Supreme Court New South Wales Medium Neutral Citation: Qureshi v John Fairfax Publications Pty Ltd [2012] NSWSC 1605 Hearing dates: 5 November - 14 November 2012 Decision date: 15 November 2012 Jurisdiction: Common Law Before: Rein J Decision: Documents tendered by the defendant to challenge evidence introduced by the plaintiff are admissible notwithstanding that they support an allegation of fraud that has not been particularised. Catchwords: EVIDENCE - admissibility and relevancy - pleadings and particulars in actions for defamation - purpose of tender to support an allegation of fraud rebutting evidence introduced by the plaintiff - defendant entitled to seek to undermine plaintiff's evidence without providing particulars in advance Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: Browne v Dunn (1893) 6 R 67 Piddington v Bennett & Wood Pty Ltd (1940) 63 CLR 533 Tabe v Amalgamated Television Services Pty Ltd (Supreme Court of New South Wales, Hunt J, 27 March 1987, unreported, BC8701474) Tabe v Amalgamated Television Services Pty Ltd (1987) A Def R 50-025; BC8700881 TCN Channel Nine Pty Ltd v Antoniadis (1998) 44 NSWLR 682 Category: Procedural and other rulings Parties: Zia Qadir Qureshi (Plaintiff) John Fairfax Publications Pty Ltd (Defendant) Representation: Counsel: B R McClintock SC; G R Rubagotti (Plaintiff) A Leopold SC; A T S Dawson; W Potter (Defendant) Solicitors: Landerer & Company (Plaintiff) Banki Haddock Fiora (Defendant) File Number(s): SC 2006/266893 Judgment 1These proceedings relate to the publication of two articles in the Australian Financial Review, the first on 6 May 2005 and the second on 3 December 2005 ("the AFR Articles"). The Australian Financial Review is published by the defendant, John Fairfax Publications Pty Ltd. Both articles concerned the activities of the plaintiff as sole director and sole shareholder of Business Catalyst International Pty Ltd ("BCI") in 2003 and 2004. Mr McClintock SC appears with Ms Rubagotti for the plaintiff and Mr Leopold SC with Mr Dawson and Mr Potter appear for the defendant. 2The plaintiff, Mr Zia Qadir Qureshi, by his third amended statement of claim, claims that the second article contained a number of imputations defamatory of him, including relevantly: (1)the plaintiff's dishonest actions in renaming BCI and placing it into voluntary liquidation meant that $1.525 M worth of employee participation shares were no longer available to eleven former consultants left in debt because of the employee participation scheme; (2)the plaintiff as the sole director of BCI/Chloer Pty Ltd knowingly allowed the company to continue trading until February 2005 when it had been insolvent since April 2004; and (3)the plaintiff, in February 2005, made a knowingly false declaration that Chloer Pty Ltd (formerly BCI) was solvent when in fact at that time there was a $1.3 M deficiency in shareholders' funds. 3By reason of the determination of a jury, the imputations alleged which I have set out above have, along with other imputations, been found to be conveyed and to be defamatory. 4Mr Qureshi's claim for damages include: (1)a claim for harm to his reputation; (2)a claim for hurt and damage to his feelings; (3)a claim for aggravated damages; and (4)a claim for exemplary damages in jurisdictions other than New South Wales. 5The defendant's defence to all the imputations found to arise, including the three I have mentioned, has principally three components: (1)first, the defendant claims that the substance of the matters relied on was true and in the public interest; (2)the defendant pleads contextual imputations, asserting that even if the imputations as pleaded are not true, these contextual imputations are true and that Mr Qureshi's reputation has not been materially affected by the imputations relied on by him; and (3)the defendant does not admit that the plaintiff's earning capacity has been damaged or damaged to the extent claimed and the defendant disputes that the plaintiff is entitled to aggravated or exemplary damages. 6The contextual imputations pleaded in respect of the second article by which the imputations previously detailed were conveyed are: (1)the plaintiff, as sole director of BCI, knowingly allowed the company to continue trading while insolvent in the period preceding the liquidation of the company in February 2005; and (2)the plaintiff, in February 2005, made a knowingly false declaration that Chloer Pty Ltd (formerly BCI) was solvent when in fact the company was, to his knowledge, insolvent. 7Yesterday during cross examination of Mr Qureshi, Mr Leopold sought to tender a document, namely document 202 in the plaintiff's second supplementary list of discovered documents (which I have made Exhibit 1 on this application). A copy of the document has already been admitted as Exhibit 19. Objection was taken by Mr McClintock to the tender on the basis that the purpose of the tender is to support a case of fraud or fraudulent conduct which has not been particularised and, it was submitted by Mr McClintock, should have been. Mr McClintock submitted that there are significant restrictions on the evidence which can be called to contradict what a witness has said in relation to cross examination going only to credit: see Piddington v Bennett & Wood Pty Ltd (1940) 63 CLR 533. 