The Star Hotel Holdings Pty Ltd v Newcastle Newspapers Pty Ltd

[2001] NSWSC 53

CITATION:	The Star Hotel Holdings Pty Ltd v Newcastle Newspapers Pty Ltd & Anor [2001] NSWSC 53
FILE NUMBER(S):	SC 20086/01
HEARING DATE(S):	07/02/01; 08/02/01
JUDGMENT DATE:	19 February 2001
PARTIES :	The Star Hotel Holdings Pty Ltd v Newcastle Newspapers Pty Ltd t/a The Newcastle Herald & Anor
JUDGMENT OF:	Whealy J at 1

COUNSEL :	Mr Clive Evatt - Plaintiff Mr Mark Lynch - Defendants
SOLICITORS:	Hovan & Co - Plaintiff Mark Polden (Sol) - John Fairfax Publications Pty Ltd - Defendant
LEGISLATION CITED:	Defamation Act s 15(2)(b) Defamation Act s 31 Defamation Act s 22
CASES CITED:	Church of Scientology v Reader's Digest (1980) 1 NSWLR 344 at 349F-350A Chappell v TCN Channel Nine Pty Ltd (1988) 14 NSWLR 153 Car Lovers Car Wash Limited & Ors v Sahathevan (2000) NSWSC 947 Levine J para 43 Macquarie Bank Limited v Charles Berg (1999) NSWSC Simpson J para 16 Hemmes v Seven Network Limited (2000) NSWSC 246 Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 40B Bellino v Australian Broadcasting Commission (1996) 185 CLR 183 at 220, 211
DECISION:	I order that the injunction granted on 5 February 2001 be at an end. I decline to make an order retraining the defendants from publishing or causing to be published in the "Newcastle Herald" imputations of an concerning the plaintiff to the effect of the matters stated in paras (a) to (f) in the amended summons filed on 7 February 2001. Summons dismissed. Plaintiff to pay the defendants' costs.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
DEFAMATION LIST

WHEALY J

MONDAY 19 February 2001

20086/01 - THE STAR HOTEL HOLDINGS PTY LIMITED v NEWCASTLE NEWSPAPERS PTY LIMITED t/a The Newcastle Herald & Anor

1    HIS HONOUR: This is a disputed application to reframe and continue an injunction granted by me late in the evening of Monday, 5 February 2001. The plaintiff is a Newcastle company which has contracted to buy and which operates a large and well known hotel (“The Star Hotel”) in the commercial centre of Newcastle at the Corner of King and Hunter Streets in that city.

2    The first defendant is the publisher of the Newcastle Herald and the second defendant is a journalist employed by the first defendant.

3    As I have mentioned, the plaintiff made an urgent ex parte telephone application to restrain the publication of a newspaper article which was scheduled to appear in the Newcastle Herald on the morning of Tuesday, 6 February 2001. Although the information provided to me in the ex parte application did not make it precisely clear what would appear in the article, sufficient evidence was placed before me to satisfy me that it was likely to be of substantial harm to the plaintiff. The alleged contents of the article were arguably capable of being defamatory of the plaintiff. Ultimately, after hearing submissions by way of a telephone conversation hook up between representatives on behalf of the plaintiff and the defendant, I granted an injunction, admittedly expressed inelegantly and too widely, which was made returnable on Wednesday, 7 February 2001. On that day, Mr Clive Evatt appeared for the plaintiff and Mr Lynch for the defendants. The matter proceeded by way of argument on 7 and 8 February 2001 when I reserved my decision.

4    At the outset of the hearing, counsel for the plaintiff reformulated the orders which are the subject of the extension application. This reformulation was made, firstly, in the form of an amended summons which I allowed to be filed in court. Later in the day, leave was given to the plaintiff to file a Statement of Claim in which a further reformulation of the imputations said to be conveyed by the proposed newspaper article was set out.

