Brien v Mrad

1. [1]

   MACFARLAN JA: I agree with Payne JA.

2. [2]

   PAYNE JA: Mr Brien, the applicant, unsuccessfully brought proceedings in the District Court for defamation in relation to words allegedly spoken by the President of the North Shore Karting Club, Mr Mrad, the respondent, on 19 September 2018 at the Annual General Meeting (AGM) of the Club. Mr Brien, a member of the Club, pleaded that Mr Mrad said to the meeting:

3. [3]

   The imputations pleaded to arise were:

4. [4]

   The primary judge described the principal issue to be determined as follows:

5. [5]

   Although there was no clear finding by the primary judge about precisely what was said by Mr Mrad at the AGM, her Honour’s conclusion was as follows:

6. [6]

   The primary judge identified two critical differences between the pleaded statement and the words proved to have been spoken; first, Endree Saade was not mentioned and, secondly, discount tyres or bribes had been offered to more than one person. Her Honour found that “these differences are sufficient to amount to ‘fatal variance’” and that the claim of publication was thus defeated (at [214]-[215]).

7. [7]

   No substantive defences were relied upon by the respondent and no challenge to the form or capacity of the imputations was made. The primary judge found at [214] that it was more likely than not that the respondent went on to say that the applicant had misled people from whom proxies were sought by not revealing that the vote was for office-bearers of the Club rather than the affiliation of the Club with other bodies. I will address the significance, if any, in this case of these additional words forming part of the matter complained of to the application for leave to appeal below.

8. [8]

   Against the risk of error, her Honour assessed the applicant’s damages on a contingent basis in the sum of $15,000. Her Honour would not have awarded aggravated damages but again, against the risk of error, assessed aggravated damages in the sum of $5,000.

9. [9]

   Mr Brien seeks leave to appeal. As to liability, the single ground of appeal proposed is that the primary judge erred in finding that the words proved to have been spoken by Mr Mrad amounted to a fatal variance from the words pleaded in the statement of claim. The error specified is that the primary judge misapplied legal principle.

Consideration

1. [10]

   In the appeal, both parties agreed that the test to be applied in this case was that identified by Simpson J (with whom Gleeson JA agreed) in Coles Supermarkets Australia Ltd v Clarke [2013] NSWCA 272 at [89]-[94]. Simpson J explained the question as being, in cases of alleged slander, the degree of tolerance allowed by the court where there is departure, in the words proved, from the defamatory words pleaded:

2. [11]

   Simpson J’s analysis of the degree of tolerance allowed by the court where there is departure, in the words proved, from the defamatory words pleaded relied upon the judgments of the Court of Appeal of England and Wales in Tournier v National Provincial and Union Bank of England [1924] 1 KB 461. After addressing two of the separate judgments in Tournier, Simpson J concluded:

3. [12]

   On the face of it, a defamation case turning on the precise words spoken by the President of a Karting Club at a rowdy AGM where the damages awarded on a contingent basis were only $15,000 is not a promising candidate for the grant of leave to appeal. To entertain appeals of this kind runs the risk of encouraging disproportionate legal costs to be incurred, contrary to the guiding principle stated in s 60 of the Civil Procedure Act 2005 (NSW).

4. [13]

   I have concluded, however, that the submissions made on behalf of Mr Mrad led the primary judge into an error of principle in the application of the test identified by Simpson J in Coles v Clarke, which this Court should correct. The submissions made on behalf of Mr Mrad suggested the following approach to determination of the issue:

5. [14]

   The approach propounded by the respondent of adopting a test for “analogous issues”, said to be imputations which “differ in substance” invites consideration of a different test developed for a different purpose. In an otherwise careful judgment, this invitation by the respondent led the primary judge into error.

