New South Wales Supreme Court CITATION : Smith v Bhagat & Anor [1999] NSWSC 70 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 20929 of 1994 HEARING DATE(S) : 17/02/97: 06/02/98: 20/02/98 JUDGMENT DATE : 17 February 1999 GRANT SMITH (Plaintiff) v PARTIES : HARI BHAGAT (First Defendant) PAMELA BHAGAT (Second Defendant) JUDGMENT OF : Levine J Mr D Casperson (Plaintiff) COUNSEL : Mr C Evatt Ms J Gibson Mr M Rollinson (Defendants) SOLICITORS : Cowley Hearne (Plaintiff) CATCHWORDS : Particulars of comment & qualified privilege; Justification; Contextual Imputations; Capacity; Form ACTS CITED : Defamation Act 1974 (as amended) DECISION : See paragraph 29 - 13 - DLJ : 2 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST No. 20929 of 1994 JUSTICE DAVID LEVINE WEDNESDAY 17 FEBRUARY 1999 GRANT SMITH (Plaintiff) v HARI BHAGAT (First Defendant) PAMELA BHAGAT (Second Plaintiff) JUDGMENT (Particulars of comment & qualified privilege - justification - contextual imputations - capacity & form) 1 This matter which is not unconnected with matter numbers 16709/91, 20701/94 and 20930/94 has been the subject of the following rulings and judgments: Dowd J 27 November 1995; Levine J 30 November 1995; and, Studdert J 5 June 1996. 2 The plaintiff filed his Statement of Claim on 29 November 1994 and sues on three publications. 3 The first publication (1 October 1994) is said to convey of the plaintiff the following imputations: "3(a) the plaintiff has behaved dishonestly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by falsely attributing to the first defendant responsibility for the Manager's poor performance; (b) the plaintiff has behaved incompetently in his capacity as an officer of the Manager of the Estate Mortgage Trusts; (c) the plaintiff has behaved improperly as an officer of the Manager of the Estate Mortgage Trusts by charging exorbitant fees for Managerial services; (d) the plaintiff has behaved dishonestly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by publishing a press release on 27 June 1994 which he knew to be false; (e) the plaintiff as an officer of the Manager of the Estate Mortgage Trusts has knowingly participated in a breach of duty by the Manager by selling a number of properties to Mercantile Mutual at a gross undervalue solely for the purpose of safeguarding the interests of the Manager; (f) the plaintiff has acted fraudulently in his capacity as an officer of the Manager of the Estate Mortgage Trusts by publishing a statement on page 27 of the November 1991 Report which he knew to be false; (g) the plaintiff has acted dishonestly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by authorising the payment of excessive fees to Mr John Murphy out of trust funds while knowing such fees were unjustifiable; (h) the plaintiff is dishonest; (i) the plaintiff is a person of extremely low intelligence; (j) the plaintiff knowingly told a deliberate falsehood in relation to statements made by the first defendant in the letter of 20 June 1994; (k) the plaintiff is untrustworthy; (l) the plaintiff is reasonably suspected of receiving secret commissions in respect of the sale of Estate Mortgage Trust properties; (m) the plaintiff is reasonably suspected of having engaged in malpractice in his capacity as an officer of the Manager of the Estate Mortgage Trusts; (n) the plaintiff is reasonably suspected of acting contrary to his duties as an officer of the manager of the Estate Mortgage Trusts by appointing a manager in return for personal benefits". 4 The second publication of the plaintiff was on 2 October 1994 and it is said to convey the following imputations: "5(a) the plaintiff has behaved improperly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by breaking a promise he made to unitholders in 1994; (b) the plaintiff has behaved improperly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by charging exorbitant fees from the unitholders; (c) the plaintiff has behaved improperly in his capacity as an officer of the Manager of the Estate Mortgage Trusts by publishing a booklet in which he attempted to deceive unitholders". 5 The third publication on 22 October 1994 is said to covey the following imputations: "9 (sic) (a) the plaintiff is reasonably suspected of malfeasance as an officer of the Manager of the Estate Mortgage Trusts in that he was knowingly involved in entry by the Manager into joint venture deals which were of personal benefit to the plaintiff and contrary to the interests of the unitholders; (b) the plaintiff has fraudulently misappropriated one million dollars of the funds of the Estate Mortgage Trusts while acting as an officer of the Manager of those trusts". 6 The defendants have raised defences of comment, privilege, justification under s 15 and contextual justification under s 16 of the Defamation Act, 1974. 7 In response to the plaintiff's pleading of 14 imputations arising from the matter complained of, the defendants plead in paragraph 11 of the Defence an immodest 32 contextual imputations. 8 In answer to the three imputations pleaded by the plaintiff in respect of the second matter complained of the defendants pleads 13 contextual imputations. 9 In answer to the two imputations pleaded as arising from the third publications sued upon, the defendants plead four contextual imputations. 10 Appearances are deceptive; the position is not as bad as it looks because it was conceded by Mr Evatt for the defendants that the following contextual imputations are abandoned: 11(a) (i) - (xv) (inclusive); 12(a)(i) - (iii); and, 13(a)(i). 