Supreme Court New South Wales Medium Neutral Citation: King v Fairfax Media Publications Pty Ltd (No 3) [2015] NSWSC 1450 Hearing dates: 9 October 2014 Date of orders: 09 October 2015 Decision date: 09 October 2015 Jurisdiction: Common Law Before: McCallum J Decision: Application to have contextual imputations struck out dismissed Catchwords: DEFAMATION – defences – contextual truth – appropriate time for determining objection that contextual imputation not capable of being conveyed "in addition to" plaintiff's imputations – objections as to capacity and form Legislation Cited: Defamation Act 2005 (NSW) Civil Procedure Act 2005 (NSW) Cases Cited: Australian Broadcasting Corporation v Hodgkinson [2005] NSWCA 190 Corby v Allen & Unwin Pty Ltd [2014] NSWCA 227 Fairfax Media Publications Pty Ltd v King [2015] NSWCA 172 Hyndes v Nationwide New Pty Ltd [2011] NSWSC 633 King v Fairfax Media Publications Pty Ltd (No 2) [2014] NSWSC 1244 Rose v Allen & Unwin Pty Ltd [2015] NSWSC 991 Category: Procedural and other rulings Parties: Wallace Macarthur King (plaintiff) Fairfax Media Publications Pty Ltd (first defendant) The Age Company Pty Ltd (second defendant) Representation: Counsel: M Richardson (plaintiff) A Leopold SC with L Barnett (defendant) Solicitors: Atanaskovic Hartnell (plaintiff) Banki Haddock Fiora (defendants) File Number(s): 2013/348650 Publication restriction: None Judgment 1. HER HONOUR: This is an action for defamation arising out of the publication of a series of articles in The Australian Financial Review, The Sydney Morning Herald, The Age and The Canberra Times. The plaintiff sues on eight separate publications in those newspapers. 2. This judgment determines the plaintiff's objections to the defendants' second attempt to plead a defence of contextual truth. The original defence specified six contextual imputations. In an earlier judgment in the proceedings, I struck out each of those contextual imputations as being bad in form: see King v Fairfax Media Publications Pty Ltd (No 2) [2014] NSWSC 1244. On 22 September 2014, the defendants filed an amended defence specifying three new contextual imputations and further argument was heard. However, the defendants then sought leave to appeal against part of the decision striking out the original contextual imputations. Leave to appeal was refused on 24 June 2015: Fairfax Media Publications Pty Ltd v King [2015] NSWCA 172. Neither party sought to address the Court further following the publication of that judgment. 3. The plaintiff objects to each of the three new contextual imputations. 4. There is a measure of overlap in the content of the matters complained of and in the imputations specified by the plaintiff as arising from each. It is convenient to explain the plaintiff's objections by reference to the first matter complained of. The imputations specified as arising from that article are as follows (the numbering of the imputations is different in the pleading, since the numbering of the original imputations has been retained in an amended pleading): 1. that he committed a criminal offence under Australian law when he approved a $42 million kickback to a company in Monaco nominated by Iraqi officials, in return for Leighton International obtaining a $750 million oil pipeline contract; 2. alternatively to (a), that he approved a bribe in Iraq; 3. that he as CEO of Leighton knew that bribery, corruption and cover-ups were rife in the company's international empire and failed to prevent them; 4. that he committed criminal offences by approving the payment of multiple bribes; 5. that he, having approved the payment of $87 million in order to obtain a $700 million contract when at least half of that payment was a kickback, was the sort of man who, if later asked about the payment of the kickback, would deceitfully claim that he had not approved the payment or that he had "forgotten it"; 6. that he while CEO of Leighton received a portion of Mr Sri Kumar's 10 per cent kickbacks for deals in Iraq, India and Tanzania; 7. that he in his role as CEO of Leighton approved plans for the company to pay multimillion dollar kickbacks in Iraq, Indonesia, Malaysia and elsewhere; 8. that he in his role as CEO of Leighton regularly covered up multiple instances of bribery and corruption of foreign officials by company executives and employees; 9. that he in his role as CEO of Leighton, after being notified in 2009 by a whistleblower of criminal conduct including a systematic fraud, covered it up; 10. that he during his tenure as CEO of Leighton encouraged a culture of rewarding corruption and incompetence, and abysmal corporate governance; 11. alternatively to (j), that his performance as CEO of Leighton was so grossly incompetent that he failed to prevent Leighton executives and employees from engaging in widespread bribery, corruption and cover-ups. 1. In respect of each matter complained of, the defendants have pleaded defences of truth and contextual truth. In each case, the defence of truth is pleaded only to imputations (j) and (k) above. The defence of contextual truth, of its nature, responds to the whole of the matter complained of. 2. The first new contextual imputation is: That the plaintiff was a grossly incompetent CEO in that whilst he was CEO of Leighton he failed to prevent a serious breakdown of probity, governance and ethics. 