MURPHY v BHAGAT SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ, KIRBY P and CLARKE JA 13 December 1994, 13 December 1994 [1994] NSWCA 213 COMPANIES — securities — conduct in relation to — statements alleging possible criminality of company trustee — claim for relief under Corporations Law, s995 — refusal of interlocutory injunction on grounds analogous to defamation — whether discretion miscarried INJUNCTION — interlocutory — statements of securities — whether defamation principles incorporated DEFAMATION — conduct in relation to securities — whether principles restraining interlocutory injunctions in defamation incorporated — held: Leave refused. Question reserved. COMPANIES — securities — publication of notices — conduct likely to mislead or deceive — newsletter issued by shareholder attacking trustee — allegations include statements which arguably imply that the trustee may have earned kickbacks, secret commissions and engaged in cheating, malpractice and dishonest management — application for injunctive relief based on defamation and issue of notice published in relation to securities likely to mislead or deceive — Leslie AJ refuses to extend ex parse injunction — refers to established principles governing restraint on the issue of injunctions to prevent defamation — publisher overseas but accepted as intending to return to Australia and as having substantial assets — whether discretion to refuse injunction miscarried DEFAMATION — injunction — restraint of publication — statements in relation to securities — relief sought under Corporations Law, s1324 — whether in provision of relief the principles restraining the issue of injunctions to prevent defamation are incorporated in the provision of relief under the Corporations Law — held: (by majority): Issue reserved — case not suitable for leave to appeal. DEFAMATION — injunction — restraint of publication — statements in relation to securities — relief sought under Corporations Law, s1324 — whether in provision of relief the principles restraining the issue of injunctions to prevent defamation are incorporated in the provision of relief under the Corporations Law — held: (by majority): Issue reserved — case not suitable for leave to appeal. INJUNCTIONS — interlocutory — statements in relation to securities — whether likely to mislead or deceive — Corporations Law, s995, s999, s1324 — primary judge (Leslie AJ) refuses injunction — refers to principles restraining the grant of interlocutory injunctions in defamation — whether such principles incorporated into the provision of relief under 1324 of the Corporations Law — held (Gleeson CJ and Clarke JA; Kirby P dissenting): The case was not one appropriate for the grant of leave to appeal as no actual or possible harm or mischief of the kind to which the statute was directed had been established. Quaere (per Kirby P and Clarke JA): Whether a newsletter containing strong criticism of a company trustee is a notice within s995(2) of the Corporations Law. 2 UNREPORTED JUDGMENTS held (by maj): Leave to appeal refused. held: (1) (by the Court): No error was shown in the refusal of the injunction in respect of the claims framed in defamation; (2) (Gleeson CJ and Clarke JA; Kirby P dissenting): Leave to appeal against the refusal of the injunction in respect of securities should be denied because (i) (per Gleeson CJ): The trustee had not shown that the publication caused harm, or the possibility of harm, or mischief of the kind to which the Corporations Law was directed; (ii) (per Clarke JA) Semble: The newsletter was not a notice within s995(2)(b)(ii) of the Corporations Law and so would not sustain an injunction under s1324 of the Law. Corporations Law, s995, s999, s1324. Gleeson CJ This is an application for leave to appeal against an order made by Leslie AJ who declined to grant interlocutory injunctions sought in the summons filed by the claimant and who dissolved or declined to continue ex parse injunctions that had been previously granted by Grove J. The claimant has not filed any statement of claim, but the injunctive relief that was sought from Leslie AJ and that is also sought from this Court in the event hat leave to appeal is granted, is expressed as follows: "An order until further order that the defendants and each of them by themselves their servants or agents or otherwise be restrained from publishing or causing to be published in any form whatsoever allegations of the plaintiff to the effect that: (a) the plaintiff has dishonestly enriched himself at the expense of unit holders in the Meridian Investment Trusts ("the Trusts"), and in disregard of their interests; (b) the plaintiff's incompetence was causing the trusts to incur losses; (c) the plaintiff had been unscrupulous in his conduct as trustee of the trusts; (d) the plaintiff was receiving bribes in his office as trustee of the trusts; (e) the plaintiff had otherwise acted criminally or fraudulently in his office as trustee of the trusts; or any similar allegations." Having regard to the way in which the orders sought were framed, it is scarcely surprising that Leslie AJ regarded the matter primarily as one founded upon the law of defamation. The claimant, however, in this Court, as he did before Leslie AJ, also placed reliance upon certain provisions of the Corporations Law and the Fair Trading Act. In particular the claimant has relied