5    Counsel for the defendants produced a document in answer to a call for the draft article. Mr Lynch, for his part, did not object to the tender of Exhibit “C” (which is identical to annexure A to the amended summons). This is the draft newspaper article at the centre of controversy. Mr Lynch made it clear, however, that although this is the substance of the proposed article, there may be slight changes to it as it passes through the usual legal and correctional systems customarily used by the newspaper. For relevant purposes, however, I am to regard it as the proposed article. The first defendant wishes to publish it. The plaintiff wishes to restrain its publication.

6    As is invariably, or almost invariably, the case in applications of this kind, the injunction is sought against a background where a draft statement of claim has been hurriedly prepared, where it may not be in its final form; where the factual material before the court is in brief and imperfect form and emanates from one side only. The time for careful cross-examination has not yet arrived, nor has the first defendant sought and obtained particulars of the imputations, nor have any defences been prepared and pleaded to the statement of claim.

7    The stark issues, so the plaintiff claims, are that the proposed article is highly defamatory of it in a number of respects; the damage occasioned by publication is significant and irreparable; and that no element of public interest, nor matters relating to the public interest, arise so as to justify any of the likely statutory defences available to the first defendant.

The facts

8    The company currently occupies premises known as “The Star Village Complex”. This encompasses a Hotel/Motel business known as “The Star Hotel”, a commercial property and a number of shops.

9    The plaintiff is a private company and is in the course of purchasing the whole of the property at 563-571 Hunter Street, Newcastle. The purchase price for this property is2.5 million dollars. Contracts were exchanged on 15 October 2000. The plaintiff was allowed to take possession of the premises after exchange to renovate and operate the business.

10    The plaintiff has expended more than 1.2 million dollars on the renovation and fit out of the hotel/motel, the commercial property and the shops on the site. The hotel licence had been dormant but the hotel was opened for business again, after renovation, on 15 December 2000. It is said to be currently trading above expectations. The liquor licence was transferred to the company or its nominee on 15 December 2000.

11    Settlement of the purchase is scheduled to take place on 15 March 2001. The plaintiff, however, has obtained private finance through a broker and actual settlement is likely to take place prior to that date. Mr Peter William Blair who swore an affidavit of 6 February 2001, in his capacity as a company director of the plaintiff, said that it was his belief that the settlement was expected to take place within two weeks of the date of his affidavit.

12    On 5 February 2001 Mr Blair received a telephone call from Mr John Norris. He is the proprietor of “Encore Advertising” and is employed by the company as a Market/Advertising Consultant. Mr Norris told Mr Blair that he had received a call from the second defendant. Apparently, the reporter told Mr Norris that he had received a call from a Mr Norman Hepburn a few minutes earlier. Mr Hepburn had phoned the reporter and alleged that he was owed the sum of $140,000 by the plaintiff for brokerage fees for financing to enable the company to complete settlement of the purchase. It seems that Mr Hepburn also alleged that there were a lot of other creditors of the plaintiff company, and that he was going to put an advertisement in the Newcastle Herald on 6 February 2001 to call a creditors’ meeting with a view to putting the company into receivership.

13    In his affidavit, Mr Blair explained that Mr Hepburn had been engaged to obtain finance for the company to enable the purchase to be completed. For reasons alleged by him, the company became dissatisfied with Mr Hepburn’s services and terminated his engagement as finance arranger. Part of the dissatisfaction with his services, so Mr Blair said, centred upon the brokerage fee he was seeking of $140,000 which was considered excessive by Mr Blair. It seems that there was some acrimony between Mr Hepburn and Mr Blair at the point of time when Mr Hepburn’s services were terminated. Mr Hepburn is alleged to have said at this time “I’ll see you in court and I will f… you”.

14    These negotiations broke down in January 2001. Mr Blair explained that he had to find another source of finance at once. He obtained a private financier. The facility to be provided is 4 million dollars on terms far more favourable than the terms offered by Mr Hepburn, according to Mr Blair.