11 Thus, in relation to the defence of contextual truth to the first publication the defendants rely upon the following contextual imputations: "11(a) … (xvi) The plaintiff is dishonest because he endeavoured to shift the blame for Global's poor performance on to the first defendant. (xvii) The plaintiff is grossly incompetent because he estimated a profit for Global of $61.6 million when its actual profit was $2.41 million in 1994. (xviii) The plaintiff conducted himself in such manner that he duped John Murphy. (xix) The plaintiff is incompetent because while Managing Director of Global its assets decreased from $2666.6 million to $168.4 million. (xx) The plaintiff's fees were excessive. (xxi) The plaintiff conducted himself in such manner as to warrant an allegation that he proposed to acquiesce in an unsatisfactory settlement with Burns Philp. (xxii) The plaintiff conducted himself in such manner as to warrant the request for an independent inquiry to investigate Global's relationship with Mercantile Mutual. (xxiii) The plaintiff conducted himself in such manner as to warrant the request for an independent inquiry into Global's debacle in respect of its diminished assets. (xxiv) The plaintiff was so incompetent that he sold properties to Mercantile Mutual worth several times more than the amount paid. (xxv) The plaintiff deceived unit holders by failing to reveal that his justification of excessive fees of $4 million a year was based on a false comparison to similar fees charged by Estate Mortgage Managers because he did not disclose that these Managers managed assets of over one billion dollars whereas the plaintiff managed assets a fraction of this sum. (xxvi) The plaintiff improperly acts against the best interest of unit holders. (xxvii) The plaintiff conducted himself in such manner he warranted being rebuked by the NSW Health Minister over statements in the prospectus issued by Global. (xxviii) The plaintiff connived at John Murphy being paid excessive fees. (xxix) The plaintiff is incompetent. (xxx) The plaintiff sold properties at a loss to finance his excessive fees. (xxxi) The plaintiff unjustifiably opposes the proposals made by or on behalf of the first defendant as set out in annexure 'A'. (xxxii) The plaintiff has acted unreasonably in opposing the first defendant's proposals as set out in annexure 'A'". 12 In relation to the second matter complained of, the defendants rely upon the following contextual imputations: "12(a) … (iv) The plaintiff had improperly attempted to stop any move to reduce Global's excessive fees. (v) The plaintiff is dishonest. (vi) The plaintiff is incompetent. (vii) The plaintiff improperly collects more than double what would be paid to any other comparable Manager or Trustee. (viii) The plaintiff together with John Murphy sells the property of unit holders in order to pay for their excessive fees. (ix) The plaintiff is a hypocrite. (x) The plaintiff attempted to deceive unit holders by covering up a trading loss. (xi) The plaintiff is so incompetent that the profit of $2.14 million set out in the annual report of 1994 which he prepared is actually a trading loss of $2.782 million. (xii) The plaintiff unjustifiably opposes the proposals made by or on behalf of the first defendant as set out in annexure 'B'. (xiii) The plaintiff has acted unreasonably in opposing the first defendant's proposals as set out in annexure 'B'". 13 In relation to third matter complained of, the defendants rely upon the following contextual imputations: "13(a) … (ii) The plaintiff deliberately used an accounting system designed to deceive unit holders. (iii) The plaintiff is incompetent. (iv) The plaintiff is dishonest". 14 In my judgments in Tyndall Funds Management Australia Limited (formerly Global Funds Management Australia Limited) & Anor v Hari Bhagat & Anor (20930/94); Tyndall Funds Management Australia Limited (formerly Global Funds Management Australia Limited) & Anor v Pamela Ann Mesh & 2 Ors (20701/94); and Tyndall Funds Management (NSW) Limited (formerly Global Funds Management (NSW) Limited) & Anor v Pamela Ann Mesh & Anor (16709/91) I have dealt with the uniform complaints made by the plaintiffs in relation to the deficiency of particulars of comment and qualified privilege. I will not rehearse them. I will order the defendants to provide full and proper particulars in answer to requests 1, 2, 3, 4, 5, 6, 7, 8 and 9 of the plaintiff's solicitors letter of 7 November 1996. 15 In respect of the particulars provided in support of the pleas of justification (and irrespective of the outcome of the plaintiff's application in relation to contextual imputation) the defendant is required to give particulars of the facts, matters and circumstances upon which they rely in support of the truth of each imputation. The imputations should be dealt with separately in this regard though it may be indicated in relation to any given imputation to be justified that the same particulars as are provided in relation to another imputation are relied upon. In other words, the defendants are obliged to allocate to each imputation justified whether it be the plaintiff's imputation or a contextual imputation the relevant facts, matters and circumstances that are going to be proved by evidence. The global approach, of which the plaintiff complains, is not appropriate. 16 Accordingly, the defendants are to provide proper particulars in answer to requests numbered 13 - 30 (inclusive) of the plaintiff's solicitors letter of 7 November 1996. 