SPC Ltd v Petersville Industries Ltd
[1989] FCA 467
•16 AUGUST 1989
Re: SPC LIMITED
And: PETERSVILLE INDUSTRIES LIMITED
No. N G1398 of 1988
FED No. 467
Defamation
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)
CATCHWORDS
Defamation - Application to strike out defamation claim - Whether matter complained of is capable of defaming the applicant - Imputations relied upon.
HEARING
SYDNEY
#DATE 16:8:1989
Counsel for the Applicant: Mr P M Wood
Solicitors for the Applicant: J C Behm & Associates
Appearing for the Respondent: Mr D M Bennett and
Mr D J Hammerschlag (solicitors)
Solicitors for the Respondent: Freehill, Hollingdale & Page
ORDER
Paragraphs 4, 5, 6, 7, 14, 15 and 16 of the Further Amended Statement of Claim be struck out.
The applicant have leave to further amend its Statement of Claim, if so advised, within fourteen (14) days of today.
The applicant, SPC Limited, pay to the respondent, Petersville Industries Limited, its costs of the Notice of Motion filed on 20 July 1989.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
There is pending in the Court a proceeding wherein the applicant, SPC Limited, seeks damages against Petersville Industries Limited, the respondent. Both SPC and Petersville are engaged in the production and marketing of canned fruit and vegetables. SPC complains of certain statements said to have been made by Petersville during the course of a commercial dispute. The material out of which the proceeding arises suggests that, for some years, Petersville has had a relationship with Letona Co-operative Limited, a canner of fruit and vegetables, by virtue of which Petersville has sold Letona products. The material further suggests that, at some time in 1988, SPC and Letona entered into discussions about a proposed merger. The apparent effect of such a merger would have been to terminate the connection between Letona and Petersville.
The statements complained of by SPC in the proceeding are, firstly, two statements made in a letter which was written on behalf of Petersville to the Chairman of Letona and, secondly, statements made by various people in seven different television advertisements which were allegedly published on behalf of Petersville.
In relation to each of the statements, SPC claims that Petersville has engaged in misleading conduct and, in that respect, SPC relies on ss.51A and 52 of the Trade Practices Act 1974. Those claims are not affected by the present motion.
SPC further contends that the statements made in the letter and in the television advertisements were defamatory of it. Damages for defamation are claimed in respect of each publication. Petersville disputes that the published matter contains the imputations alleged and also that the published matter is capable of bearing a defamatory meaning. Consequently, Petersville has applied by Notice of Motion for an order pursuant to O.11 r.16 of the Federal Court Rules that those parts of the Further Amended Statement of Claim which relate to the defamation claims be struck out. Order 11 r.16 reads:
"16. Where a pleading--
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;
(b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or
(c) is otherwise an abuse of the process of the Court,
the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out."
In paragraph 3 of the Further Amended Statement of Claim SPC alleges that, on 11 August 1988, Petersville caused to be published to the Chairman of Letona a letter. In para.4 SPC alleges that the letter contained the following extracts:
"(a) Given SPC's past earnings record and the difficulty being encountered in export marketing it is unlikely that SPC's after tax profits will be, in the foreseeable future, substantially different from those achieved in the past.
(b) There are additional operating costs to be considered, particularly in relation to an upgrading of SPC's marketing and sales force, given that Letona has none, that SPC has no experience in the frozen food industry and a limited canned vegetable sales force. There will be the additional cost of a necessarily aggressive marketing campaign if there is to be any prospect at all of preserving the sales of even some of Letona's present fruit and vegetable production."
Paragraph 5 of the Further Amended Statement of Claim contains the allegation that the "said matter was published of and concerning" SPC. Paragraph 6 alleges certain imputations, each of which is said to be defamatory of SPC. These imputations are:
"(a) that the Applicant had in the years prior to 11 August 1988 failed to improve its earnings;
(b) that the Applicant was not competently managed;
(c) that the Applicant was incapable of handling a frozen food business;
(d) that the Applicant had a limited canned vegetable sales force;
(e) that the Applicant was incapable of handling sales of an increased volume of canned vegetables."
By para.7 of the Further Amended Statement of Claim SPC alleges that: "By means of the publication of the matter complained of and the making of each of the imputations specified", SPC "has been brought into hatred ridicule and contempt and has been gravely injured in its character and reputation and has suffered and will continue to suffer considerable loss and damage".
No extrinsic facts are pleaded in relation to the letter. This means that the applicant relies upon the natural and ordinary meaning of the words. The words must be construed in their context, as part of the whole of the letter, but without reference to any special facts of which the recipient may be aware. The imputations which are pleaded are the meanings said to arise out of a normal and ordinary reading of the letter. In the language of defamation lawyers, they plead a "false innuendo". The situation is similar in respect of the television advertisements.