8The defendant agrees that it has not given any particulars of the fraudulent conduct other than what was put to Mr Qureshi in cross examination and summarised on 13 November 2012 at T544 - T551 and T555 but contends that there is no requirement for it to have done so. Mr Leopold candidly admitted the fraudulent conduct of which he now advances only became apparent to him on considering the Sinitus investment within the two weeks before the trial. He also made the point that the Sinitus issue is only one thread in a very extensive examination of the true financial position of BCI and Mr Qureshi's conduct. 9It is necessary to describe the background to this aspect of the case in some detail to understand the contentions of the parties. 10On 23 or 24 December 2004 an agreement was entered into by Mr Qureshi, Business Catalyst (Hong Kong) Ltd ("BCHK") (a company owned and controlled by Mr Qureshi) and a company owned by Swiss-based investor Sinitus Ltd or interests connected with Sinitus Ltd under the control of a Mr Urs Meisterhans, which I shall for convenience refer to as "Sinitus". By that agreement, Sinitus (and Mr Qureshi) undertook to invest $1.5 M in BCHK by taking up shares in BCHK. 11There is evidence from Mr Qureshi that Sinitus and Mr Meisterhans were represented in Australia by Ms Anne Harley, then a partner in the firm Atanaskovic Hartnell. It was with Ms Harley that Mr Qureshi principally dealt. Mr Qureshi's evidence was that Sinitus was considering investing far more than $1.5 M but that as at 19 November 2004 he was informed by an email passed on to him by Ms Harley that Sinitus was willing to invest, at that point, $1.5 M. According to an email tendered by Mr Qureshi (see Exhibit C at p 197), the willingness to invest $1.5 M was not subject to any conditions. The email at p 197 is a curious email - it has ellipses in the middle of it. Mr Qureshi's evidence about the form of the email in chief was "I think among these high fly investment bankers, you know, this is a fast tracking way of writing an email. There is no other explanation, that is self explanatory" (T133.17 - 19). The email from which p 197 has been edited is now Exhibit 5 (and see Exhibit 23 which is a comparison of p 197 and Exhibit 5). It was not produced from Mr Qureshi's discovery but was produced on subpoena by Atanaskovic Hartnell. 12The full version of the email (Exhibit 5) indicates that Sinitus' investment was dependent on funds of an equal amount being placed in BCHK by Mr Qureshi or his interests. Mr Qureshi's evidence is that he could not recall receiving Exhibit 5 (see T306.34 - 40) and that no condition for investment by him was imposed (see T315.27 - 39). 13Another email which has been truncated is an email of 19 January 2005 from Ms A Harley to Mr Asif of Habib Finance (Australia) Ltd ("Habib Finance"), with the full version being at Exhibit 21 and the shortened version in Exhibit C at p 196 (and see Exhibit 25 which is a comparison of p 196 and Exhibit 21). Again, the short version was produced on discovery by Mr Qureshi but the long version was not. 14There is evidence that Mr Qureshi arranged with Habib Finance for a loan to BCHK. According to documents produced by Habib Finance on subpoena, the loan was for one week and the security for the loan was the money to be received by BCHK from Sinitus. Mr Qureshi does not agree that that was the arrangement but he does not dispute that Habib Finance did lend BCHK $1.475 M and that the funds were paid back within four days of having been received. There is evidence from which it appears that Mr Qureshi arranged for Ms Harley to be informed that the Habib Finance funds had been placed in the BCHK account and that on that confirmation being received Ms Harley approved the transfer of funds paid by Sinitus in Habib Finance's US account to BCHK (see Exhibits 7, 8 and 11). 15The defendant, through cross examination of Mr Qureshi and tender of documents, has made it clear that it contends: (1)that Mr Qureshi knew that Sinitus required an investment of $1.5 M by Mr Qureshi or interests controlled by him as a condition of its investment of $1.5 M; (2)that Mr Qureshi arranged with Habib Finance for a short-term deposit of $1.475 M to BCHK ("the Habib funds") so that it could be demonstrated to Sinitus that the condition for its investment had been met; (3)that at a time when the Habib funds had been paid back to Habib Finance, Mr Qureshi sent Ms Harley a copy of the BCHK account statement which showed the Habib funds deposited but not the removal of the Habib funds; (4)that Ms Harley and Sinitus, acting on the representation that the condition had been met, authorised the release of the Sinitus investment funds from a Habib Finance New York account to BCHK; (5)that Mr Qureshi set out to dupe Sinitus into believing that its condition had been met; and (6)that Mr Qureshi, for the purpose of dealing with the liquidator of BCI and this case, has set about: (a)doctoring the emails to which I have referred; (b)destroying evidence that would establish that Mr Qureshi had dishonestly obtained Sinitus' investment on behalf of BCHK; and (c)creating a false paper trail. 