1. The plaintiff submits that this imputation is not capable of meeting the statutory requirement that a contextual imputation be one that arises "in addition to" the imputations specified by the plaintiff, specifically the plaintiff's last imputation: That the plaintiff's performance as CEO of Leighton was so grossly incompetent that he failed to prevent Leighton executives and employees from engaging in widespread bribery, corruption and cover-ups. 1. A threshold issue is to consider the timing of the application. Mr Leopold SC, who appears with Ms Barnett for the defendants, submitted that, where an objection is taken that a contextual imputation is not capable of arising "in addition to" the imputations specified by the plaintiff, the Court should not determine that objection in advance of the trial except perhaps in an extreme case. The reason suggested for not determining such an objection at the interlocutory stage is that the assessment whether the contextual imputation arises "in addition to" the plaintiff's imputations cannot properly be made until the tribunal of fact has determined which of the plaintiff's imputations are conveyed and are defamatory. 2. Mr Leopold did not suggest that the Court should refrain from determining questions of form or capacity in respect of a contextual imputation, or the question whether a contextual imputation is incapable of meeting the requirement of s 26(b) of the Defamation Act 2005 (NSW)("the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations"). It was submitted, however, that the Court must refrain from determining the "in addition to" question until the jury has determined the question of defamatory meaning. Mr Leopold accepted that the Court might take a different approach in an exceptional case, such as where it would be perverse for the jury to find that the contextual imputation conveyed but the plaintiff's imputation not conveyed. 3. Mr Richardson, who appeared for the plaintiff on the present application, submitted that, if the Court took the absolute approach suggested by the defendants, it would effectively forfeit the ability to supervise the pleading of contextual imputations so as to prevent the raising of false issues. That is an issue of particular concern in proceedings in this list, where the cost of interlocutory steps is often at risk of being disproportionate to the interest at stake. Section 60 of the Civil Procedure Act 2005 (NSW) expressly provides that the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute. Section 57 of that Act mandates the management of proceedings having regard to, among other things, the object of the achieving the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. The practice note SC CL 4 governing proceedings in the defamation list promulgated by the Chief Justice last year underscores the importance of those objectives. 4. Mr Richardson submitted, on the strength of those considerations, that it is appropriate for the Court to undertake an evaluative judgment at an early stage whether there is any real likelihood, in the case of similar imputations, of the plaintiff's imputation being found not conveyed but the contextual imputation being found conveyed. 5. In the present case, the plaintiff's argument is, specifically, that the first contextual imputation is not capable of arising in addition to one particular imputation specified by the plaintiff. In such a case, having regard to the principles referred to by Mr Richardson, I do not think the Court should shirk from undertaking some assessment of the real likelihood of a differential result in respect of those two imputations. 6. I would accept, however, that that evaluation must be undertaken with an eye to the important principle invoked by Mr Leopold that ultimately the question whether a contextual imputation is carried in addition to a plaintiff's imputation is a question for the tribunal of fact. The Court must be astute to refrain from usurping that role at the interlocutory stage. The proper approach is to consider the individual circumstances of the case paying due regard to the important, competing considerations referred to above. 7. That is not an easy judgment to make in the present case. On the one hand, the plaintiff's application commends itself for determination at the interlocutory stage, since it is a case in which a single contextual imputation is said not to arise in addition to a single imputation specified by the plaintiff. It cannot be doubted that the imputations are very similar. Each is an attribution of gross incompetence as CEO of Leighton in failing to prevent something. The only difference in the imputations is the characterisation of that which there was a failure to prevent. 