15    Mr Blair gave details in his affidavit of the arrangements he has made with creditors of the company. He says that most of the creditors, with the exception of two unnamed creditors, have agreed to wait until the new finance has been arranged, as it now has. He asserts that all creditors have been paid or will be paid when the monies owing are due and payable, in accordance with normal trading terms. He says the company is solvent and the company is able to meets its debts as and when they fall due. It is able to pay its normal trade creditors on a day to day basis.

16    Apart from the finance that has been approved for the settlement, he has arranged further short term finance through the company’s accountant Mr Craig Fromme. This means that the company has been able to obtain $150,000 to overcome short term difficulties arising out of the failure of the finance from Mr Hepburn.

17    Mr Blair says that he has not had an opportunity to respond properly to the allegations made in the draft article annexure “C”. He says if the article were placed in the Newcastle Herald it could have disastrous effects on the plaintiff and be of advantage to his competitors in the Newcastle central area. He went so far as to say that the effects of such an article could be so adverse as to force the plaintiff out of business. He said that an award of damages in twelve months time or even longer could not compensate the plaintiff for what could be irreparable injury and huge financial losses.

18    I should stress that although Mr Blair’s affidavit was admitted into evidence, he has not been cross-examined in relation to its contents and the first defendant has not had the opportunity of putting on evidence in relation to any of the factual material contained in Mr Blair’s affidavit.

The Draft Article - its contents

19    The parties have agreed that it is undesirable I set out, in these reasons, the full text of the draft article. It is sufficient to say that it relates to aspects of the plaintiff’s financial stability and its relationship to its creditors and suppliers. It will be necessary, however, for me to mention certain details regarding the structure and content of the article when I examine the submissions made in relation to imputations alleged to have been necessarily conveyed (or likely to be conveyed) by its publication.

Principles involved in granting Injunctions in Defamation Actions

20    It is agreed between the parties that the principles in relation to the granting of an injunction in a defamation matter are well settled. The basis upon which courts have acted in granting interlocutory applications in matters of this kind has been stated by Hunt J in Church of Scientology v Reader’s Digest (1980) 1 NSWLR 344 at 349F-350A in the following terms:

“I accept as the settled law that the power to grant interlocutory injunctions in defamation cases must be exercised with great caution, and only in very clear cases. A plaintiff must establish that a subsequent finding by a jury that the matter complained of was not defamatory of him would be set aside as unreasonable; that there is no real ground for supposing that the defendant may succeed upon any defence of justification, privilege or comment, and that he, the plaintiff, is likely to recover more than nominal damages only. In particular, questions of privilege and malice are not normally appropriate to be decided upon an interlocutory application. Nor will an injunction go which will have the effect of restraining the discussion in the press of matters of public interest or concern.”

21    Later in Chappell v TCN Channel Nine Pty Ltd (1988) 14 NSWLR 153 Hunt J modified somewhat his approach in one respect. At p 163C, his Honour said: -

“In the present case, therefore, I concluded that my inability to hold that a jury’s verdict of no libel would be set aside as unreasonable did not require me to reject the plaintiff’s application for an interlocutory injunction on that ground alone.”

22    His Honour, went on to say on p 163 below the line D:

“That is not to say that the considerations enshrined in the “rules” laid down by Lord Esher should be ignored in an application for an interlocutory injunction in defamation cases. Far from it. Those considerations should in my view continue still to be relevant, but not in the absolute terms in which they were expressed over 100 years ago by Lord Esher.”

