Supreme Court New South Wales Medium Neutral Citation: Schlaepfer v Australian Securities and Investment Commission [2017] NSWSC 1656 Hearing dates: 11 October 2017 Decision date: 11 October 2017 Jurisdiction: Common Law Before: McCallum J Decision: Defendants' objections to the statement of claim rejected; defendants to pay the plaintiff's costs of the application Catchwords: DEFAMATION – publication – whether adequately pleaded – conversation noted in an email – plaintiff pleading cause of action in respect of conversation based on content of email DEFAMATION – imputations – whether adequately precise Legislation Cited: Defamation Act 2005 (NSW), s 9 Uniform Civil Procedure Rules 2005 (NSW), r 14.28 Cases Cited: Australian Securities and Investments Commission v Schlaepfer [2017] NSWCA 247 Dank v Cronulla Sutherland District Rugby League Football Club [2013] NSWSC 1101 Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSW CA 288 Drummoyne Municipal Council v Australian Broadcasting Council (1990) 21 NSWLR 135 Fairfax Media Publications Pty Ltd v Pedavoli (2015) 91 NSWLR 485; [2015] NSWCA 237 Schlaepfer v Australian Securities and Investments Commission [2017] NSWSC 47 Category: Procedural and other rulings Parties: Daniel Schlaepfer (first plaintiff) Select Vantage Inc (second plaintiff) Merlito Securities Co Ltd (third plaintiff) Australian Securities and Investment Commission (first defendant) Greg Yanco (second defendant) Representation: Counsel: M Richardson (plaintiff) J Hmelnitsky SC, M Lewis (defendants) Solicitors: Mark O'Brien Legal (plaintiffs) Ashurst Australia (defendants) File Number(s): 2016/302827 Publication restriction: None Judgment 1. HER HONOUR: This is an action for defamation and injurious falsehood commenced by statement of claim filed a year ago today. The progress of the proceedings has been delayed by a contested application by the first plaintiff to obtain an extension of the limitation period for the cause of action in defamation and the defendants' subsequent decision to appeal against the decision of Garling J granting that extension (see Schlaepfer v Australian Securities and Investments Commission [2017] NSWSC 47 and Australian Securities and Investments Commission v Schlaepfer [2017] NSWCA 247). 2. Accordingly, the proceedings come before the Court today for the first listing: see Practice Note SC CL 4, cl 13. The defendants raise a number of objections to the form of the statement of claim. This judgment determines those objections. 3. There are three plaintiffs in the proceedings. The first plaintiff is Mr Schlaepfer. He sues for defamation. The second and third plaintiffs are companies with which he has some association. They have no cause of action for defamation, not being excluded corporations within the meaning of s 9 of the Defamation Act 2005 (NSW). They sue for injurious falsehood. 4. The first defendant is the Australian Securities and Investments Commission (ASIC). The second defendant is Mr Yanco, ASIC's head of market supervision. The claims arise out of statements allegedly made by Mr Yanco to Mr Andrew Couper, a senior executive at Credit Suisse. The same statements are alleged to have been made by Mr Yanco to at least two other persons in separate telephone calls. 5. In order to explain the way in which the case has been pleaded it is necessary to explain the manner in which the first plaintiff became aware of the matter complained of. Some of the relevant background is recorded in the decision of Garling J. In short, in June 2016 the first plaintiff was forwarded an email dated 21 November 2014 written by Mr Couper to several officers within Credit Suisse. The email appears, on its face, to provide a contemporaneous record of the telephone conversation between Mr Yanco and Mr Couper on which Mr Schlaepfer seeks to sue. It is on the strength of the contents of Mr Couper's email that Mr Schlaepfer has pleaded his claim. 6. It is appropriate in the circumstances to set out Mr Couper's email in full: Just took a call from Greg Yanco (ASIC head of market supervision) – Note – this does not involve any actions by CS. ASIC have concerns about a particular Entity who is layering the market ASIC is aware that the Entity has been closed down at two brokers because of their behaviour ASIC is aware this entity would be quite a payer to brokers (fees) This would be a DMA ASIC was NOT able to advise the name of the Entity but were able to advise they are related to Swift Trade, Select Vantage and Merlito. Peter Beck (or Becj) is associated with Swift Trade ASIC needs us to be aware of their concerns. Can you please check if we have any clients with associations with the above entities and be aware of new clients and apply heightened diligence. Interesting call on a Friday afternoon. 