16There is also evidence that BCHK made payment out of the Sinitus funds deposited with BCHK to creditors of BCI, including an amount of $315,000 to the ATO. The defendant asserts that the funds were desperately needed by BCI to avoid it being wound up by creditors, particularly the ATO. 17The document which is sought to be tendered, being the plaintiff's discovered version of Exhibit 19, will, in the contention of the defendant, be one of the planks of evidence which will make good at least proposition [15](6) above, and possibly others. 18Mr Qureshi strongly denies any wrongdoing and contests each of the defendant's factual contentions. The issue of admissibility as now articulated (see T330 - T331 where objection was made on the grounds of relevance to Exhibit 8, another document in connection with Sinitus) goes well beyond the particular document sought now to be tendered but relates to all of the documents and cross examination on which the defendant relies in connection with the Sinitus investment, except insofar as the cross examination is directed to credit. Mr McClintock accepts that the plaintiff can be cross examined on credit, see TCN Channel Nine Pty Ltd v Antoniadis (1998) 44 NSWLR 682, but he relies on that case to support the proposition that in the absence of a defence of truth in which particularised allegations of fraud are relied on, documents and cross examination beyond credit cannot be relied on. Mr McClintock submits that if the defendant contends that the Sinitus funds cannot be relied on by the plaintiff because they were obtained fraudulently, then the defendant ought to have particularised that fraud and that its failure to do so precludes it being able to now seek to make out such a case. 19Mr McClintock draws attention to particularly r 15.3 of the Uniform Civil Procedure Rules 2005, which is in the following terms: 15.3 Allegations of behaviour in the nature of fraud (cf SCR Part 16, rule 2; DCR Part 9, rule 20) A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies. 20He also referred to r 14.32 and r 15.4, which I set out below: 15.4 Allegations as to condition of mind (cf SCR Part 16, rule 3; DCR Part 9, rule 21) (1) A pleading that alleges any condition of mind must give particulars of the facts on which the party pleading relies. (2) In subrule (1), condition of mind includes any disorder or disability of mind, any malice and any fraudulent intention, but does not include knowledge. 14.32 Defence of justification generally (cf SCR Part 67, rule 14; DCR Part 49, rule 13) (1) Defence under Defamation Act 1974 Subject to rule 14.31 (2), a defence under section 15 (2) of the Defamation Act 1974 is sufficiently pleaded if it alleges: (a) that the imputation in question was a matter of substantial truth, and (b) either: (i) that the imputation in question related to a matter of public interest, or (ii) that the imputation in question was published under qualified privilege. Note. The defence of justification under section 15 (2) of the Defamation Act 1974 applies to the exclusion of the common law defence of justification. See section 15 (1) of the Defamation Act 1974. (2) Defences under Defamation Act 2005 and at common law Subject to rule 14.31 (2), a defence of justification under section 25 of the Defamation Act 2005 or at common law is sufficiently pleaded if it alleges that the imputation in question was substantially true. Note. The defence of justification under section 25 of the Defamation Act 2005 is in addition to, and does not vitiate, limit or abrogate, the common law defence of justification. See section 24 (1) of the Defamation Act 2005. 21Mr Leopold explained the relevance of the Sinitus matter (in addition to credit) as follows: (a)The plaintiff's expert report, prepared by Mr Mark Guest and dated 3 August 2010, makes reference to Sinitus' investment at several points, pars 60(d), 68, and 70 relying on it to support that expert view that BCI was solvent. The defendant seeks to rebut reliance on the Sinitus investment by seeking to demonstrate that the investment was obtained by fraud. Mr Qureshi gave evidence in chief about the Sinitus investment: see T131 - T137. I will have the pages extracted from Mr Guest's report marked as Exhibit 2 on this application. (b)Mr Qureshi claims that his earning capacity has been badly damaged as a result of the AFR Articles. Mr Qureshi claims that BCI had been working on a major Chinese investment program with TransGrid and that the Sinitus investment was to provide the requisite capital to progress the venture. The defendant submits that the circumstances in which the capital came to be injected in BCHK are relevant in determining how likely it is that BCHK and or Mr Qureshi would have earnt the money that Mr Qureshi claims would have been earnt. (c)That in determining BCI's ability to meet its tax debt to the ATO (and other debts), it is relevant, in assessing Mr Qureshi's resistance to the proposition that BCI was unable to meet those debts, to take into account the fact that the only means by which he was able to stave off action by the ATO was to obtain funds from Sinitus in what the defendant claims was a dishonest manner. 