6. [15]

   The adoption by the primary judge of the approach propounded by the respondent is clear. Her Honour concluded that the words proven in the evidence could only carry a “general imputation”, such as the plaintiff had bribed people to obtain their proxy votes. That was not an application of the test in Coles v Clarke. Her Honour said:

7. [16]

   The primary judge underlined this reasoning, by reference to John Fairfax Publications Pty Ltd v Hitchcock (2007) 70 NSWLR 484; [2007] NSWCA 364, a case referred to by the respondent in applying the “different in substance” test applicable to imputations:

8. [17]

   The respondent in the appeal sought to defend the approach which it had led the primary judge to adopt, submitting that the notion of “difference in substance” arises in a number of contexts in the law of defamation. So much may be accepted, but it is important to bear in mind the purpose for which the question is being asked.

9. [18]

   The correct approach to pleading imputations in defamation actions in NSW has received a disproportionate amount of attention for two historical reasons. First, under s 9 of the Defamation Act 1974 (NSW), the imputation (not the matter complained of) was the cause of action. That was the explanation for the requirement to specify each imputation relied upon by the plaintiff and the constraint that, if more than one imputation was pleaded, the imputations must differ in substance.

10. [19]

    The Defamation Act 2005 (NSW) abandoned reliance on imputations as the cause of action, but imputations retained their importance for the purposes of the defences of truth and contextual truth under ss 25 and 26 respectively. The result was the development of highly specific and in some respects arcane rules about the requirement that any imputation allowed to go to the jury (whether relied upon by the plaintiff or the defendant) must differ in substance from any other imputation. For example, Uniform Civil Procedure Rules 2005 (NSW) r 14.30(3) requires for the pleading of imputations or the particularisation of imputations, that they differ in substance one from the other. That requirement applies to a contextual imputation that is pleaded by a defendant who relies on a defence under s 26 of the Defamation Act.

11. [20]

    A significant development in understanding the importance of the “difference in substance” requirement for imputations was the decision of this Court in Besser v Kermode (2011) 81 NSWLR 157; [2011] NSWCA 174 in which it was held that, under s 26 of the 2005 Act, a defendant could no longer adopt the practice permitted under the 1974 Act of “pleading back” the plaintiff’s imputations for the purposes of a contextual truth defence. As explained by McCallum J in Oscar Kazal v Fairfax Media Publications Pty Ltd [2017] NSWSC 44, the operation of the truth defences under the 2005 Act gave rise to a natural contest about imputations that differed, if only subtly, from each other.

12. [21]

    It was against that background that the principle recognised by this Court in Fairfax Media Publications v Zeccola (2015) 91 NSWLR 341; [2015] NSWCA 329 developed, that a general contextual imputation can be pleaded in defence to a specific imputation even though they relate to the same subject matter as long as they “differ in substance”. The “difference in substance” requirement for imputations is explicable by reference to this history and statutory context.

13. [22]

    In order to determine whether the language of the proved words was substantially to the like effect as that pleaded, the primary judge erred in applying the “different in substance” test, developed in relation to imputations. The “difference in substance” test is relevant to the existence of possible truth defences. The correct test identified in Coles v Clarke is posed for a different purpose, to examine whether the matter complained of has been established in that the words proved, though not the very words pleaded, are words substantially the same as those pleaded.

14. [23]

    In the present case the language proved was substantially to like effect as the language pleaded, despite the fact that the language established went further or established a broader slander than that pleaded. In the present case, I respectfully disagree that Mr Brien’s cause of action was defeated simply because on the words proved he was defamed more comprehensively than alleged in the pleading.

15. [24]

    In reaching this conclusion, I wish to emphasise that the degree of tolerance allowed by the court where there is departure in the words proved from the defamatory words pleaded will always be a matter of degree. I also think it desirable to avoid the language of “fatal variance” drawn from the passage in Gatley (Gatley on Libel and Slander (12th ed, 2013, Sweet & Maxwell), [32.15]). It is not helpful to draw upon this shorthand expression which has grown up in another jurisdiction in addressing the degree of tolerance allowed by the court where there is departure, in the words proved, from the defamatory words pleaded.