Each television advertisement took the form of a statement made to camera by an individual, who was sometimes identified and sometimes not. SPC alleges that the statements were published by the respondent, who trades as Edgell-Birdseye, because, in each case, the advertisement stated it was "authorised by Edgell-Birdseye". According to the Further Amended Statement of Claim, and adopting the identification numbers used therein, the words spoken in the advertisements included the following:
1. The speaker is a man shown outdoors standing in front
of a tree. He says:
"for this opportunity to express my serious concern that the possibility that following the proposed merger of the Leeton cannery with SPC that eventually sooner or later that the Leeton cannery will be closed. It is grieving me to think that 250 odd people who rely of
(sic) the cannery directly for their employment together with their families which may reach a number of say 100 within the community again represent around about one sixth of the Leeton township. Too, if this event occurs and the cannery is closed, we'd be directly affected and I would like to see the other options more carefully considered both by the grower and the community."
The second statement is made by a person standing in
a supermarket. He says:
"My name is Geoff Chifley. As a supermarket proprietor, I am concerned that the Letona cannery may close as a result of the SPC/Letona merger. The major percentage of Letona's turnover in Australian (sic) comes from products other than canned fruit. If the merger proceeds, Edgells have stated that they won't give away the value of business they have built. In fact Edgells say it is worth 10 million dollars per year. Now, how can the cannery remain open when it faces a loss of such an amount?"
The third person is speaking in a men's clothing
store. He says:
"I am Lloyd Pilkenton. As a businessman in Leeton, I am very concerned about the outcome of the proposed SPC/Letona merger. We were planning a major shop extension and have decided not to proceed until our future is clear. Should the Leeton cannery close, it will be disastrous for the whole Leeton area. Business would suffer, unemployment would rise and real estate values would tumble. The only way to keep Leeton prosperous is to guarantee to keep the cannery open."
The fourth person is an unidentified man speaking in
a shop. He says:
"... Businessmen, (sic) farmer and dry shareholder in Letona. The future of Letona should be determined by all shareholders. This is being denied by the active membership legislation and the board is not showing any consideration to non-active shareholders many of whom are still farmers and in the future could supply the cannery. A merger with the Victorian enterprise, would not be in the best interests of our canneries. I believe the board should involve all shareholders in decision ..."
The fifth statement is made by a man speaking in an
orchard:
"My name is Philip Cook. I have been an orchardist in this District for quite a period of time and currently I am most concerned at the delay centred around the future of Letona. It would appear to me that the time has arrived for the growers to very seriously consider the situation where the proposed merger seems to have got into a great deal of difficulty. It would seem that because of these difficulties, the growers should look very closely at the next most practical of alternatives to the proposed merger, which in my view would be a situation where the cannery aligns itself with the Edgell proposal. In this way, we should be able to see a reasonable (sic) good future be (sic) being associated with a company that has a proven expertise."
5A. The next statement is made by a farmer shown pruning
trees in an orchard: He says: "I'm Mick Romeo and here I am pruning and don't know whether it will be worthwhile. I don't know what the future is. The board is pushing a merger with SPC and keeping us growers in the dark absolutely. I wish they would come out clean and tell us what is going on. I don't believe monopolies are good because they can dictate and there is no alternative. I wish they would tell us what is going on ..."
The final statement is made by Ian Peden, Marketing
Manager of Edgell-Birdseye. He says: "There is great concern in the area about the possible closure of the Leeton and Batlow canneries should the merger with SPC go ahead. If Edgell-Birdseye became (sic) competitors with Letona that would mean that Letona would stand to lose two million dollars in the first year of operation. On the other hand, an association with Edgell-Birdseye would mean that the future of Leeton and Batlow is assured."
The above statements are pleaded in para.13 and the schedule of the Further Amended Statement of Claim. By para. 14 it is said that the "matter was published of and concerning the Applicant" and imputations are set out in para.15 as follows:
"(a) that the Applicant proposed to cause the closure of the Leeton Cannery of Letona Co-Operative Ltd following the merger of Letona Co-Operative Ltd with the Applicant or with some entity controlled by the Applicant (items 1,2,3 and 6 in the schedule);
(b) that the Applicant was incapable of effecting a merger with Letona Co-Operative Ltd (item 5 in the Schedule) and
(c) that the Applicant would form a monopoly by merger with Letona Co-Operative Ltd and would unjustly dictate terms of commercial dealing with growers (item 5A of the schedule)."
The test to be applied, in considering a strike out application in connection with a defamation action is the same as that which applies in connection with other actions: see Bik v Mirror Newspapers Ltd (1979) 2 NSWLR 679, Monte v Mirror Newspapers Ltd (1979) 2 NSWLR 663 and Mirror Newspapers Ltd v Singleton (1980) 2 NSWLR 129. The test was enunciated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at pp 128-129 in these words:
"The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r.18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action ... is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'."