22Mr Leopold submits that it is the plaintiff who has introduced the Sinitus investment into the case. It was not asserted by the defendant that BCI owed a debt to Sinitus and that that is why BCI was insolvent and hence it was not a matter which the defendant was required to plead. The defendant has complied with the requirements of r 14.32 and there is no suggestion r 15.4 is relevant. It is the plaintiff whose expert draws attention to the Sinitus investment and it is the plaintiff who claims that there were billions of dollars to be made out of the China venture promoted by BCI (originally) and TransGrid and to be taken up by BCHK or Business Catalyst Asia Pacific ("BCAP") (BCHK's subsidiary). Mr Leopold points out that if it is the plaintiff's case that BCI was solvent, as demonstrated in some fashion by the money obtained from Sinitus, then the defendant must be able to cross examine the plaintiff on this and advance a case to rebut it without limitation. 23Mr McClintock claims that his client is severely prejudiced by the defendant's claims because he had no notice that it was going to be suggested that the Sinitus funds were procured by fraud - he says that he and his solicitors are having difficulty tracking down Ms Harley, that there has already been evidence that some of the files of Atanaskovic Hartnell opened in respect of Mr Qureshi have been seized by the Australian Federal Police, apparently in connection with some wider investigation not involving Mr Qureshi. Mr McClintock drew attention to an email chain between Atanaskovic Hartnell and Mr Meisterhans (which I will have marked as Exhibit A on this application), which he said indicated support for the proposition that Mr Meisterhans had admitted that Mr Qureshi was free to use the funds deposited for the purposes of BCI. 24There can be no doubt that if a plaintiff pleads a case of fraud or misrepresentation he must give particulars of the alleged fraud. The defendant does not plead a case of fraud as part of its defence - it pleads that the imputations and the contextual imputations were true. The defendant has to establish, inter alia, that BCI was insolvent and that Mr Qureshi knowingly signed a false declaration of insolvency - both matters that have been pleaded and in respect of which the defendant has given detailed particulars in its defence to the third amended statement of claim. 25Where a plaintiff claims to have been injured in an accident and to have suffered a very significant impairment of his earning capacity in his action against the alleged tortfeasor and the defendant cross examines the plaintiff to the effect that the accident did not occur, that the plaintiff's version of its occurrence is a fabrication, that the plaintiff's claims as to his past earnings and his claims as to his future earnings but for the accident are all bogus, the defendant is not required to plead any of these matters before being permitted to advance them. Mr McClintock accepted that the defendant in such a situation as that posited does not need to plead or particularise fraud. He submitted that the present case was quite different to that because in the posited example the defendant is not making an allegation, he is simply seeking to disprove the plaintiff's case. Mr Leopold submitted that the present situation is akin to the personal injury example. 26I think that there may be a distinction between a defendant claiming that the plaintiff's claim is bogus and claiming that money which the plaintiff has received from a third party has been obtained fraudulently but the two may coalesce, for example where a plaintiff claims that his earnings prior to the accident were $10,000 a week and the defendant asserts that those earnings were derived to a significant extent by fraud. 27The critical issue here, as I see it, is how the Sinitus investment issue has arisen. The defendant asserted that the declaration of insolvency made by Mr Qureshi was false and that BCI was trading whilst insolvent. It does not rely on the Sinitus investment in support of that case but points to various debts of BCI and its financial difficulties, including its inability to meet its tax obligations. The plaintiff, from the expert report, seeks to rebut any suggestion of insolvency by relying on the injection of funds into BCHK by Sinitus (see MFI 1). The defendant, as I understand its position, disputes that the injection of funds in BCHK by Sinitus is relevant but contends that if it is relevant the fact that it was obtained fraudulently from Sinitus nullifies its impact. 28That the plaintiff would be relying on the Sinitus investment does not come from any pleading by the plaintiff in reply or otherwise, it comes from the service of a report by Mr Mark Guest, an accountant, which the plaintiff relies on as its expert, and from the plaintiff's own evidence in chief, including the investor agreement between Mr Qureshi, BCHK and Sinitus: see Exhibit C at pp 181 - 191. 29I should note in this context that this is a case in which neither party sought orders for the service of affidavits or statements in advance of the hearing, nor even orders for bundles of documents. There have been 31 boxes of documents subpoenaed from third parties. Included in that subpoenaed material is material such as the complete version of documents which have been redacted by someone (the defendant asserts by the plaintiff and the plaintiff denies this). 