in the amount $60,000 from Eastland by Fee-Zone, even mentioned or discussed, let alone approved or ratified by the board of Eastland: see minutes of meetings of the Eastland board for 20 April 2009, exhibit 1.2.97 TB 323 ‑ 326; minutes of meeting of the board of 26 May 2009, exhibit 1.3.118 TB 380 - 381; and exhibit 1.3.142 TB 476 - 478 for the minutes and attachment of the meeting held between 6.00 pm and 6.35 pm on 8 June 2009.
I would note, in that regard, s 53(a) of the Corporations Act concerning the affairs of a body corporate, s 124(1)(a) and (d), as to the legal capacity and powers of a corporation, s 126 as to the exercise of a company's powers by an agent, and particularly s 198A, which reads:
198APowers of directors (replaceable rule - see section 135)
(1)The business of a company is to be managed by or under the direction of the directors.
…
(2)The directors may exercise all the powers of the company except any powers that this Act or the company's constitution (if any) requires the company to exercise in general meeting.
The effect of s 135(1)(a) is that replaceable rules apply in respect of companies registered on or after 1 July 1998. Section 135(2) further provides that a replaceable rule can be displaced or modified by a company constitution.
I was not taken to the provisions of the Eastland constitution, to ascertain whether it affected the replaceable rules. Perhaps, this was a considered decision on the part of the defendant, who in fact contended by his written outline of opening submissions that Mr Sims was not a signatory to Eastland's bank accounts as from 2002, and that the Invoice No 00024 payment transaction was 'made without prior knowledge or authority of the directors [or] shareholders' of Eastland: pars 5 and 44. The overall tenor of the case for the defendant seemed to be that the 8 June 2009 demand letter of Mr Sims was, in every respect, wholly ultra vires conduct by him as a director of Eastland.
In the written outline of closing submissions, the defendant noted a denial in par 4(a) of Mr Sims' Reply: see par 68. However, those submissions go on to say, in somewhat bland terms, that Mr Sims 'issued the Letter of Demand in his capacity of a director of EMS when he had no legitimate basis to do so'. The requisite degree of precision articulating what power or duty was actually being put in issue there is ultimately lacking.
Although these are not criminal proceedings, an allegation of criminal conduct by infringing against s 184(1) is a serious one, axiomatically a charge to be made good on the balance of probabilities applied at a Briginshaw level of more than mere 'inexact proofs, indefinite testimony, or indirect inferences': see Briginshaw v Briginshaw (1938) 60 CLR 336, 362 (Dixon J); Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 450 (Mason CJ, Brennan, Deane and Gaudron JJ). I hold at least a suspicion that the Eastland constitution may well have shown either that replaceable rule s 198A was not displaced or modified, or that at any rate, as a director, Mr Sims could exercise a power to send correspondence on behalf of Eastland. But I should not have to speculate. Nor should Mr Sims, who acted for himself. I decline to pursue the s 184(1) transgression enquiry further.
Section 184(2) - Dishonest use of position
I turn now to s 184(2). I set out my conclusions in respect of the elements of that offence seriatim.
Mr Sims used his position as director of Eastland to send the letter of demand
In light of the findings delivered earlier, I am satisfied on the balance of probabilities that on 8 June 2009, Mr Sims issued a letter of demand, to Eastland via Mr Tiede, exhibit 1.3.135. At that time, Mr Sims still remained a director of Eastland.