Barwick C.J. went on to point out that the authorities cited did not limit the exercise of the jurisdiction to cases where argument was unnecessary to evoke the futility of the plaintiff's claim. Argument, even of an extensive kind, might be necessary to demonstrate that the plaintiff's case is clearly untenable and cannot possibly succeed: see p 130.
Applying this test, the application must succceed in respect of the letter. In each of the two extracts upon which SPC relies, statements are made concerning SPC. But for these statements to be defamatory of SPC it must be possible to say that the matter complained of exposes SPC to hatred, ridicule or contempt; or, to adopt more modern formulae, is a statement to its discredit -- see Youssoupoff v Metro-Goldwyn-Mayer (1934) 50 TLR 581 -- or is such as to cause ordinary decent folk in the community, taken in general, to think less of SPC -- see Gardiner v John Fairfax and Sons Pty Ltd (1942) 42 SR (NSW) 171 and Consolidated Trust Co Ltd v Browne (1948) 49 SR (NSW) 86. I do not see anything in either statement which could have that effect. The first statement is a comment about the likelihood of SPC's after-tax profits, in the foreseeable future, being substantially different from those achieved in the past. In the absence of any extrinsic facts, such a comment is incapable of reflecting upon SPC's standing, integrity or conduct. A company may be unlikely to increase its future profits for various reasons consistent with its being a worthy corporate citizen. As to the second extract, the only statement made about SPC is that it has no experience in the frozen food industry and a limited canned vegetable sales force. There is nothing reprehensible about that.
I think that it is apparent that the pleader also had difficulty in extracting any defamatory imputations from the letter. The pleaded imputations (a), (b), (c) and (e) do not arise out of the matter relied upon. To say that the after-tax profits of a company are not likely to improve in the future does not imply that the company has failed to improve its earnings in the past or that it is not competently managed or that it is incapable of handling a particular type of business or sales of a particular type. After-tax profits may be limited by the circumstances of the trade in which the company is engaged, or even by a policy consciously and responsibly adopted.
I agree that imputation (d) does arise. Indeed the letter states, in terms, that the applicant has a limited canned vegetable sales force. However, that is not a statement which is likely to cause ordinary decent folk to think less of SPC. The statement might make the recipient wonder whether SPC is the ideal merger partner for Letona. No doubt that was the intention of its author. But it is not defamatory of a company merely to suggest that it is not suited for a particular enterprise.
I turn to the television advertisements. In relation to advertisements 1, 2, 3 and 6 the only imputation pleaded by SPC is that, by this material, Petersville alleges that SPC proposes to cause the closure of the Leeton cannery following a merger between Letona and SPC.
None of the advertisements suggest that the cannery would definitely close. None of the speakers goes beyond mooting the possibility of a closure. However, whether the advertisements be understood as postulating either a possibility or a likelihood of closure, such a statement is not defamatory of SPC. Even if the published matter was capable of supporting the imputation alleged by SPC, that it was proposing a closure, this would not be defamatory of it. No doubt the prospect of closure was a matter of concern to the people of Leeton. However, at least in the absence of extrinsic facts, it is not defamatory of a company to say that it will close down a manufacturing plant such as a cannery. Decisions to open and close particular facilities are regular incidents of corporate and community life. Individuals may be disappointed, even upset, about a particular decision. But the making of that decision, without more, does not adversely reflect upon the standing, integrity or competence of the company which makes it. It seems to me clear that advertisements 1, 2, 3 and 6 lack material capable of defaming SPC.
No imputation is pleaded in respect of advertisement 4. SPC is not named in that advertisement, although there is a reference to "a merger with the Victorian enterprise". Paragraph 1 of the Further Amended Statement of Claim alleges that SPC was incorporated under the laws of Victoria. Accordingly, for present purposes, I take SPC to be "the Victorian enterprise" referred to in advertisement 4. However, once again all that is said is that a merger with SPC "would not be in the best interests of our canneries". The point is the same as that in respect of the previous advertisements.
The imputation pleaded in respect to advertisement 5 is that SPC was incapable of effecting a merger with Letona. This imputation does not arise out of the published matter. SPC is not referred to by name or description in the published material. The speaker refers to "the delay centred around the future of Letona". This may be understood as a reference to delay in the determination of the merger proposal. Even so, there is nothing to suggest that the delay has been occasioned by some fault or deficiency of SPC. Still less can the advertisement be understood as indicating that SPC is incapable of effecting a merger. In any event, a statement that a particular company is incapable of effecting a merger with another company is not, of itself, defamatory of the first company. There may be reasons why a merger is impossible even for the most worthy company.