8. I accept, as submitted by Mr Richardson, that the contextual imputation is more general and less serious than the plaintiff's imputation ("a serious breakdown of probity, governance and ethics" compared with the engagement by Leighton executives and employees in "widespread bribery, corruption and cover-ups"). Each adopts words drawn, in terms, from the first column of the first matter complained of (the term "bribery, corruption and cover-ups" is drawn from paragraph 4, while paragraph 13 states "Concord [identified earlier as a private consultant firm] warned that the allegations [in Asia] indicate a serious breakdown of probity, governance and ethics within Leighton's Asian operations". The matter complained of draws no distinction between the measure of responsibility to be attributed to the plaintiff in either case; as noted by Mr Richardson, he is the primary focus of the article. In my assessment, this is a case in which it can confidently be said that a determination by a jury that the contextual imputation was carried but the plaintiff's imputation was not carried would be perverse. 9. Accordingly, it is necessary to consider whether the contextual imputation is capable of being conveyed "in addition to" the plaintiff's imputation. Noting that the question is one of capacity ("capable of being conveyed in addition to"), I have concluded, with some equivocation, that the contextual imputation in this case must be left to the jury. Mr Richardson submitted, with some force, that the attribution contained in the contextual imputation is necessarily implicit in the act identified in the plaintiff's imputation. On that basis, he submitted that the contextual imputation does pass the test of the statute, citing Hyndes v Nationwide New Pty Ltd [2011] NSWSC 633 at [34]. 10. The two imputations are, however, conveyed by different passages of the matter complained of and do entail different concepts. As emphasised by Mr Leopold in his oral submissions, the contextual imputation focuses on a passage of the matter complained of that refers to allegations of "conflict of interest, kickbacks, unethical staff appointments and so on" in Asia. 11. A consideration which, in my view, is important in the present case is the possibility that the defendants might prove both the plaintiff's imputation and the contextual imputation to be true. The law is unclear, in that circumstance, as to the proper approach to the element in s 26(b) of the Defamation Act: the competing authorities are considered in my judgment in Rose v Allen & Unwin Pty Ltd [2015] NSWSC 991. 12. One possibility is that, in that circumstance, the plaintiff's imputation proved true should be taken out of consideration in the s 26(b) exercise, in which event the defendant could have a complete defence to any other defamatory imputations by reason of the truth of the contextual imputation. 13. In all the circumstances, I have concluded that the first contextual imputation should not be struck out. 14. The second new contextual imputation (as amended in response to the plaintiff's objections) is: The plaintiff behaved unethically by accepting a grossly exorbitant termination package from Leighton Holdings despite having left the company in a state of turmoil which developed during his term as CEO. 1. It may be observed in passing that none of the imputations specified by the plaintiff addresses the issue of the termination package. The imputation is alleged to arise only from the first and third matters complained of. If capable of arising from those articles, it is plainly capable of meeting the statutory requirement that it arise "in addition to" the plaintiff's imputations. However, the plaintiff submits that the imputation is not capable of arising from those articles. 2. In my view, it is. The test as to whether an imputation is capable of being conveyed by allegedly defamatory matter is one of reasonableness. The principles are well-known and need not be rehearsed here. The test is no different or more demanding in the case of a contextual imputation (as opposed to one specified by the plaintiff). 3. The part of the article referring to the plaintiff's severance package is identical in each case. In the first matter complained of, it is paras 61-65, as follows: Bribery, corruption and cover-ups in Leighton Holdings' international empire were rife and known to top company executives and directors, according to internal company files. Those in the know included the construction giant's chief executive at the time, Wal King, and his short-term successor, David Stewart. In revelations that will be internationally embarrassing for Australia and raise questions about the role of the corporate watchdog, the files expose plans to pay alleged multimillion-dollar kickbacks in Iraq, Indonesia, Malaysia and elsewhere, along with other serious corporate misconduct. Hundreds of confidential company documents, obtained during a six-month Fairfax Media investigation, reveal a culture of rewarding corruption or incompetence, and abysmal governance in what is looming as the worst recent case of corporate corruption. 1. The article does not, in terms, describe a severance package approaching $30 million as "grossly exorbitant" but that is the clear implication by the juxtaposition of that information with the statements regarding the very serious matters that "remained hidden" at the time the plaintiff left Leighton. The attribution of unethical behaviour could plainly be inferred from the suggestion that he knew about those matters (and that they remained hidden) when he accepted his severance package. 