Slater v Ecosol Pty Ltd

Case [2023] SASC 99

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

SLATER v ECOSOL PTY LTD

[2023] SASC 99

Judgment of the Honourable Justice Blue  

DEFAMATION - STATEMENTS AMOUNTING TO DEFAMATION - PARTICULAR STATEMENTS - IMPUTATION - OTHER CASES

DEFAMATION - PRIVILEGE - QUALIFIED PRIVILEGE

DEFAMATION - PRIVILEGE - QUALIFIED PRIVILEGE - REBUTTAL OF PRIVILEGE BY MALICE - GENERALLY

DEFAMATION - OTHER DEFENCES - TRIVIALITY

The respondent Ecosol Pty Ltd formerly carried on business manufacturing stormwater treatment products. The applicant Mr Slater and the cross applicant on the cross claim Mr Smith are shareholders (amongst others) of Ecosol. Mr Smith is also the chairman of directors of Ecosol.

In 2018 Ecosol entered into a contract with Urban Asset Solutions Pty Ltd to sell its stormwater treatment business. The contract was subject to shareholder approval. Mr Slater sent a number of letters to shareholders of Ecosol opposing the proposed sale. Mr Smith on behalf of Ecosol sent a number of letters to shareholders of Ecosol supporting the proposed sale.

Mr Slater claims against Ecosol for defamation in respect of various imputations said to arise from five letters sent by Mr Smith on behalf of Ecosol to shareholders. Mr Smith cross claims against Mr Slater for defamation in respect of various imputations said to arise from three letters sent by Mr Slater to shareholders.

Ecosol denies that the imputations alleged by Mr Slater arise or are defamatory. It relies on defences of justification, qualified privilege and triviality. It also contends that the action is an abuse of process.

Mr Slater denies that the imputations alleged by Mr Smith arise or are defamatory. He relies on defences of justification, qualified privilege and triviality.

Held (dismissing Mr Slater’s claim):

1Most but not all of the imputations alleged by Mr Slater arise from Ecosol’s impugned publications (at [327]-[331], [334]-[339], [342]-[345], [348]-[352], [355]-[357]).

2       All but two of the imputations arising are defamatory (at [363], [368], [370]-[372], [375]).

3Ecosol’s justification defences are not established (at [389], [394], [403], [416], [422], [427], [428]-[429], [447], [459], [476], [482], [486], [490], [495], [499], [500]).

4Ecosol’s common law qualified privilege defences are prima facie established (at [511], [516]).

5       Mr Slater’s malice response is not established (at [563]).

6It is not necessary to decide whether Ecosol’s statutory qualified privilege defences are established (at [565]).

7       Ecosol’s triviality defences are not established (at [573]).

8       Ecosol’s abuse of process contention is not established (at [605]).

9       Action dismissed (at [606]).

Held (dismissing Mr Smith’s claim):

1Most but not all of the imputations alleged by Mr Smith arise from Mr Slater’s impugned publications (at [616], [621]-[629], [636]-[639], [643]-[649], [655]-[659], [664]-[668], [674]-[678], [681], [687]).

2All but one of the imputations arising are defamatory (at [691]-[692], [693], [694], [696]-[697]).

3Mr Slater’s justification defences are not established (at [709], [713], [715], [720], [724], [726], [728], [731], [819], [838], [843], [848], [849]).

4Mr Slater’s common law qualified privilege defences are prima facie established (at [855]-[856]).

5       Mr Smith’s malice response is not established (at [923]).

6It is not necessary to decide…

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Slater v Ecosol Pty Ltd [2023] SASC 99
Case
[2023] SASC 99
Decision Date

CaseChat Overview and Summary

The case of Slater v Ecosol Pty Ltd involved a defamation claim brought by Mr Smith against Mr Slater and Ecosol Pty Ltd. Mr Smith alleged that statements made by Mr Slater about Mr Smith's conduct and management of the company were defamatory. The dispute was heard in the Supreme Court of Queensland. The central legal issues were whether the statements made by Mr Slater were defamatory, whether the defences of qualified privilege and triviality applied, and whether the defendant had proven malice if the defences were applicable.

The court examined the nature of the statements and their potential defamatory meaning. It found that Mr Smith had not successfully demonstrated that the statements were defamatory or that they conveyed the specific imputations he alleged. Furthermore, the court determined that Mr Slater had established the defence of common law qualified privilege. This defence was based on the context in which the statements were made, which was a situation where Mr Slater had a duty to communicate the information to the shareholders of Ecosol Pty Ltd. The court held that Mr Smith had not proven that Mr Slater acted with malice, which was necessary to rebut the qualified privilege defence. Consequently, the court dismissed Mr Smith's defamation claim.