Advertisement 5A is primarily a statement about the board of Letona. The speaker criticises that board for "keeping us growers in the dark absolutely". However, it is clear that he is speaking about the proposed merger with SPC. The complaint of SPC is that the speaker goes on to say: "I don't believe monopolies are good because they can dictate and there is no alternative". A viewer might understand that statement to be aimed at a monopoly consisting of an entity formed by a merger between SPC and Letona. Upon that basis the speaker is saying that he thinks that it would be undesirable if there was such a monopoly, because such a monopoly could dictate to growers and deprive them of any alternative; presumably as to the sale of their produce.
There is, perhaps, more substance to the suggestion of defamation in this advertisement than the others. However, I do not think that this statement is capable of defaming SPC. To say that, if a particular company mergers with another, it will achieve a monopoly position wherein it can dictate terms is not a statement about that company which is likely to cause ordinary decent folk to think the less of it. Such a statement is simply a recognition of a commercial situation.
No doubt it was the realisation of this fact which caused SPC to frame its imputation in the manner it did; that is, that the published material meant that SPC "would form a monopoly" by merger with Letona and "would unjustly dictate terms of commercial dealings with growers". As I have said, I do not think that it is defamatory to say that SPC would form a monopoly by merger with Letona. The situation would be different if the published material was capable of bearing the meaning that SPC had deliberately sought a monopoly position whereby it could take advantage of growers. Nor do I think that the published material fairly bears the meaning that the monopoly would unjustly dictate terms. All that the speaker was saying was that, if a monopoly was created, the monopoly would be in a position to dictate terms. He did not say that the monopoly would take advantage of that position by treating people unjustly.
The questions whether the various passages in the publications made by Petersville of SPC are capable of bearing defamatory meanings are questions of law. At the trial, even if there were a jury, they would be matters for the Judge to decide. As there is no allegation of extrinsic facts, that Judge would have to determine these questions by reference to the same material as is presently before me. I am of the opinion that, the test applied in the General Steel case is satisfied where it can be seen, and held as a matter of law, that the material upon which an applicant relies for a defamation claim is incapable of bearing a defamatory meaning. If the matter relied upon is incapable of bearing a defamatory meaning, ex hypothesi any defamation action based upon that matter is "'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'", etc. As the applicant's position cannot be improved at the trial, there is no advantage in allowing the matter to go to trial with the consequent additional expense which would be imposed upon the parties.
What I have just written may be thought to be inconsistent with a passage in the judgment of Hunt J in Monte. I would not lightly differ from any view of his Honour in the realm of defamation law. The relevant passage consists of a sentence, at the foot of p 675. Speaking of what was required to be shown before a defamation claim could be struck out, Hunt J said: "Clearly the tests, as discussed in Bik's case, require me to be satisfied of something more than merely that the matter complained of is not capable of defaming the plaintiff". The sentence causes difficulties, because there is nothing in Bik to suggest that a judge who concludes that the matter complained of is incapable of bearing a defamatory meaning ought not exercise the summary jurisdiction of the court. Indeed, the Court of Appeal upheld the decision of Brereton J, at first instance, striking out the plaintiff's claim.
As I read Bik, it makes two relevant points: first, that the test applicable to other actions -- as enunciated in General Steel -- applies also to defamation actions; and, secondly, that, in considering whether the words are capable of having a defamatory meaning, in the words of Herron CJ at p 681, "... there must be added to the implications which a court is prepared to make as a matter of construction all such insinuations and innuendoes as could reasonably be read into them by the ordinary man". Of course, this equally applies at the trial.
I think that the key to the sentence in Monte is provided by what immediately follows. Hunt J goes on to point out that the expression "industrial espionage", a term used of the plaintiff in that case, has no formally accepted or understood meaning. In other words, as it seems to me, his Honour is saying that there may be a defamatory innuendo capable of being read into the words by an ordinary reader. Obviously, and with respect, it was therefore proper to refuse the strike out application; but this was because the words could not be held to be incapable of bearing a defamatory meaning, not because the application was made before the trial.
The motion ought to be allowed. I propose to strike out all the paragraphs of the Further Amended Statement of Claim which relate only to the defamation claim; that is to say, paras.4, 5, 6, 7, 14, 15, and 16.
I have dealt with the present application upon the basis that the Further Amended Statement of Claim does not allege extrinsic facts. However, having regard to some statements made by counsel during argument, it is possible SPC may wish to reconsider its position and, in particular, whether it will seek to support the defamation claims by reference to extrinsic facts. I do not encourage this course. There is nothing to suggest that SPC can improve its position in connection with the defamation claims. But I think that I should allow an opportunity for this possibility to be considered. Accordingly, I will give leave to the applicant to amend further its Statement of Claim within 14 days. SPC must pay the costs of the present motion.
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