23    And again at line G on p 163 his Honour continued -

“It is important to emphasise that the power to grant interlocutory injunctions in defamation cases will, even where such a discretion is applied, continued to be exercised with great caution and only in a very clear case: Bonnard v Perryman (at 285) and Stocker v McElhinney (No 2) (at 544; 1048). That is because in most cases the grant of such an injunction before the rights of the parties have been finally determined at a trial involves an interference with an important right of the defendant, that of his freedom of speech, which is necessarily interfered with if its exercise is delayed or prevented. In many cases, the grant of such an injunction before those rights have been finally determined involve an interference with an even more important right, the right of the community in general to discuss in public matters of public interest and concern and to be informed of the different views held by others. That is what I described as the independent and overriding principle, and which I discussed in some detail, in the Church of Scientology case (at 351-352). A free and general discussion of public matters is fundamental to a democratic society.”

24    These principles have been applied by judges of this Court on a number of occasions (see for example, Levine J Car Lovers Car Wash Limited & Ors v Sahathevan (2000) NSWSC 947 para 43; Simpson J Macquarie Bank Limited v Charles Berg (1999) NSWSC 526 para 16; Hulme J Hemmes v Seven Network Limited (2000) NSWSC 246).

Should the injunction continue?

25    In my opinion, the plaintiff is not entitled to a continuance of the existing injunction. Further I have come to the conclusion that the plaintiff is not entitled to an order restraining the defendants from publishing or causing to be published in the Newcastle Herald the imputations set out in the amended summons filed in court. I shall state my reasons.

26    First, it is not clear to me that a jury would necessarily find that the imputations alleged would be conveyed to the ordinary reasonable reader by the publication of the draft article. I say this having regard to the article as a whole and to its individual paragraphs. The article has been “divided” into numbered paragraphs in the document marked annexure “A” to the Statement of Claim. I shall refer to the paragraphs in the article by reference to that numbering. Paragraphs 2, 8 and 9 raise the prospect of the plaintiff being placed in receivership. This is in the context of unpaid creditors, especially Mr Hepburn. Paragraphs 7 and 10 assert that the company has a number of suppliers and/or creditors whose bills have not been paid in substantial amounts, one owing since December. Paragraphs 11 and 12 etc. Paragraphs 11 and 12 refer to Mr Hepburn’s son, Scott being forced to stand down as Managing Director of the plaintiff last week on proviso that the debts would be paid. This allegedly has not been done, according to the last paragraph of the article, although Mr Scott Hepburn had been unavailable for comment.

27    On the other hand para 3 of the article is favourable to Mr Blair in his capacity as new managing director of the plaintiff. It describes him as a person who is well known in Newcastle for his role in the water treatment company Hydrotech Distillation Systems, part of a group of companies trading under the umbrella of Positive Investment Concepts. The article notes that Mr Blair was unavailable for comment “yesterday” and refers to a statement issued by the plaintiff’s lawyer, Mr Wayne Warwick (para 4). He is quoted as saying that the hotel was trading well and had received no formal demand from creditors. The quote continues: -

“(I have it) from the directors no formal financial demands have ever been made …. The hotel is trading to its expected percentage …. It is very prosperous, one of the most popular hotels in Newcastle”. (paras 5 and 6).

28    It is not at all clear to me that a subsequent finding by a jury that the matter complained of was not defamatory of the plaintiff would be set aside as unreasonable. In so saying, I wish to make it clear that I am not asserting that a jury would necessarily find against the plaintiff in relation to the imputations. A jury may very well find in the plaintiff’s favour. The point I wish to stress is that there are arguments which might reasonably be put each way and it is impossible to say that a finding against the plaintiff would be set aside as unreasonable.

29    The position is to be very much contrasted with that in Chappell (supra) where the plaintiff conceded that the proposed segment of the defendant’s television programme was capable of conveying the two imputations nominated in the injunction which had been granted, and where Hunt J was himself satisfied that a jury’s verdict that the proposed publication would not have been understood as having in fact conveyed the conceded imputations would be set aside as unreasonable.

30    This is very much to be contrasted with the present case where, even in the event that some of the individual paragraphs of the proposed article were capable of conveying the nominated imputations, the question would remain whether the article as a whole did so.