upon the provisions of s995(2)(b)(ii) of the Corporations Law. That prohibits a person, in connection with any notice published in relation to securities, from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. $1324 of the Corporations Law enables the Court to grant injunctive relief at the suit of a person whose interests have been affected by conduct in contravention of the law, and the same section empowers a Court, where it is considered desirable to do so, to grant an interim injunction. This is a discretionary remedy. The claimant, insofar as his case is based upon the law of defamation, has to overcome well established, albeit flexible, principles, relating to the circumstances in which injunctive relief, as opposed to an order for damages, would be regarded as appropriate in relation to the publication of defamation. In my view no error on the part of Leslie AJ has been shown in relation to the application of principles concerning the granting of injunctive relief in relation to the publication of defamatory material. His Honour directed that the claimant should file a statement of claim and that the matter should proceed in the defamation list of the Common Law Division. URJ MURPHY v BHAGAT (Kirby P) 3 I should add that senior counsel for the claimant has disclaimed any suggestion that this is a case in which damages would be an inadequate remedy because of the nationality or lack of assets of the opponents. They are residents of Australia and, as I understand it, people of substantial means. Argument in this Court has centred largely upon the reliance the claimant seeks to place upon s995 of the Corporations Law. A difficulty which is encountered by that argument is the total absence of evidence demonstrating any harm to date, or prospective harm, or other mischief of the kind to which the Corporations Law is directed, other than harm to the reputation of Mr Murphy. I do not for a moment intend to suggest that harm to the reputation of Mr Murphy is a matter to be taken lightly, but his rights in that regard would be vindicated by defamation proceedings. There is no evidence, for example, which justifies a conclusion that the value of the securities in question has been diminished in the past or is likely to be diminished in the future by reason of the conduct of Mr Bhagat complained of. The absence of any such evidence is all the more striking when one bears in mind the facilities that would be available to bring such evidence, if it were capable of being obtained. There was, for example, no evidence filed by a stockbroker to say that in his opinion the value of the securities had been diminished or was likely to be diminished by the conduct complained of. There was no evidence of any banker or financier to say that any transaction to the benefit of the unit holders had been threatened or frustrated. If, in fact, the value of the securities had suffered or was likely to suffer by reason of the conduct of Mr Bhagat, that is something that could have been proved. If at some future time, Mr Bhagat having persisted in the line of conduct sought to be restrained in the present proceedings, it should be made to appear that he was causing loss or possible loss to unit holders or harm to the business of the trusts in question, that would put a different complexion on the matter. I do not intend in any way to suggest that this may not be a case in which, on proper evidence, reliance could be placed on the provisions of s995 of the Corporations Law. I would add that, even if evidence in that regard were obtained, there would still remain for determination an interesting question as to the relationship between the discretionary considerations affecting the grant of interlocutory injunctions in defamation matters and the grant of interim injunctions under the Corporations Law, in circumstances such as the present. However, on the present state of the evidence, there is no need to determine those interesting questions. In my view it has not been shown that the claimant has sufficient prospects of success to justify a granting of leave to appeal against Mr Acting Justice Leslie's refusal of interlocutory relief on the state of the evidence before him. In those circumstances, I would propose that the application for leave to appeal should be dismissed with costs. Kirby P Insofar as the Chief Justice has dealt with the summons for leave to appeal from Leslie AJ in respect of the claimant's request for relief concerning the alleged defamation of him by the opponents, I agree with what the Chief Justice has said. To that extent, I too would dismiss the summons. However, there is, as has been pointed out, an alternative basis upon which the matter has been argued before this Court. Indeed it was so argued before Leslie AJ. It was so foreshadowed in the summons. I refer to the claimant's reliance on the provisions in Pt7.11 ("Conduct in relation to Securities") of the Corporations Law. 4 UNREPORTED JUDGMENTS The most relevant section is s995 of the Corporations Law which says, omitting immaterial parts: "995(2) A person shall not, in or in connection with: (a)...5 (b) without limiting the generality of para(a): (i)...3 (ii) any prospectus issued, or notice published, in relation to securities; (iii)...3 (iv)...3 engage in conduct that is misleading or deceptive or is likely to mislead or deceive." If such conduct is