2. Mr Richardson noted that the imputation seeks to link the severance package with the loose and vague concept of "turmoil". He submitted that is not what the article says, since it links the severance package quite specifically to the allegations of covering up of criminal conduct. 3. Mr Leopold responded by noting the broader allegations in other parts of the matter complained of, particularly at paras 5-8 of the matter complained of, as follows: It now appears Wal King, who ran Leighton as chief executive for 23 years, and his senior colleagues knew about the company's questionable methods of winning contracts in countries rife with corruption. As far back as 2009 King apparently was warned by a whistle-blower that a "pay-off" had been given in relation to the construction of a barge in Asia. A subsequent investigation under King's watch went nowhere. Had the company looked a little harder, Leighton would have uncovered serious allegations suggesting an executive from its Offshore division, Graeme Hodge, was funnelling hundreds of thousands of dollars of Leighton property into a black-market racket. Meanwhile, a Malaysian based businessman, Pakianathan Sri Kumar, had allegedly received kickbacks of 10 per cent on contracts for bringing in deals in Iraq, India and Tanzania. Instead, this all remained hidden and King left Leighton in 2011 with a severance package that approached $30 million. 1. In my view, those passages are capable of being understood in the distilled meaning that a state of turmoil developed during the time the plaintiff was CEO of the Leighton group. In this context, that term takes its meaning from the passages of the matter complained of by which it is said to be conveyed. In the decision of the Court of Appeal dealing with the earlier contextual imputations, the Court stated that the requirement of precision in the formulation of a contextual imputation is that "facts, matters and circumstances that can be relied on to establish its truth bear a reasonable relationship both to the contextual imputation itself and to the published material relied on by the plaintiff", citing Australian Broadcasting Corporation v Hodgkinson [2005] NSWCA 190 at [34]. It is sufficiently clear, in my view, that the "turmoil" referred to in the contextual imputation in the present case is the litany of governance issues referred to in the passages set out above. 2. It may be noted that the particulars of truth relied upon to support the contextual imputation do not introduce any additional matters beyond those relied upon to support the truth defence. Rather, there is a single additional allegation that payments were made to the plaintiff "at a time when the Leighton Group was in turmoil as a result of the various allegations of bribery, corruption and cover-ups particularised above". Whilst that is not the test for the requirement of precision in the formulation of a contextual imputation, it is a feature of the present defence that reinforces my conclusion that the imputation is (contextually) adequately precise. 3. Separately, Mr Richardson submitted that the phrase "behaved unethically" is imprecise. I do not agree but in any event any imprecision reflects the language of the matter complained of. The appropriate ruling is that the second contextual imputation is capable of arising. 4. The third new contextual imputation (as amended in response to the plaintiff's objections) is: The plaintiff's gross incompetence as CEO of Leighton Holdings in failing to prevent Leighton executives and employees from engaging in widespread bribery, corruption and cover-ups was such that he deserved to be investigated by ASIC as to whether he was guilty of breaches of his duties of care and diligence as a senior executive of Leighton Holdings. 1. The plaintiff submits that this imputation is incapable of arising. The thrust of the submission was that the parts of the matter complained of which refer to the prospect of any investigation by ASIC make plain that the matter warranting investigation was suspected breaches of foreign bribery laws. It was submitted that there is no suggestion that any person (and particularly the plaintiff) deserved to be investigated as to whether he was guilty of breaches of the nominated duties on the grounds of "mere incompetence". 2. I have concluded, again with some equivocation, that the imputation must be left to the jury. Reading the matter complained of as a whole, there is much force in Mr Richardson's submissions, but ultimately I think this is an issue on which reasonable minds could differ. The Court of Appeal has recently emphasised the care with which the Court should approach this issue in the case of a plaintiff's imputations: Corby v Allen & Unwin Pty Ltd [2014] NSWCA 227. As already noted, there is no warrant for taking a different approach in the case of a contextual imputation. 3. The whole tenor of the matter complained of is to raise concerns as the corporate governance of the corporate group of which the plaintiff had stewardship at the relevant time. The ordinary reasonable reader could reasonably read the matter complained of to raise the broader question as a matter for ASIC's proper investigation. 4. The appropriate ruling is that the third contextual imputation is capable of arising. ********** 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: 16 October 2015