South Australian Water Corporation v Sullivan No. Scciv-01-189

SOUTH AUSTRALIAN WATER CORPORATION v SULLIVAN
[2004] SASC 42
Appeal from a Master

Bleby J: On 16 October 2000 the defendant and present appellant caused to be published a media release announcing the termination of the plaintiff as Chief Executive Officer. The media release was in the following terms:
“SA Water replaces Chief Executive
Mr James Porter, Chairman of the South Australian Water Corporation, has announced that the Board has terminated the employment contract of its Chief Executive, Mr Sean Sullivan. The decision follows a recent review of Mr Sullivan’s performance. Mr Peter Norman, currently Head of Water Services for the Corporation, has been appointed as Acting Chief Executive.”
In this action the plaintiff sues the defendant for damages for breach of contract arising out of the termination of his contract of employment and for defamation arising out of the publication of the media release.
Paragraph 11 of the plaintiff’s further amended statement of claim alleged:
“11.1In their natural and ordinary meaning the words in the media release meant and were understood to mean that:
11.1.1In carrying out his duties as chief executive officer of the defendant, the plaintiff had performed in a poor, inadequate and/or unsatisfactory fashion;
11.1.2That the plaintiff’s performance as chief executive officer of the defendant had been poor, inadequate and/or unsatisfactory and that this led to, or had been the reason for, the termination of his employment contract;
11.1.3That the plaintiff’s performance as chief executive officer of the defendant had been sufficiently poor, inadequate and/or unsatisfactory that the termination of his employment contract by the defendant was justified;
11.1.4That the plaintiff had been sacked or dismissed by the defendant by reason of his poor, inadequate and/or unsatisfactory performance as chief executive officer.”
By paragraph 10 of the third further amended defence the defendant denies that the words in the media release bore or were understood to bear or were capable of bearing those meanings. By paragraph 12, the defendant pleads that the words in their natural and ordinary meaning meant and were understood to mean that following a review of the plaintiff’s performance the board considered that his position should be terminated. It then proceeds to plead justification of the words so understood. Whether that is a good plea in the light of the decision in Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519 is not the subject of dispute on this appeal and need not presently be considered.
However, paragraph 14 of the defence pleads:
“If the words in the media release bore or were understood to bear, or were capable of bearing the meanings or imputations alleged in sub-paragraphs 11.1.1. to 11.1.4 of the Statement of Claim, which is denied, the defendant says that the words were true in substance and in fact.”
PARTICULARS
14.1A review of the plaintiff’s performance was conducted on 29^th September 2000 and 14^th and 15^th October 2000 (‘the performance review’).
14.2Following the performance review, the Board of the defendant considered that the plaintiff’s performance in carrying out his duties as chief executive officer of the defendant in regard to his personal conduct was poor, inadequate and/or unsatisfactory.
14.2A The performance of SA Water as a Corporation at the relevant time was considered by the Board in the course of the performance review. The Board considered that the poor, inadequate and/or unsatisfactory personal conduct of the plaintiff standing on its own and separate from the performance of SA Water as a Corporation required that the plaintiff’s employment be terminated.
14.3The plaintiff’s performance was poor, inadequate and/or unsatisfactory by reason of his personal conduct in that: …”
There followed a number of particulars which are summarised below.
Included in the plaintiff’s reply are the following allegations:
“7.1During the period of the employment of the plaintiff as CEO of the defendant, the defendant had recorded the best performance figures in its history and his performance was satisfactory.
7.2In relation to paragraph 14.2 of the Defence and in particular to the allegation that the Board considered that the plaintiff’s performance of his duties as CEO of the defendant in regard to his personal conduct was poor, inadequate and/or unsatisfactory, the plaintiff says as follows:
7.2.1The Board did not proceed in a manner which amounted to consideration;
7.2.2The Board did not consider the performance of the plaintiff in carrying out his duties as chief executive officer properly or at all;
7.2.3Insofar as the Board formed an opinion that it wished to terminate the services of the plaintiff, the plaintiff says that such opinion was not based upon any review of his performance.
7.2.4At no time during the purported performance review did the Board members conducting that ‘review’ raise any of the specific allegations that now appear in the defence.
7.2.5The purported performance review concerned the business performance of the defendant corporation and not the personal conduct of the plaintiff.”
The pleadings I have quoted have already been the subject of disputed applications before a Master and of one appeal to a Judge. The present appeal is by the defendant against the order of a Master granting leave to the plaintiff to add three further sub-paragraphs to paragraph 11.1 of the statement of claim. It will help if I set out the whole of paragraph 11.1 as now amended. The amendment allowed by the Master appears in italics.