I note, in particular, the following features of Mr Sim's letter of demand:
(a)It bore an Eastland letterhead;
(b)It was addressed to Mr Tiede in his capacity as 'CFO / Eastland Medical Systems Ltd';
(c)It commences with the words 'I hereby instruct you';
(d)In these circumstances, it would have been expected by Mr Sims and understood by Mr Tiede that this communication was a formal instruction to transfer funds from Eastland, and which Mr Tiede was able to implement (by acting in conjunction with Mr Strahan) by virtue of being one of the two token holders (with Mr Strahan) who could electronically access and thereby operate Eastland's Westpac bank accounts;
(e)The demand letter refers to 'Invoice No 00024 Dated 10-05-2009', which Mr Sims had earlier given to Mr Patterson, at his office, at Eastland's premises;
(f)Mr Sims would have expected Mr Tiede would have had access to or possession of this invoice in his capacity as CFO, an officer of Eastland;
(g)Invoice No 00024 as referred to (whether one looks to a first or second iteration), although presenting as a document produced by Fee-Zone Pty Ltd, articulates an underlying transaction giving rise to a claim for a debt, predicated on Mr Sims and Mr Jooste QC conducting the affairs of Eastland;
(h)The 8 June 2009 letter of demand continues in its second paragraph to refer to some foreshadowed steps consequent upon a payment being received by Eastland, which would involve another Eastland officer, Mr Strahan, taking future action to issue shares in Eastland to Fee-Zone;
(i)The demand letter continues, at the fourth paragraph 'You are also instructed', the instruction again clearly being to Mr Tiede to exercise powers as an officer of Eastland in respect of that corporation's funds;
(j)The text concludes by using some unusual, even ominous words 'If you refuse my instruction you are in breach of your engagement contract' which, in the circumstances, must refer to Mr Tiede's contract of engagement with EMS;
(k)At its conclusion, the letter of demand is signed off 'Douglas A Sims/Executive Director'.
As Keane JA noted in Robinson, the words 'use of position' potentially embrace a wider range of conduct than 'exercise [of] powers'. There is, his Honour noted, a distinction between 'powers and duties which are truly held by or imposed on the officer in question as aspects of his or her particular office [and] the exercise of a mere opportunity to do an act in breach of the general obligation to act honestly' [35].
Viewing all the circumstances as related above in combination, it is plain to me that whatever his powers and duties actually were, by his 8 June 2009 letter Mr Sims clothed himself in the authority of a director of Eastland, in order to procure its officer (CFO) Mr Tiede, and thereby Eastland, to implement the instructed payments to be made to Fee-Zone.
Mr Sims' letter, in the end, was entirely effective in ultimately achieving his intended purpose.
Mr Sims' use of his position as a director of Eastland was dishonest
At this point, it is necessary to briefly address the legal meaning of 'dishonest', as that term presents in the chapeau of s 184(2).
This fault element was recently considered in the criminal context by Weinberg JA and Davies AJA in SAJ v The Queen [2012] VSCA 243; (2012) 36 VR 435. The question before their Honours was whether it was sufficient for the Crown to prove that the conduct of an accused would be regarded as dishonest by the standards of ordinary, decent people, the test used in Peters v The Queen [1998] HCA 7; (1998) 192 CLR 493, followed in Macleod v The Queen [2003] HCA 24; (2003) 214 CLR 230 and Farah v Say‑Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89. In Farah, the Peters test was summarised in the following terms:
As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards. [173] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ)
In SAJ the accused, in what was an interlocutory appeal, argued it was necessary for the Crown to go further, and prove the accused was aware that ordinary, decent people would view his conduct in that way, relying on R v Ghosh [1982] QB 1053.
Weinberg JA and Davies AJA noted what appeared to be some conflicting decisions upon the applicable test: [70] - [76], referring to Kwok v The Queen [2007] NSWCCA 281; (2007) 175 A Crim R 278 and Krecichwost v The Queen [2012] NSWCCA 101. The latter case favoured the Peters test, but did not expressly reverse the view in Kwok that the Ghosh test applied after Ch 2 of the Criminal Code (Cth) came into force. Special leave to appeal was refused in Krecichwost v The Queen [2012] HCATrans 294, and dealing with a different issue. Nevertheless, I would note French CJ's remarks emphasising the 'continuing authority in Macleod'.
It was accepted in SAJ that the word 'dishonestly' as used in s 184(2)(a) is a distinct fault element, but following Macleod it is clear this does not affect the application of the Peters line: [121] - [122]. Furthermore, Weinberg JA and Davies AJA saw nothing in the text, surrounding context or legislative history of s 184(2) that suggests 'dishonestly' was used in a 'special sense' that would displace the Peters test. If it was, it would be given a special definition, as is the case in certain other Commonwealth offences, such as s 1041F(2) and s 1041G(2) of the Corporations Act: [125] - [126].
Despite some expressed misgivings, Nettle JA noted by his concurring reasons that the fact that a Ghosh objective-subjective test is explicitly adopted in certain other provisions of the Corporations Act and Criminal Code (Cth) would imply, by contradistinction, it was not applicable to s 184(2): [1] - [6]. I would respectfully adopt the same approach.