31    The second reason resides essentially in the fact that I am not persuaded, assuming that a jury were to find in the plaintiff’s favour in relation to the imputations, that the defendants would necessarily fail in the establishment of defences to the claim.

32    Defences have not been pleaded as yet. The parties have invited me to assume such defences will, or are likely to, extend to and include defences of justification, comment and statutory qualified privilege; and perhaps common law qualified privilege.

33    Mr Evatt, on behalf of the plaintiff, argues that, whichever of these defences is pleaded, there will arise for determination the question as to whether the public interest is involved. If the defence be justification, the imputations must relate to a matter of public interest (Defamation Act s 15(2)(b)); if it be statutory qualified privilege, the defendant must show that the recipient public has an interest or an apparent interest in having the information contained in the public material (Defamation Act s 22). This interest must extend beyond curiosity and be a matter of substance (Barbaro v Amalgamated Television Services Pty Ltd (1985) 1 NSWLR 30 at 40B). If the defence be comment, the comment must relate to a matter of public interest (Defamation Act s 31).

34    In relation to the “independent and overriding consideration that an injunction will not be ordered if its effect is to restrain the public discussion of matters of public interest or concern” (Chappell at 171D), Mr Evatt submitted that the same fundamental issue is involved namely whether a matter of public interest or concern does arise in the context of the proposed article.

35    It is the plaintiff’s robust submission that the subject matter of the article is not a matter of public interest. Mr Evatt maintains that what is involved is really a matter of a private feud between a dissatisfied person, who claims to be owed money by the plaintiff, and a company which says it will not, nor does it have to pay, a fee which was not earned. The imputations, he contends, relate to the private affairs of the plaintiff company. The fact that the plaintiff has failed to pay a broker’s fee, the fact that the plaintiff owes monies, even substantial monies, to various creditors is not a matter of or relating to the public interest. Such matters are not “the conduct of the person engaged in activities that either inherently, expressly or inferentially, invite public criticism or discussion” (Bellino v Australian Broadcasting Commission (1996) 185 CLR 183 at 220, 211).

36    I am unable to agree that matters of public interest, necessarily, do not and will not arise in relation to either the imputations or the matters dealt with generally in the proposed article. The limited array of facts appearing from the brief and untested affidavit of Mr Blair makes this much clear, namely that this is a substantial hotel in the commercial centre of the city of Newcastle; it is a hotel which has a motel providing accommodation for the public generally, and the hotel has, as part of the commercial venture, a number of shops and a commercial property either attached to it or nearby. The scope of the venture can be appreciated when regard is had to the purchase price and extensive monies spent on renovation to this date. The size of the loan facility is a recognition of the status of this hotel/motel commercial venture.

37    The hotel itself is, it is to be inferred, an institution offering drinking, dining, gaming facilities and the like to many hundreds of members of the public, each week. It may well be its public appeal is on an even greater scale. Mr Blair said that it was “trading above expectations”. It is a facility whose financial stability is likely to have a significant impact on the businesses of many of its wholesale suppliers, and in that sense, to play a part in the overall economic stability of the Newcastle central business district. Its solvency and financial stability would be a matter of interest to its patrons, the Newcastle business community generally, the Liquor Administration Board, the Australian Hotels Association and other industry groups at a more localised level.

38    At the very least, it seems to me that it cannot be said as a matter of certainty, on the facts as they are known, that the above aspects of the public interest are clearly not present as relating to the imputations or in relation to the general topic of the Star Hotel’s solvency and financial stability. For the same reason, it is at least arguable on the basis of the facts known that the activities relevant to the solvency and financial stability of the Star Hotel is the “conduct” that relevantly invites public criticism and discussion. (See Bellino supra).