16. [25]

    I reject the respondent’s attempt to support the reasoning of the primary judge by reference to Mr Mrad’s alleged lost opportunity to plead and conduct various defences. In so doing I do not suggest that the Coles v Clarke test is not concerned with fairness. The principal function of a pleading is to furnish a statement of the case that is sufficiently clear to allow the other party a fair opportunity to meet it: Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70. I am in this case, however, not persuaded that the unfairness suggested by the respondent arises. As I have sought to explain, it is inappropriate to focus, as the respondent’s submissions did, on the pleaded imputations in determining whether the language proved was substantially to like effect as the language pleaded. The respondent went further and concentrated, to the exclusion of almost everything else, on imputation (a). I agree that in failing to prove that Mr Mrad referred to Mr Sadee, the applicant failed to prove imputation (a), which I have set out at [3] above. This does not mean that the language proved was not “substantially the same as that pleaded”. It remained open to the respondent at the trial, had he chosen to do so, to engage with the other pleaded imputations, including by marshalling truth defences to those imputations, if he was able to do so. His case, and only case, at trial was that he said nothing about Mr Brien at the AGM. That evidence was rejected. There is no unfairness to the respondent in the conclusion that he had used language substantially the same as that pleaded, despite the fact that the language established went further or established a broader slander than that pleaded.

17. [26]

    This conclusion is not altered by the finding of the primary judge (at [214]) that Mr Mrad went on to say that Mr Brien’s conduct misled people from whom proxies were sought by not revealing that this was a vote for the office-bearers as opposed to club affiliations. I accept that this finding was also relevant to possible defences, but none were pleaded here despite the respondent having in his possession at the trial a contemporaneous email from Mr Sadee which may have supported such defences. The respondent’s complaint is really that he made forensic choices at the trial not to proffer any defence, beyond the allegation that Mr Mrad did not say anything about Mr Brien at the AGM. The respondent thereby ran the risk of a finding that he had used language substantially the same as that pleaded. It does not avail the respondent to complain about the consequences of losing the only forensic contest in which he chose to participate.

18. [27]

    For these reasons, I would grant leave to appeal on ground 1 concerning liability.

19. [28]

    In the event leave was granted, the respondent relied upon a draft notice of contention containing two grounds. The first was that the primary judge should have concluded that Mr Mrad had not used the words “bribed”, “bribes” or “bribery” about Mr Brien. The second was that the failure to prove the use of the words “bribed”, “bribes” or “bribery” about Mr Brien constituted a substantial difference from the pleaded slander.

20. [29]

    The notice of contention may be addressed briefly. The primary judge made detailed findings about the 13 witnesses she saw give evidence, including Mr Brien and Mr Mrad. Those findings were at least, in part, credit based demeanour findings. Her Honour rejected Mr Mrad’s evidence and found that Mr Erdman, at least, heard Mr Mrad use the word “bribe”. Her Honour’s finding was not “glaringly improbable” or contrary to compelling inferences or inconsistent with contemporaneous documents: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22. There is no basis to set aside her Honour’s findings of fact about this matter.

21. [30]

    In any event, I reject the submission that even if her Honour had concluded that the words “bribed”, “bribes” or “bribery” had not been used about Mr Brien any different result would follow. To allege that discount tyre prices had been offered for proxy votes may equally be described as an allegation that bribes had been offered for proxy votes.

22. [31]

    I would dismiss the notice of contention and allow the appeal on liability.

Damages

1. [32]

   The other issue in the case, damages, does not warrant the grant of leave. The primary judge made a contingent award of $15,000 in damages to the applicant. After correctly explaining the relevant principles and relevant facts in this case, her Honour concluded that:

2. [33]

   No arguable error or error of principle was disclosed by this conclusion.

3. [34]

   Other than to observe that at best for Mr Brien any aggravated damages award would be small, this Court is not in a position to assess aggravated damages in a case such as the present which is highly dependent upon having seen and assessed the various witnesses, particularly Mr Brien and Mr Mrad. Remitting the matter to the primary judge for a further hearing about, at best, a small amount of aggravated damages is disproportionate to the amount possibly at stake: s 60 Civil Procedure Act.

4. [35]

   For these reasons leave to appeal on ground 2 should be refused. The judgment below should be set aside and in place of the primary judge’s orders judgment for Mr Brien should be entered in the sum of $15,000.