established, or if other applicable conduct eg under s999 of the Corporations Law is established, an injunction may issue under $1324 of the Corporations Law directed at the person who is engaged, or is proposing to engage, in a contravention of the Law. The issues that are raised by the summons are, in this respect, such as would attract leave. In saying this, I would not wish necessarily to indicate concurrence in the submissions for the claimant that s995(2)(b)(ii) of the Corporations Law applies to the case in hand. There is at least a doubt in my mind that the words "notice published" in s995(2)(b)(ii) apply to a notice published by way of newsletter issued by a person such as the first opponent in the present case. However, that is a matter which I would allow to be debated before the Court in a properly developed argument, as on an appeal. Secondly, there is the issue which, as the Chief Justice has said, is a very interesting and, I would add, important question. This is whether, if the newsletter be a notice otherwise attracting relief, in the exercise of the powers to grant an injunction or interim injunction under s1324 of the Corporations Law, the principles which have been developed by the courts around the law of defamation would be imported, either in whole or in part, into this area of the law. The provisions in Pt7.11 of the Corporations Law are, in some ways, novel. They are designed to protect the sensitive securities market of this country. They contain provisions which, to some extent, intrude upon freedom of speech in our community. They do so for the reason, apparent on the face of the Corporations Law, that in some cases misleading or deceptive speech concerning securities, in a volatile market, may have an extremely damaging effect affecting the vital economic and other interests of a lot of innocent people. In the present case, Leslie AJ dealt with the whole of the application, after two days' hearing, in very brief reasons. They encompass less than a full page. So far as the claim for relief under the Corporations Law is concerned, all that his Honour said was this: "The appeal to forms of action other than defamation cannot avoid the application of received doctrine relating to the exercise of discretion to grant interlocutory injunctions in matters of defamation." It will, therefore, be seen that Leslie AJ has not addressed himself specifically, at least in terms, to the issues which were raised by the claimant before this Court based upon the Corporations Law. He simply assumed that the principles which have been developed in connection with the law of defamation were subsumed to this new body of the law. They were to be imported, without any acknowledged modification, to govern the exercise of the discretion which was invoked by the claimant under the Corporations Law. URJ MURPHY v BHAGAT (Kirby P) 5 With every respect to his Honour, I consider this step in his reasoning to have caused his exercise of discretion to miscarry. I do not believe that the consideration of an application for an injunction under s1324 of the Corporations Law imports, unmodified, all of the principles which have been developed for the exercise of the general judicial discretion to grant an interlocutory injunction to prevent publication "in a matter of defamation", as his Honour says. There is no specific reservation of that body of law under the Corporations Law. I am not convinced that the matter is as simple as Leslie AJ seems to have assumed that it was. The question is then raised as to whether, notwithstanding that his Honour's discretion may have miscarried, this Court should refrain from intervening because of the lack of satisfaction that, on the evidence presently before the Court (being the material that was before his Honour - with one exception to which I will refer), this Court would itself provide the injunction which his Honour declined to grant. It has been said many times that the Court of Appeal does not provide relief to correct the reasons of judges, but to correct their orders. Therefore, if the orders which were made by Leslie AJ were the orders which this Court would make on the same material, we would not intervene. We would decline leave to appeal. With respect to those of a different view, I consider that there is sufficient material before this Court (as there was before Leslie AJ) to invoke an arguable case for interlocutory injunctive relief under the Corporations Law. I would point to four elements: First, there is the very nature of the allegations which were made by the first opponent. Those allegations appear in a newsletter published to unit holders of the trusts, of which the claimant is the trustee. The allegations are not simply allegations which are directed to suggesting that the claimant is a person who is incompetent or negligent. They go further. They suggest that he is a person who is, or might be thought to be, dishonest. Such allegations are extremely serious. They could affect not just the claimant's personal reputation but a volatile securities market. I give illustrations from the newsletter. Two of the passages on which the claimant relies are: "There has been no denial by Grant Smith that only $7.41 million was realised for the Lexington Building and it was not sufficient to even pay his and John Murphy's combined fees of $7.5 million for one year. A