39    A principal problem for the continuance or grant of an injunction in the present circumstances is that the question is posed against the sketchiest factual background. When the facts are fully stated, tested and ultimately found, the position may be significantly clearer than it is. As a general rule, it is not appropriate to restrain the publication of imputations in a proposed article where the pleadings and related matters are not finalised; where the facts are largely unexplored and where the analysis of relevant legal principles, particularly where there is an ambit of contest to their application, is unable to be made against an appropriate factual context. This is so in the present case, for example, in relation to the live issue which it is said may arise concerning the question as to whether the defendants are able to show they have acted reasonably. Mr Evatt has submitted the defendants would necessarily fail on this issue because no opportunity was given to the plaintiff to respond (Lange v Australian Broadcasting Commission (1997) 189 CLR 520 at 574).

40    It is simply impossible to determine the ambit of this one aspect of a possible defence without a full appreciation of the factual situation.

41    The principles to which I have referred in Church of Scientology (supra) and Chappell (supra) make it clear that the discretion to restrain defamatory publications should be exercised with great caution and only in a very clear case. This is so because, while it may appear, prima facie, that a publication is defamatory, the resolution of the proceedings may well reside in the defences pleaded, and these cannot ordinarily cannot be determined at the stage of an interlocutory injunction application. As Simpson J observed in Macquarie Bank (above) at para 16: -

“To restrain the publication would unduly override the rights of the publisher and pre-empt the resolution of legitimate issues which arise in claims for defamation. The second reason concerns the fundamental public interest in freedom of speech and freedom of information. An injunction will ordinarily not lie where it would have the effect of restraining discussion in the media of matters of public interest or concern.”

42    To the same effect are the observations of Levine J in Car Lovers Cash Wash Limited (supra) at para 33 where his Honour said: -

“It is notorious, if I might say so, that the courts are very reluctant to grant injunctive relief to restrain publication of alleged defamatory matter.”

43    Two further points need to be made: first, it may well be the situation that, when the present proceedings come to ultimate hearing, it will be determined that the publication is defamatory, is not protected by any of the available defences, and warrants an award of damages. I do not intend anything I have said to represent a categorical finding that matters of public interest must arise in relation to the imputations and to the matter contained in the draft article generally. Secondly, although the principles in the authorities to which I have referred require that the power to restrain a defamatory publication be exercised with great caution, there will be occasions, perhaps infrequently, where the need to issue an injunction will properly arise. There may be cases in which the position is so clear that an injunction will be required to prevent major and irreparable damage. Chappell (supra) and Hemmes (supra) were such cases. The present proceedings, however, in my view do not present such a clear picture either in relation to the imputations themselves or the issues of public interest which have been debated in the interlocutory application.

44    Although it is not necessary to consider the balance of convenience at this stage, since I am not satisfied about those matters described, in shorthand fashion, as “threshold” matters in proceedings to restrain defamatory publications, I should say that I am not satisfied that the evidence presently relied upon by the plaintiff establishes that it has demonstrated that the publication of the draft article will necessarily result in significant and irreparable damage to it. (Chappell 163E). Mr Blair’s evidence establishes that satisfactory arrangements have been made with all the plaintiff’s creditors save two; that it has in place short term finance of a limited kind to meet day to day creditor demands. There is no evidence to suggest that the proposed financier, which is to provide the money to complete the purchase, would, as a consequence of the publication of the article, do other than fulfil the obligations of the commitment it has obviously made. Again, I do not wish to pre-empt the evidence that will be given at an ultimate hearing of the defamation action should it proceed. There may well be evidence of damage following publication, if publication (or re-publication) occurs. I am not satisfied, however, that the evidence placed before me establishes that matter at this interlocutory stage.

45    For these reasons I propose to order that the injunction granted on 5 February 2001 be at an end. I decline to make an order restraining the defendants from publishing or causing to be published in the “Newcastle Herald” imputations of and concerning the plaintiff to the effect of the matters stated in paras (a) to (f) in the amended summons filed on 7 February 2001.

46    Summons is dismissed. The plaintiff is to pay the defendants’ costs.

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Last Modified: 02/20/2001