Costs

1. [36]

   The applicant is entitled to his costs of the trial and of the appeal. Senior Counsel for the applicant submitted that the rejection by Mr Mrad of an offer included in the applicant’s original concerns notice entitled the applicant to indemnity costs under s 40 of the Defamation Act. It was submitted that:

2. [37]

   Leave was granted to file an additional document setting out the course of offers made by both parties before the trial.

3. [38]

   The “defamatory publication” alleged in the concerns notice relied upon by Mr Brien is subtly different to the pleaded slander. What was alleged was that “Martin Brien only obtained the proxy vote from Endree Saade by offering him a bribe of a discount on tyres”. This formulation seems to me to be more specifically aimed at conduct engaged in obtaining Mr Saade’s proxy vote than the bare allegation of offering a bribe for his proxy vote which was ultimately pressed. The concerns notice contained the following offer framed as a “demand”:

4. [39]

   Section 40 of the Defamation Act provides:

5. [40]

   The effect of s 40 of the Defamation Act is that where a plaintiff is successful in defamation proceedings, a court must (unless the interests of justice require otherwise) order costs on an indemnity basis if, relevantly here, the defendant unreasonably failed to accept a settlement offer proposed by the plaintiff. It was not suggested that the test of a “reasonable offer” in s 40(2)(a) is other than objective.

6. [41]

   The terms of Mr Brien’s offer are set out above. It is common ground that Mr Mrad did not respond to the notice but did subsequently engage in making settlement offers. On 4 September 2019, the respondent’s solicitors contacted the solicitors for the applicant, proposing settlement in the amount of $3,800. On 5 September 2019, the solicitors for the respondent offered to compromise the matter by paying $7,000 and providing a signed apology. On 6 September 2019, the respondent’s solicitors offered to pay $8,000 and (later that same day) $11,000. A revised apology was offered. I am not satisfied that Mr Mrad unreasonably failed to make a settlement offer.

7. [42]

   In the absence of an express reference to an offer of settlement, it is not perhaps as clear as it could be that the “demand” made by Mr Brien in the concerns notice was a “settlement offer” within the meaning of s 40 of the Defamation Act. I have concluded that in context it was.

8. [43]

   I am not, however, satisfied that Mr Mrad unreasonably failed to accept the settlement offer proposed by Mr Brien in the concerns notice. If that offer had been limited to the compensation sought and had sought an identified apology which was appropriately limited in nature, I would likely have awarded Mr Brien indemnity costs of the trial. There are a number of aspects of the offer, however, about which I am not satisfied Mr Mrad acted unreasonably in rejecting, in particular clauses 1-4 of the demand. Those clauses seem to me, in the context of a concerns notice, to impose too wide and unqualified an obligation to describe their rejection as unreasonable.

9. [44]

   As to the costs of the appeal, Mr Brien’s submissions may have assumed that the costs regime in s 40 of the Defamation Act 2005 applies to an appeal. That approach is incorrect: Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2, [67]-[69]. The expression “defamation proceedings” as used in s 40 does not include an appeal.

10. [45]

    Mr Brien did not contend that there was any other basis upon which he was entitled to indemnity costs in relation to the costs of the appeal. It was not suggested that there were any special or unusual circumstances of the appeal which would justify departure from the ordinary rule.

Conclusion and orders

1. [46]

   For the foregoing reasons I propose the following orders:

   1. (1)

      Leave to appeal granted on ground 1 of the draft notice of appeal;

   2. (2)

      Leave to appeal refused on ground 2 of the draft notice of appeal;

   3. (3)

      Within 7 days the appellant to file with the Registry a notice of appeal limited to ground 1 of the draft notice of appeal;

   4. (4)

      Appeal allowed on ground 1;

   5. (5)

      Set aside the orders made by Gibson DCJ on 19 December 2019 and in lieu thereof make the following orders:

   6. (6)

      Mr Mrad to pay Mr Brien’s costs of the appeal.

2. [47]

   McCALLUM JA: I agree with Payne JA.