30In short, it is the plaintiff who has, by serving an expert report referring to the Sinitus funds, introduced the Sinitus funds as a matter on which he relies to rebut the defendant's case on insolvency and in my view the defendant is entitled to seek to undermine the evidence led by the plaintiff and to do so in the manner which it has foreshadowed without having to provide in advance particulars of its challenge to the plaintiff's evidence. The parties are clearly in issue on whether or not BCI was solvent in the year before it was placed in voluntary liquidation and the Sinitus issue has been made relevant to that issue by the plaintiff. 31Mr McClintock says that the evidence about Sinitus was led in chief to deal with the defendant's contention that Mr Qureshi put BCI into voluntary liquidation in February 2005 to avoid having to pay out claims to employees having units in a share participation scheme. The plaintiff denies that and asserts that placing BCI into liquidation was part of a restructure called for by reason of Sinitus' insistence on a new company being utilised - that again makes the Sinitus investment a matter relied on by the plaintiff. Exhibit 2, however, is not likely to be limited to the question of the restructure. 32Thirdly, Mr Qureshi's claim on damages for loss of earning capacity asserts that Mr Qureshi would derive a benefit from the huge earnings which he claims would be generated by the China venture and his evidence in relation to the China venture includes his evidence of the investment of funds by Sinitus. Once again, the defendant is entitled to challenge this evidence by asserting and proving, if it can, that the funds were fraudulently obtained without having to provide in advance particulars of its challenge to the plaintiff's evidence. 33In relation to the further basis of relevance identified in [21](c) above, if the evidence about Sinitus had not been led in chief by the plaintiff and not been relied on by Mr Guest, determining whether it could be relied on by the defendant on a ground other than credit would be more difficult to resolve but it is closely related to the first point and in any event since, in my view, the defendant is entitled to seek to undermine the evidence led by the plaintiff on Sinitus on other grounds, it is not necessary to consider this point separately. 34I note also in passing that it has been held that a defendant is not required to provide particulars of his intention to lead evidence of the truth of imputations in order to mitigate damages where a claim for aggravated damages has been made: see Tabe v Amalgamated Television Services Pty Ltd (Supreme Court of New South Wales, Hunt J, 27 March 1987, unreported, BC8701474), affirmed on appeal in Tabe v Amalgamated Television Services Pty Ltd (1987) A Def R 50-025; BC8700881 per Samuels and Mahoney JJA and McLelland AJA. 35Mr Leopold has squarely put the propositions which he is presently intending to submit (T544 - T553) and it is appropriate, having regard to the rule in Browne v Dunn (1893) 6 R 67, that he has done so. No objection was taken to those questions and I think rightly so. 36Mr McClintock asserts that the situation in which the plaintiff finds himself is one of considerable prejudice because now the plaintiff's legal advisers are investigating matters at a very late stage and may have difficulty locating Ms Harley or Mr Meisterhans. 37The existence of the full versions in subpoenaed material was available to both parties and the failure of Mr Qureshi or his legal advisers to examine the contents of those subpoenaed documents and deal with the consequences of the existence of those documents and the failure of Mr Qureshi or those advising him to seek orders for an agreed bundle of documents so that each party would know what documents were relied on by the defendant are not matters which can be laid at the door of the defendant. 38I recognise how significant it must be to Mr Qureshi to be confronted with a claim that his investment in Sinitus involved fraud and or misrepresentation on his part but the defendant is entitled to challenge any evidence put forward by the plaintiff in support of his claims in the case and is not required to provide the plaintiff with advance notice of the basis of its challenge. I am, however, inclined to the view that as soon as Mr Leopold has concluded his cross examination on the Sinitus funds point, Mr Qureshi should be permitted to speak to his counsel should they seek the opportunity, to enable them to obtain instructions from him relevant to the allegations made against him in cross examination and summarised at T544 - T553 in relation to the Sinitus investment. Mr Leopold has indicated that he expects to be another six days with Mr Qureshi and I am inclined to think that the opportunity of obtaining instructions should not be delayed until re-examination. I will, however, hear counsel on this point. Conclusion 39It follows, in my view, that the defendant is entitled to tender document 202 in the plaintiff's second list of documents. ********** 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. Decision last updated: 21 December 2012