11.1In their natural and ordinary meaning the words in the media release meant and were understood to mean that:
11.1.1In carrying out his duties as chief executive officer of the defendant, the plaintiff had performed in a poor, inadequate and/or unsatisfactory fashion;
11.1.2That the plaintiff’s performance as chief executive officer of the defendant had been poor, inadequate and/or unsatisfactory and that this led to, or had been the reason for, the termination of his employment contract;
11.1.3That the plaintiff’s performance as chief executive officer of the defendant had been sufficiently poor, inadequate and/or unsatisfactory that the termination of his employment contract by the defendant was justified;
11.1.4That the plaintiff had been sacked or dismissed by the defendant by reason of his poor, inadequate and/or unsatisfactory performance as chief executive officer.
11.1.5That the plaintiff was incompetent in the performance of his duties as Chief Executive Officer of the South Australia Water Corporation.
11.1.6That the performance by the plaintiff as Chief Executive Officer of the South Australia Water Corporation so adversely affected the business operations of the South Australia Water Corporation as to warrant the termination of the plaintiff’s employment.
11.1.7That the plaintiff was so incompetent in the performance of his duties as Chief Executive Officer of the South Australia Water Corporation as to justify the termination of employment.”
The primary issue before the Master and on appeal is whether the publication complained of is capable of bearing those additional imputations.
The relevant principles are summarised by Lander J in Chapman and Chapman v Australian Broadcasting Corporation (2000) 77 SASR 181 at 189 - 190:
“Whether words complained of are capable of bearing a defamatory meaning is a matter of law for the Court: Stubbs Ltd v Russell [1913] AC 386 at 393.
The imputation which any particular words might bear is to be determined as an objective test. The intention of the publisher is irrelevant and so also is the meaning those to whom the words were published might give the words.
The test is whether reasonable people might understand the words in a defamatory sense: Hough v London Express Newspaper Ltd [1940] 2 KB 507 at 515. In Capital & Counties Bank Ltd v Henty & Sons (1982) 7 App Cas 741 at 745 Lord Selborne said:
‘The test, according to the authorities, is, whether under the circumstances in which the writing was published, reasonable men, to whom the publication was made, would be likely to understand it in a libellous sense.’
The words will be construed in their natural and ordinary meaning which is a meaning which reasonable men of ordinary intelligence with the ordinary man’s general knowledge and experience of worldly affairs would be likely to understand them.
In Farquhar v Bottom [1980] 2 NSWLR 380 at 386 Hunt J said:
‘The ordinary reasonable reader is a person of fair, average intelligence: Slayter v Daily Telegraph Newspaper Co Ltd (1908) 6 CLR 1; who is neither perverse: ibid; nor morbid or suspicious of mind: Keogh v Incorporated Dental Hospital of Ireland (1910) 2 Ir R 577; nor avid for scandal: Lewis v Daily Telegraph.’
That ordinary reasonable reader is not a lawyer but a layman who does not read the article cautiously or carefully but casually and who is prone to a certain amount of loose thinking: Morgan v Odham Press Ltd [1971] 1 WLR 1239; [1941] 2 All ER 1156.
The words should not be given any strained, forced or unreasonable interpretation. The imputation should be pleaded unambiguously otherwise it will be liable to be struck out as embarrassing: Singleton v Ffrench (1986) 5 NSWLR 452; Drummoyne Municipal Council v Australian Boadcasting Corporation (1990) 21 NSWLR 135.”
The key words in the publication which give rise to the possible imputations now pleaded, apart from the report of the termination of the plaintiff’s contract of employment, are “The decision follows a recent review of (the plaintiff’s) performance”.
The word “performance” is a word of very wide meaning according to the context in which it appears. In the context of a musical or ballet production, it would normally only relate to the nature and quality of the artistic skills exhibited by the particular artist or company during a particular production. In the case of a motor car, without qualification, it would usually relate to a combination of a number of factors such as the car’s capacity to accelerate, its speed, road holding, braking and fuel consumption. On the other hand, if it were qualified by the word “braking”, it would relate only to the car’s ability to stop or slow down.
In the context of the Chief Executive Officer of a corporation, without qualification, the word would cover a very wide field of activity, including personal relations with other staff, personal relationships with customers and suppliers, the nature and quality of information supplied to the board, the ability to make prudent business decisions, the ethical standards the Chief Executive Officer observes and other factors too numerous to mention. Some aspects of the Chief Executive Officer’s “performance” may directly affect the profit performance of the corporation. Some may not.
No objection has been taken that the publication is not capable of bearing the imputation pleaded in sub-paragraphs 1 - 4 of paragraph 11.1. In essence the imputation pleaded in those paragraphs is that the plaintiff performed in a poor, inadequate and/or unsatisfactory fashion and it was for that reason that his contract was terminated. There is no attempt in those paragraphs to identify any particular part or area of the plaintiff’s performance which is said to have been poor, inadequate and/or unsatisfactory. There is no allegation that the imputation was that the plaintiff’s performance had an effect on the financial or business operations of the defendant.