valuable property which would have produced an income of $4.1 million per year was eaten up by the sharks. With excessive fees and disastrous results both Grant Smith and John Murphy are nothing better than an Eating Machine gobbling up our properties. How can we be sure that John Murphy and Grant Smith have not done quite (sic) deals and earned kickbacks and secret commissions on every property sale with the enormous powers that they wield? How else could such horrific losses have occurred after such optimistic projections. Without transparent accountability we have every right to be apprehensive as we have been cheated before and our assets have declined sharply, contrary to the expectations of substantial growth by both Grant Smith and John Murphy. Every unit holder would like to know what checks and balances were in place to ensure that no malpractice has taken place."(emphasis added) and: 6 UNREPORTED JUDGMENTS "T ask all those who have not sent in their blue forms to please do so now, to strengthen my hands to call a meeting, to reduce Global's fees from $3.5 million per year to $1.7 million, the same that would be paid to any other Manager. We want a full recovery of our losses and any wrongdoing to be exposed. To all those who have supported me, I say thank you. It is your support especially from those who are old and ill and have nowhere else to turn to, that has sustained me against all odds these past four years. I ask that you may help in convincing the others that our cause for a full recovery of our losses is just. We are being treated tyrannically by Global and John Murphy with their excessive fees, poor and perhaps dishonest management suspect due to undisclosed accountability for their losses." (emphasis added) Such allegations, on their face, by their suggestions of dishonesty, give rise to an inference that, put abroad in the public, they could affect the value of unit shares. Secondly, there was some evidence, which is confirmed in part by a graph which was placed before Leslie AJ and is before this Court, that a week after the distribution of the first newsletter, the price of the units went down. It is true that thereafter they rose. Certainly, the evidence is not complete or entirely satisfactory. However, for present purposes, which I remind myself are interlocutory only, there would appear to be sufficient evidence from which it could be inferred that the publication of the newsletter might have had an effect in a volatile securities market of the very kind that the Corporations Law was designed to prevent. Thirdly, the claimant gave evidence before Leslie AJ. Because of the fact that the matter has come before this Court with such urgency, the Court does not have the transcript of that evidence. Nor is there an agreed statement of facts. Nor have the parties been able to provide an affidavit in substitution for transcript. Builders' Licensing Board v Mahoney (1986) 5 NSWLR 96 (CA), 98. However, the Court was informed by senior counsel for the claimant that, in the course of his evidence, the claimant referred to the fact that the credit committee of the National Australia Bank Ltd had received the statements contained in the newsletter of the first opponent. I consider that, in this interlocutory proceeding and the statement not having been completed, the Court can accept that evidence to this effect was given before Leslie AJ. Of course, the fact that the credit committee of the National Australia Bank Ltd received such statements would not necessarily indicate that the members would be affected by the statements. Perhaps they would not. But it does indicate that the kind of circle or audience had been reached which the Corporations Law was directed at protecting. This is occurring in the present case. The statements of dishonesty on the part of the claimant have come into the hands of the credit committee of the National Australia Bank Ltd. Fourthly, there is the consideration that the first opponent did not himself give evidence. No affidavit on his behalf, nor other evidence, was read before Leslie AJ to support the allegations or suggestions of dishonest conduct on the part of the claimant. This may, in part be explained by the fact that it appears that the first opponent was in India at the time of the hearing of the proceedings. However, he did not seek by written testimony to justify before Leslie AJ the statements of dishonesty which he put abroad in his newsletter concerning the claimant. I certainly agree with the Chief Justice that the evidence upon which the claimant moved was less than entirely satisfactory. However, it must be acknowledged that such will often be the case in the very nature of the kind of URJ MURPHY v BHAGAT (Kirby P) 7 misleading or deceptive conduct to which Pt7.11 of the Corporations Law is addressed. It will sometimes, at least, be the case that a person seeking relief under the injunctive provisions of the Corporations Law will not be able affirmatively to prove the impact to that time of the misleading and deceptive conduct on the market. The claimant for relief will often need to move very quickly, precisely to pre-empt serious harm to the value of securities which the Law is designed to prevent. This is made plain by the terms of s1324(6) of the Corporations Law. That subsection addresses the fact that an injunction may be granted whether or not