And even if the Ghosh test were assessed as applicable here, I would still have little difficulty in concluding upon the presenting facts that, by sending the letter of demand of 8 June 2009, Mr Sims was using his position as a director of Eastland and that he did so dishonestly. That conclusion for me follows necessarily from the concluded facts.
I am more than satisfied here, at the Briginshaw standard of proof, that Mr Sims was aware of the dubiousness of this money claim, which agitated a debt being due to the Fee-Zone company by Eastland, arising as a result of what were wholly private share receipt arrangements as between himself and Mr Jooste QC. I am equally satisfied Mr Sims knew the proposed $60,000 payment that he was requiring to be made urgently by Eastland, was not approved by or indeed even notified to the board of Eastland. Mr Sims' knowledge as to that state of affairs, I would conclude, is precisely why his demand letter of 8 June 2009 was framed in the terms it was, by strongly pressing what was a colourable demand for payment directed at Eastland's CFO by a peremptory command issued by Mr Sims, invoking his position as an Eastland director. That element of compulsion over Eastland's subordinate employees, was a power at the disposal of Mr Sims by virtue of his position as an Eastland director and was needed to be used to render his payment objective plans for Fee-Zone effective - in spite of what was clearly a spurious underlying basis for a claim.
His actions were taken even though Mr Sims was also plainly aware of other methods by which a director presuming a legitimate, unpaid debt could, formally or informally, but in any event honestly, press for payment.
Mr Sims intended to gain an advantage for Fee-Zone or himself, or cause detriment to Eastland
I interpret the words of s 184(2)(a) or (b) as requiring an additional fault element (beyond 'dishonestly') namely that the offender must act with the intention (under (a)), or recklessness (under (b)) as is there specified.
By its terms, s 184(2) does not actually require, by way of a physical element, that any advantage actually be obtained, or that any actual detriment be caused, by the offending director's conduct. However, were that to be the case, again I would have no difficulty here finding that such physical elements were also shown as established.
There was a direct financial advantage, to the tune of $60,000, gained for Fee-Zone as a result of that corporation receiving the payment as Mr Sims had instructed. If nothing else, this was also an indirect advantage accruing to Mr Sims, as a shareholder and controller of Fee-Zone. There was also a detriment caused directly by Mr Sims to Eastland, in the form of its loss of $60,000 out of its limited funds at the time.
Nor am I swayed from that assessment by the fact Mr Sims, as appears from his 8 June 2009 letter, contemplated Fee-Zone would use the $60,000 to subscribe for shares in Eastland. This is for at least two reasons. First, the onward acquisition of additional share capital in Eastland was still an advantage to Fee‑Zone and, by extension, for Mr Sims. Second, I do not assess a foreshadowed loss of $60,000 from Eastland's funds as being so fleeting or immaterial as not to fall within the terms of s 184(2)(a) or (b). For so long as and to the extent that these funds were not at the disposal of Eastland, it suffered a detriment. Its precarious day-to-day finances at the relevant time only fortify that assessment.
Section 5.2 of the Criminal Code (Cth) defines intention as:
5.2Intention
(1)A person has intention with respect to conduct if he or she means to engage in that conduct.
(2)A person has intention with respect to a circumstance if he or she believes that it exists or will exist.
(3)A person has intention with respect to a result if he or she means to bring it about or is aware that it will occur in the ordinary course of events.
The terminology of 'gaining an advantage' or 'causing detriment', it would appear, invokes s 5.2(3), that is, the intention to cause a result.
I restate that I assess Mr Sims' purpose in sending his letter of demand was to gain a benefit, directly for Fee-Zone, and thereby indirectly for himself - and he meant to bring that result about.
I do not find that it was Mr Sims' purpose to cause a detriment to Eastland. However, as I have said, a detrimental result nevertheless plainly followed necessarily from the means Mr Sims adopted to obtain the benefit he sought - one could not come to fruition without the other. Mr Sims was aware a financial detriment would be suffered by Eastland in the ordinary course of events. I am therefore satisfied it is proven he thereby committed an offence against s 184(2)(a).
I am also satisfied, by virtue of my finding that Mr Sims made use of his position as a director in the manner described above, that Mr Sims did so as a director, in the management of the corporation Eastland. Accordingly, imputation 6(a) is justified as substantially true.