In summary, the court found that Mr Smith's defamation claim was without merit because the alleged defamatory statements were protected by the common law qualified privilege. The court did not find it necessary to address other defences such as statutory qualified privilege and triviality. The final order was that Mr Smith's defamation claim against Mr Slater and Ecosol Pty Ltd was dismissed.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

As observed above, there is a high degree of overlap and interrelationship between Mr Smith’s various contentions in relation to malice. Considering all of his contentions and the relevant facts holistically, he has failed to prove malice. Conclusion Mr Smith has failed to establish malice. It follows that Mr Slater’s common law qualified privilege defence is established. For the sake of completeness, even if I had found that all of the imputations pleaded by Mr Smith arose and all of them were defamatory, I would still have found that Mr Slater had established his common law qualified privilege defence and Mr Smith had failed to prove malice. It follows that Mr Smith’s defamation claim must be dismissed.Defence of statutory qualified privilege Given my conclusion in relation to common law qualified privilege, it is not necessary to decide whether the defence of statutory qualified privilege is established and I do not do so. Mr Smith does not appear to dispute that the first two elements are established. In any event I would have found that they are established for essentially the same reasons as the traditional common law qualified privilege category addressed above. The third element of statutory qualified privilege is that the conduct of the publisher in publishing must be reasonable in the circumstances. It is necessary to assess reasonableness in relation to each passage, and each defamatory imputation arising from each passage, in respect of each impugned publication. This is a substantial task upon which it is not necessary to embark. If I had embarked on the task, I doubt that I would have been satisfied that Mr Slater’s conduct in respect of at least some passages giving rise to the imputations was reasonable in the circumstances but I do not decide that question.Defence of triviality Given my conclusion in relation to common law qualified privilege, it is not strictly necessary to decide whether the defence of triviality is established but I do so because it can be addressed briefly. In order to establish the defence, Mr Slater must prove that the circumstances of publication were such that, assessed prospectively, Mr Smith was unlikely to sustain any harm. In respect of the first impugned publication, Mr Slater pleads the defence only in respect of imputations F1, F4, F13 and F18. I have not found imputation F1 or F18 established. I reject Mr Slater’s contention in respect of imputations F4 and F13. In any event, as there is a single cause of action in respect of the first impugned publication, all established defamatory imputations must be considered. That impugned publication contained grave imputations that Mr Smith had breached his fiduciary duties, was biased towards the MBO and wilfully permitted Ecosol to refuse to abide by the Queensland Supreme Court orders. The impugned publication was made to all shareholders of Ecosol, comprising just under 50 persons. The circumstances were such that Mr Smith was likely to suffer harm by way of injury to his feelings. He was also likely (judged contemporaneously) to suffer harm by way of damage to his reputation amongst the shareholders. The defence of triviality fails in respect of the first impugned publication.

Ratio Decidendi

Legal Principle Established

At the same time Mr Macklin also had a discussion with Mr Smith about the contemplated management buyout. At some stage, Mr Macklin said that he was unable to secure sufficient third party financing. Mr Smith told Mr Macklin that he did not believe that there was enough security available to offer vendor finance. Mr Smith thought that the offer was below market value because it left Ecosol with liabilities.Exploration of listing on stock exchange At the same time Mr Macklin on behalf of Ecosol engaged DMCA Chartered Accountants to explore the costs and benefits of Ecosol listing on the “Small Business Stock Exchange”. On 22 February 2013 DMCA sent a letter to Mr Macklin saying that there was not a Small Business Stock Exchange in Australia but other mechanisms were listing on the ASX or converting to a public unlisted company. They said that Ecosol did not have the necessary net tangible assets, market capitalisation or net profit to qualify for listing on the ASX and in any event the likely cost of listing was $250,000 to $300,000. They said that converting to a public unlisted company was relatively straightforward and inexpensive. It required a special resolution of shareholders. It allowed a company to have more than 50 shareholders but otherwise did not provide significant benefits. On 25 February 2013 Mr Macklin sent an email to Mr Slater saying that, as requested, he had obtained some preliminary professional advice on various listing options for Ecosol. It appears that he attached the DMCA letter dated 22 February. He said that converting to a public unlisted company required two special resolutions and other major shareholders (who he did not identify) had told him that that would not consent to the change. He said that he would continue to explore this option along with others and then outline each option in detail in the next shareholder newsletter requesting all shareholders to vote formally on their preferred option going forward. In March 2013, at the request of the board, Mr Macklin contacted the NSX and received a Guide to Listing. Mr Smith gave evidence that Mrs Roy refused to support a listing on the NSX. Mr Smith did not identify his source of this knowledge. Mrs Roy gave evidence that she had no recollection of ever having a conversation with anyone about listing on a stock exchange. She was not challenged on this evidence in cross-examination. I find that Mrs Roy did not say to anyone at Ecosol that she refused to support a listing on the NSX. I find that Mr Smith was mistaken in his evidence (perhaps confusing 2013 with what Mr Charlton reported to the board in 2005 referred to above). In August 2013 Mr Charlton and Mr Bishop decided not to finance Mr Macklin’s proposal. In October 2013 Ecosol issued a shareholder newsletter which said amongst other things that one shareholder had requested that the company explore the possibility of listing. It said that management had consulted with the company’s accountants who identified listing on the ASX or NSX or converting to a public unlisted company. It said that the company did not satisfy the criteria for an ASX listing and the other two options would require a special resolution, which would be difficult to implement. It said that the costs of listing would be prohibitive, likely in excess of $200,000. It said that the most likely exit strategy was for an investor to buy the company and management was looking at several options at the moment. It said that the most recent independent valuation was $1.31 per share.