there is imminent danger of substantial damage to a person. For these reasons, I am of the view that sufficient was shown, both before Leslie AJ and in this Court, to establish the requirements that I would take to be necessary to provide interlocutory relief and hence to grant leave, an arguable case on an important point being otherwise established. Leslie AJ's discretion miscarried in the way that I have described. There is point in granting leave to appeal because of the prospect that this Court would itself provide relief at the end of the hearing of an appeal, by leave. It would provide relief in the meantime to prevent further harm. There are three further matters that I would wish to say. First, I do not regard the fact that the claimant has sued, in terms, upon allegations "of the plaintiff', as fatal to what I have just said. The summons goes on to make it clear that a breach of s995 of the Corporations Law is relied upon, albeit in terms of damages. Further or other orders are sought. Such further or other orders were sought, as is clear both from Leslie AJ's reasons and what the Court has been informed, in terms of the Corporations Law. There is no doubt that the matter under the Corporations Law was argued before Leslie AJ. The case was not advanced before his Honour or before this Court as a simple defamation case. As well, the claimant sues not merely for defamation of himself as an individual, but also as trustee. When reference is made to the allegations" of the plaintiff', I take such reference to include those allegations which are made of him as trustee. These invoke the protection which the Corporations Law is now expressed to provide. Secondly, in considering whether an injunction would be provided pending the hearing of the appeal by leave, it would be entirely appropriate to take into account the countervailing considerations in favour of freedom of expression in our community. However, as against such considerations must now be weighed, in the special area of expression which might affect the securities market, the limitations which are expressly provided for by Parliament in the Corporations Law. Thirdly, counsel for the second opponent pointed out that Mrs Bhagat, although named as the second defendant in the summons (and included as a party in the summons for leave to appeal), has not been shown herself to have taken part in the publication of the newsletter. I do not consider that she was a proper party to the proceedings, at least in this Court. I would not be minded to provide any relief against her. In my view, she should be dismissed from the proceedings. But, so far as the first opponent is concerned, I would certainly contemplate an application for injunctive relief pending the hearing of the appeal by leave, which I would now grant the claimant. As I understand that my opinion in this regard is a minority opinion, I will not trouble to explore the conditions upon which I would grant that relief or the other orders I would make. It is enough to say that I would not give the relief in the exact terms sought by the claimant. I would 8 UNREPORTED JUDGMENTS confine the relief strictly to endure to the hearing of the appeal or further orders of the Court. I would delete references to those provisions in the draft orders which the claimant sought in respect of statements reflecting on the claimant's alleged incompetence. I would certainly not interfere in that regard. I would confine the relief to those statements which could affect the securities market, being those statements which impute to the claimant dishonesty, enrichment of himself at the expense of unit holders, unscrupulous conduct as a trustee and receiving bribes. They are the very kinds of statements which could, in a volatile market and in the minds of anxious people, affect the value of unit shares in a way that the Corporations Law was designed to prevent. It is in the failure of Leslie AJ to address himself to the foregoing considerations that, with respect, I see error. His Honour simply thought that this was a defamation case. It was. But it was also a case under the Corporations Law. I would therefore favour the order that leave to appeal should be granted. I would make ancillary orders which I will not trouble to elaborate in view of the fact that mine is a minority opinion. Clarke JA I agree with what has been said by the learned Chief Justice except to the extent that I have difficulty in seeing the relevance of s995 of the Corporations Law to the present application. While I understand the way Mr Nicholas of Queen's Counsel has put the case, and I am prepared to disregard the form of the summons, as at present advised I consider that the section is concerned with documents of quite a different nature to the circulars and other documents which have been published by the first respondent. It is unnecessary, however, to pursue the matter because, even if I be wrong in this view, I would reach the same conclusion. I agree with the orders of the learned Chief Justice. GLEESON CJ: The orders of the Court will be that leave to appeal is refused. The claimant must pay the costs of the opponent. Summons dismissed with costs. Counsel for the Claimant: W H Nicholas QC/T D Blackburn Solicitor for the Claimant: Mallesons Stephen Jaques Counsel for the Opponent: C A Evatt Solicitor for the Opponent: Gunn Hamilton & Blay