For completeness, I need to briefly address the issue of recklessness, as an alternative fault element that is available under s 184(2)(b). Section 5.4 of the Criminal Code (Cth) defines recklessness as:
5.4 Recklessness
(1)A person is reckless with respect to a circumstance if:
(a)he or she is aware of a substantial risk that the circumstance exists or will exist; and
(b)having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(2)A person is reckless with respect to a result if:
(a)he or she is aware of a substantial risk that the result will occur; and
(b)having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
…
(4)If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element.
By s 5.4(4), a finding of a proven intention, in effect, subsumes one of recklessness. However, even if the advantage or detriment were merely assessed as a 'substantial risk', I am satisfied here, that taking that risk was unjustifiable, in all the circumstances as known to Mr Sims. I refer in that regard, in particular, to Mr Sims' knowledge of the wholly questionable basis of his 8 June 2009 demand, a lack of any approval for the directed payment on behalf of Eastland, and the straitened finances of Eastland, as they then were.
A word on defences
For completeness, I briefly note certain defences under the Criminal Code (Cth). Mr Sims did not, by his Reply, raise any defences which might meet an allegation of criminal conduct under the Corporations Act. However, by aspects of this testimony, and certain paragraphs of his written outline of opening submissions, Mr Sims appeared to allege facts which, in a general way, might raise defences.
First, I note, in particular, that at par 4(c) of his submissions, Mr Sims said he 'had full right to demand his payments'. That might be regarded as an attempted invocation of a 'claim of right' under s 9.2 of the Criminal Code (Cth). If that were so, I would not assess it as helping Mr Sims. That defence is based upon a 'mistaken belief' about a 'proprietary or possessory right'. Accepting, as the High Court said in Macleod at [42], that an 'honest claim' 'may be both unreasonable and unfounded', my findings here in relation to a dishonest use of the position of director still must necessarily exclude the existence of such a belief.
Second, by some answers given in evidence, Mr Sims appeared to assert that he did not expect Invoice No 00024 or his letter of demand to be acted on. A mistake or ignorance of fact is sometimes catered for by a defence raised under s 9.1 of the Criminal Code (Cth). Importantly, such a mistake or ignorance is exculpatory only if it negates a fault element of the s 184(2) offence. Again, my findings in respect of dishonesty, intention and recklessness fully account for and negate that defence.
Reckless disregard of shareholders' interests
From the foregoing, I have, in the end, little difficulty concluding at the Briginshaw standard that Mr Sims, in the management of the corporation Eastland, acted with reckless disregard for the interests of shareholders. I need only add a further comment that procuring a benefit for a related entity at the necessary expense of a company known to be in a straitened financial state displays, if nothing else, an extraordinarily high level of indifference as to the interests of the corporation and its members (shareholders). Imputation 6(b) is also justified.
Accordingly, Mr Sims' action fails on this basis as well.
Conclusion
Mr Sims' action is dismissed.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SIMS -v- JOOSTE [No 2] [2014] WASC 373 (S)
CORAM: KENNETH MARTIN J
HEARD: ON THE PAPERS BY SUBMISSIONS
DELIVERED : 5 NOVEMBER 2014
FILE NO/S: CIV 1991 of 2011
BETWEEN: DOUGLAS ARTHUR SIMS
Plaintiff
AND
JAMES CECIL INNES JOOSTE
Defendant
Catchwords:
Civil law and procedure - Costs - Special costs - Lifting of scale limits - Unusual difficulty, complexity or importance - Counsel fee - Defamation
Legislation:
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA)
Legal Profession Act 2008 (WA), s 280(2)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiff: In person
Defendant: Mr M L Bennett
Solicitors:
Plaintiff: No appearance
Defendant: Bennett + Co
Case(s) referred to in judgment(s):
CMA Contracting Pty Ltd v John Holland Pty Ltd [2011] WASC 249
Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311 (S)
Marsh v Baxter [2014] WASC 187 (S)
KENNETH MARTIN J: My reasons for decision following the trial of this action were delivered on 10 October 2014.
At that time, I dismissed Mr Sims' action and made some directions for the parties to provide written submissions concerning costs - so that this residual issue could be dealt with on the papers.