17 Complaint is made in relation to paragraph 6 of the Defence which purports to refer to other documents which are said to explain or qualify and add to the letter complained of. I dealt with this matter in my judgment in matter number 16709/91 and for the reasons therein stated I will strike out paragraph 6 of the Defence. 18 In these proceedings Mr Caspersonn for the plaintiff raised issues in relation to the cross-claim in matter number 20701/94. I make no order in these proceedings as I have dealt with the cross-claim in my judgment in that matter. 19 With respect to the matters raised in mitigation of damages at pages 10 and 11 of the Defence, for the reasons stated in the other judgments in this litigation I strike out particulars (v), (vi) and (vii). The observations I have made elsewhere in relation to these matters apply here as well. 20 I return to the pleas of contextual justification. It is submitted generally for the plaintiff that the remaining contextual imputations are imprecise, failing to specify what "nefarious' act the plaintiff did. They contain a wide suggestion of a great variety of conduct and each constitutes what is described as a package of words that mean nothing concrete. 21 They contain concepts that are nebulous, examples being 11(a)(xviii), (xxi), (xxii), (xxiii) and (xxvii). Secondly, they are rhetorical, examples being 11(a)(xiv) and 12(a)(xi). Thirdly, the argumentative style imputations linking back into the matter complained of are defective in form, namely contextual imputations 11(a)(xxxi) and (xxxii), 12(a)(xii) and (xiii). Fourthly, the contextual imputations suffer from the Drummoyne imprecision vice specifically contextual imputations 11(a)(xx) and (xix); 12(a)(v), (vi) and (ix); and, 13(a)(iii) and (iv). Further, contextual imputations contain additional argumentative material incorporating complex fund management fees considerations, for example, 11(a)(xxv) and 12(a)(vii). The use of such an expression as "the plaintiff connived at" in 11(a)(xxviii) exposes a flaw. 22 In the course of submissions reference was made to standard authorities in relation to contextual imputations, particularly Waterhouse v Hickey (1995) Aust. Tort Rep 81-347 per Priestley JA at 62,494; NRMA Insurance Limited v Amalgamated Television Services Pty (Hunt J, unreported, 14 July 1989); Marsden v Amalgamated Television Services Pty Limited (Levine J, unreported, 30 November 1995). Bearing in mind the principles and the bases of objection one could easily and in despair perhaps, simply strike out the whole of the defences in each case. Consideration of the contextual imputations remaining however, does not in the end justify such a course. 23 I strike out the following remaining contextual imputations: 11(a)(xviii), (xxi), (xxii), (xxiii), (xxvi) - (xxxii) (inclusive). 24 With respect to the contextual imputations pleaded in answer to the second matter complained of I will strike out contextual imputations 12(a)(iv), (v), (vi), (vii), (ix), (xii) and (xiii). 25 With respect to the contextual imputations remaining in answer to the third matter complained of this is a very short document and one must be wary of the application with too much facility of what is known as the Drummoyne principle. However, the contextual imputation 13(a)(iv) "the plaintiff is dishonest" will be struck out because the matter complained of does contain material that would amplify that notion. However, the amplification by reference to the material in the matter complained of would lead to the position, I am satisfied, that a contextual imputation simply will not differ in substance from that pleaded by the plaintiff. In the end, accordingly, I strike out contextual imputations 13(a)(ii), (iii) and (iv). 26 As Mr Caspersonn submitted the defence of truth pursuant to s 15 is the appropriate defence when the contextual imputations sought to be relied upon do not differ in substance from those pleaded by the plaintiff. 27 In the exercise of any leave granted to replead defences under s 16 the defendants should give careful consideration to not only the formalities but also to the realities. 28 The plaintiff has overwhelmingly succeed and is entitled to the appropriate order for costs. 29 The formal orders are: 1. The defendants are to provide proper further and better particulars of the defence of comment and qualified privilege in response to the plaintiff's solicitors letter of 7 November 1996 within 28 days. 2. The defendants are to be provide, in accordance with reason reasons, proper particulars of the facts, matters and circumstances upon which reliance will be placed in support of the defences of justification in answer to the plaintiff's solicitors letter of 7 November 1996. 3. Paragraph 6 of the defence is struck out. 4. Particulars (v), (vi) and (vii) of the particulars of Mitigation of Damages are struck out. 5. The defendants are to provide proper further and better particulars of particular (viii) of Mitigation of Damages, within 28 days. 6. Contextual imputations 11(a)(xviii), (xxii), (xxiii) and (xvi) to (xxxii) inclusive are struck out. 7. Contextual imputations 12(a)(iv), (v), (vi), (vii), (ix), (xii) and (xiii) are struck out. 8. Contextual imputations 13(a)(ii), (iii) and (iv) are struck out. 9. The defendants have leave to file an Amended Defence within 28 days. 10. The defendants are to pay the plaintiff's costs. 11. At the expiry of 28 days, liberty to restore to the Defamation List on 3 days notice. Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.