The defendant in its alternative plea of justification only seeks to justify the imputation alleged by the plaintiff insofar as it concerns the plaintiff’s personal conduct as being poor, inadequate and/or unsatisfactory. It then proceeds to allege by way of particulars that the plaintiff’s performance was poor, inadequate and/or unsatisfactory by reason of his personal conduct in that he so conducted himself as to engender a lack of confidence in him on the part of the members of the board, so as to cause resentment and disaffection amongst his senior staff; that he so conducted himself in West Java, Indonesia, on trips designed to institute a project by the defendant in that province, as to prejudice the project; that he indulged in inappropriate criticism of the Government of South Australia and the board of the defendant; that he failed to form cooperative relationships with other governments or semi-governmental agencies or with the defendant’s major contractors; and that he presented himself as disinterested in the defendant and water related issues relevant to South Australia, particularly on a tour of the River Murray with the Murray Darling Basin Authority in or about June 2000. The pleading does not seek to justify the imputation insofar as it alleges other poor, inadequate and/or unsatisfactory conduct.
The imputation pleaded in sub-paragraphs 1 - 4 inclusive is wide enough to cover conduct beyond that which the plaintiff seeks to justify. As Duggan J said in his reasons for dismissing the earlier appeal to which I referred: “Those imputations are wide enough to include criticism of the plaintiff’s performance as Chief Executive Officer which may have had an effect on the performance of the company”: South Australian Water Corporation v Sullivan [2003] SASC 206 at [12]. I respectfully agree.
With those preliminary observations I turn to the amendment to which objection is taken by the defendant.
The first thing to note about the amendment is that it requires all sub-paragraphs of paragraph 11.1 to be read conjunctively. None of the sub-paragraphs are pleaded in the alternative. The amendment must therefore be read as a further qualification on the imputation already pleaded in sub-paragraphs 1 - 4.
The pleading as amended must therefore be read as a whole to see whether publication is capable, in the sense described above, of bearing the imputation now alleged.
The amendment qualifies the range of conduct which is said to have been performed in a poor, inadequate and/or unsatisfactory fashion. The imputation now is that the plaintiff’s performance, besides being poor, inadequate and/or unsatisfactory, relates to his performance as Chief Executive Officer of the defendant, and that the performance is confined to conduct that adversely affected the business operations of the defendant and that it was that conduct which caused or which justified the termination of his contract of employment. The question is whether the publication is capable of bearing the imputation so qualified.
As I mentioned above, the “performance” of a Chief Executive Officer of a corporation that is reviewed and that results in his or her dismissal may conceivably cover a wide range of conduct. However, it need not. It could be performance of a particular type or in a particular field of activity that is reviewed and that gives rise to dismissal. The more the imputation alleged seeks to confine the range of conduct said to have been reviewed, the less likely it is that the words published will be capable of bearing that imputation. For example, the words published in this case would not be capable, in their ordinary and natural meaning, of bearing the imputation that the performance reviewed related to a sexual assault on a female member of staff of the organization. To the ordinary reader it would imply something more than review of a single isolated act. It implies a review of a number or combination of acts or omissions. The ordinary reasonable reader would also understand that the board of the Corporation, in terminating the contract of employment of its Chief Executive Officer, normally would be doing so in what the members of the board collectively perceived to be the business interests of the Corporation and of its owners and shareholders, and that they would not normally do so capriciously or according to their own personal whim. The economic well-being of the Corporation would normally be uppermost in their mind.
The imputation which the statement of claim as amended seeks to draw from the ordinary and natural meaning of the words used in the publication is that the poor, inadequate and/or unsatisfactory performance of the Chief Executive Officer was performance in his capacity as Chief Executive Officer, performance which adversely affected the business operations of the defendant and performance which justified, in the mind of the board, its decision to terminate the plaintiff’s contract of employment. I consider that that is an imputation which the published words are capable of bearing, and that, if not true, it is capable of being defamatory of the plaintiff. The qualifications added by the additional paragraphs do not so qualify the nature of the performance in question that the words published are incapable of bearing that imputation. The Master’s decision cannot be attacked on that ground.
The only other ground of objection, which was but faintly argued, was that the amendment will cause a substantial alteration in the course of the action and further substantial amendment to the pleadings, possibly rendering unnecessary a number of previous pleadings, amendments and arguments in relation to them. The Master realised that and included in his order an order to the effect that the plaintiff should pay the defendant’s costs thrown away as a result of the amendment. Apart from prejudice caused by delay, and no serious prejudice on that ground was identified, that order rectifies any prejudice which the defendant may suffer.
In my opinion the Master’s order allowing the amendment was properly made. The appeal is dismissed.

[2004] SASC 42

26 February 2004