The defendant, as the successful party after trial, provided written submissions as to costs through his solicitors, on 16 October 2014.
Essentially, he seeks his taxed costs of the action against Mr Sims, including certain reserved costs. The defendant also seeks an order pursuant to s 280(2) of the Legal Profession Act 2008 (WA), asking that a special costs order be made in his favour allowing for the taxing officer at a taxation to make reasonable allowances for nine as specified scale items, 'without regard to the scale or hourly limits, imposed under the relevant legal costs determinations'.
The defendant's proposed orders seeking taxed costs with special orders as regards allowances are supported by the affidavit of a Ms Jocelyn Nicholson sworn 16 October 2014. Ms Nicholson is a solicitor employed by the defendant's current solicitors, Bennett + Co. Her affidavit provides certain information concerning the level of the defendant's incurred solicitor/client costs including at par 11 as to the approximate amount of those costs incurred in respect of the various scale items - in respect of which it is sought to have the scale limits removed for the purposes of a taxation (see pars 11.1 - 11.7 of Ms Nicholson's affidavit). Ms Nicholson also attaches to her affidavit as JRN‑1 a table of various Bennett + Co hourly rates - said to be applicable to the various solicitors, counsel or law clerks who have been engaged upon the matter for the defendant. This table juxtaposes, in effect, the hourly rates charged by those participant legal practitioners and clerks in respect of work done for the defendant, in contrast to the comparable scale determination hourly rate allowed as a maximum under the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA).
By the directions I made when reasons for decision were delivered, the plaintiff, Mr Sims, who remains unrepresented, was to have filed any responsive submissions or materials bearing upon the issue of costs orders, by 24 October 2014. Nothing has been received from Mr Sims within that time frame, or at all.
Effectively then, the successful defendant now moves for his taxed costs and for special costs orders, ex parte, in the absence of any materials or submissions from Mr Sims.
Clearly, as the successful party after trial, the defendant is prima facie entitled to receive his taxed costs of the action paid by Mr Sims as the unsuccessful plaintiff at trial. The only real issue arising is whether the special costs orders sought concerning the removal of costs scale determination limits are appropriate. That issue in turn poses an underlying question as to whether the threshold requirements of s 280(2) are surmounted by the defendant in the present case, in order to support the special costs orders of the character sought against Mr Sims.
In Marsh v Baxter [2014] WASC 187 (S), I recently canvassed some of the leading costs authorities and principles in this jurisdiction, particularly the dual s 280(2) threshold requirements of showing a likely 'inadequacy' in the level of taxed costs recoverable absent a special costs order, and then the second but related requirement (see Allanson J in CMA Contracting Pty Ltd v John Holland Pty Ltd [2011] WASC 249 [2]) showing that the action has displayed one or more of the elements of either 'unusual difficulty, complexity, or importance'. These dual but related requirements are sometimes called the Heartlink factors - a reference to the decision of the Martin CJ in Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S), especially at [17] and [19]. I see no need to repeat the discussion about costs principles recently undertaken in Marsh v Baxter [2014] WASC 187 (S).
Here, by reason of the defendant's written submissions and the information in Ms Nicholson's affidavit, I find myself prima facie satisfied as a matter of overall impression as to the likely inadequacy of a possible taxation outcome for the defendant concerning allowances under the scale items identified upon this application. At the end of the day, it will be for the defendant, of course, to satisfy a taxing officer of this court as to the level of an appropriate allowance. Orders of the character sought from the Court simply open up the discretion of the taxing officer to allow an amount greater than might otherwise be allowed by reason of a scale limit.
I am also satisfied that the second limb of the Heartlink factors is met. This is, first, because the action was a defamation trial, carrying of its very nature some specialist considerations that would meet the criteria of showing unusual difficulty. Second, the touchstone of 'unusual difficulty' is also met here, due to the need for the defendant at this trial to engage against a plaintiff litigant in person - which, in the overall context of a defamation trial made the running of the litigation more difficult than, say, a trial against a legally represented defamation plaintiff. Third, the subject matter of the defendant's justification defence, as was successfully advanced ultimately at the trial, carried with it elements of difficulty and complexity as regards showing an infringement by Mr Sims against provisions of the Corporations Act 2001 (Cth) - as ultimately shown. There was unusual difficulty and, in my view, complexity arising from that consideration. Even beyond that, however, the criterion of importance in this action for the defendant, in refuting the plaintiff's defamation action brought against him is met. This defamation action presented as going beyond the ordinary Orwellian feature manifesting in all litigation whereby every case is considered naturally enough to be of importance to each participant. As to that, see the recent observations of Le Miere J in Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311 (S) [8]. Here Mr Sims had made it plain by his evidence at the trial he was pursuing this defamation action as something of a personal retaliation against the defendant's father - with whom he had badly fallen out. For such circumstances the defendant's refutation of the attack brought against him by Mr Sims manifested as a scenario of more than usual importance as between ordinary litigants.
In all the circumstances, I am persuaded that there should be special costs orders as sought by the defendant, pursuant to s 280(2) of the Legal Profession Act. In Marsh v Baxter [2014] WASC 187 (S) I issued similar orders that removed costs scale determination limits in respect of the identified scale items, where the lifting of the allowance was sought. However, I did not in Marsh v Baxter, as it was opposed, lift the maximum hourly rate limit specified under the scale concerning the costs of legal practitioners. Here I am asked, once again, to make that order as regards the level of the maximum hourly rates levied by legal practitioners. Ms Nicholson's affidavit by attached JRN‑1 and the table of hourly rates for legal practitioners and clerks at Bennett + Co displays that, overwhelmingly, the pragmatic impact of making such an order will be felt as regards removing the maximum hourly rate of counsel, vis-à-vis the 2012 maximum scale allowance rate of $363 per hour. Upon that hourly rate ceiling maxima being removed, the appropriate hourly rate allowance is left at the open-ended discretion of the taxing officer. A removal of the determination maximum hourly rate limit does not thereby deliver the outcome of approving the claimed hourly rate sought on behalf of counsel ($880 per hour).
In the Marsh v Baxter costs reasons I was not satisfied as to the required level in order to remove the scale limit maximum hourly rate ceiling applicable to legal practitioners. That was a conclusion reached upon the state of the material submitted. However, the position here is different. This was a defamation action and trial calling, appropriately, for specialist defamation expertise in counsel. My day-to-day experience as a case manager of multiple defamation actions automatically included within this court's CMC list shows there is a local deficiency in terms of readily available defamation expertise in the West Australian legal profession. In circumstances of limited supply and considerable demand, I do think it appropriate here to allow a taxation of the defendant's costs to proceed upon the basis that the maximum hourly rate limit set under the applicable scale is also removed.
With the outstanding issue of costs being dealt with, this matter no longer presents as being in need of intensive case management. I will therefore remove it from the CMC list.
Accordingly then, my assessment is that it is appropriate there be orders, broadly in accord with the defendant's minute of proposed orders as to costs of 16 October 2014, in these terms:
1.The plaintiff pay the defendant's costs of the action, including reserved costs of the proceedings in chambers held on 14 November 2013 and 26 May 2014, to be taxed if not agreed.
2.Pursuant to s 280(2) of the Legal Profession Act 2008 (WA), the taxing officer, in taxing the bill of costs of the defendant, is to make reasonable allowances for the following items and without regard to the scale or hourly limits imposed under the relevant legal costs determinations, in relation to:
2(i)defence (scale item 3(b));
2(ii)requesting and giving of particulars (scale items 6(a) and 6(b));
2(iii)giving discovery (scale item 7);
2(iv)inspection (scale item 8);
2(v)proceedings in chambers (scale item 10(a));
2(vi)preparation of case (scale item 17);
2(vii)counsel fee on brief and for counsel fee for subsequent days of trial (scale items 20(a) and 20(c));
2(viii)instructing solicitor attending trial (scale item 20(e)); and
2(ix)taxing including drawing of bill of costs (scale item 30).
3.Without limiting the taxing officer's discretion, the taxing officer is also directed to make reasonable allowances for:
3(i)the preparation and attendance at the trial by both counsel and junior counsel in addition to the allowances for the instructing solicitor;
3(ii)further preparation carried out by counsel, junior counsel and instructing solicitor after the commencement of the trial.
4.The plaintiff pay the defendant's costs of this costs application to be taxed on the same basis as the action.
5.The matter be removed from the CMC list.
Those orders are now made and take effect upon the publication of these reasons.
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