1. Mr Schlaepfer subsequently obtained, on a Freedom of Information application, a copy of an email sent by Mr Yanco, evidently internally within ASIC, later on the same day headed "Merlito update" which tends to confirm that he did indeed speak to Mr Couper and others that day. That email states: I've let Citi, [redacted] and Credit Suisse that [sic] a client of another broker had been turned off for layering behaviour that ASIC was concerned about – suspected manipulation. I also noted it was similar to trading by Swift Trade and Select Vantage that other regulators were concerned about. 1. As revealed by the terms of that email, it appears Mr Yanco called Mr Couper and two other persons, neither of whom is named in the document available to the plaintiff. The matter complained of is pleaded in the following terms: ASIC has concerns that a particular entity is layering the market; ASIC is aware that the Entity has been closed down at two brokers because of their behaviour; ASIC is aware that the Entity would be quite a payer to brokers; This would be a Direct Market Access; ASIC not able to advise the name of the Entity but it is able to advise they are related to Swift Trade, Select Vantage and Merlito. Peter Beck is associated with Swift Trade; ASIC wants you to be aware of our concerns. 1. The pleading of the claim proceeds on the assumption that the three conversations Mr Yanco allegedly had that afternoon were in substantially the same terms on his part. 2. The defendant's first objection to the pleading is that the pleading of the element of publication is bad in form and is liable to be struck out, presumably under r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW). Mr Hmelnitsky of Senior Counsel, who appears with Mr Lewis for the defendants, relied on my decision in Dank v Cronulla Sutherland District Rugby League Football Club [2013] NSWSC 1101 in which I struck out the pleading of an alleged oral publication in circumstances not dissimilar to the present. In that judgment I said at [25]: In my view, the pleading of the oral publication in its present form is embarrassing because it does not provide the whole of any single publication sought to be sued on or the context. It is, in my view, liable to be struck out for that reason. 1. That finding was upheld by the Court of Appeal in Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 at [123] to [124] (Ward JA, Emmett and Gleeson JJA agreeing at [156] and [158], respectively). 2. Mr Hmelnitsky submits that the pleading in the present case suffers from the same vice, that is, that it fails to plead the whole of any single publication sought to be sued on and that it fails to plead the context of the publication or fails to provide context in its failure to provide the whole of the relevant publication. In my assessment the ruling in Dank was based on a very different set of circumstances and does not mandate the same result in the present case. Mr Dank had pleaded a string of quotes as if all of those words had been said on the one occasion. In fact, they were drawn from different sources and the pleading was manifestly untenable in that form. The plaintiff faced the obvious problem that he did not know what had been said by the relevant defendant on any single occasion. I sought to address that obvious difficulty by granting him leave to interrogate that defendant as to the effect of the words attributed to him in other places and whether he had said those words. 3. The present case is different, at least to the extent that it is clear enough the plaintiff seeks to sue on statements made on a single occasion. The case has been pleaded on the strength of the contemporaneous record of the conversation to which I have referred. The defendants submit the vice of the pleading is that it does not give the whole of the publication and, in particular, that it does not give Mr Couper's side of the conversation. Upon analysis I do not think that gives rise to the difficulty identified in Dank. 4. The plaintiff in the present case seeks to sue on the defamatory statements allegedly made by Mr Yanco to Mr Couper. Mr Couper's contribution to the conversation is of less significance in that context. It must be accepted that the pleading does not set out the whole of the relevant conversation. The defendants say Mr Schlaepfer could have taken the further step of contacting Mr Couper to learn the full content of the conversation. That, of course, would not address the other matters complained of, where the other two alleged recipients of a call from Mr Yanco are unknown to Mr Schlaepfer. 5. In any event, the critical question is whether what the plaintiff has been able to plead is tenable in the form in which it is pleaded. At this stage, that is a question of form, not evidence. The two difficulties identified are completeness or lack of it and a lack of context. Each case of this kind must be determined on its own facts. 6. I am satisfied in the circumstances of the present case that the pleading is acceptable in its present form. Obviously more was said in the conversation but the plaintiff has a proper basis for pleading what has been included and, further, a proper basis for inferring that that was the burden of the conversation, since those were the points summarised by Mr Couper in his email reporting to other employees of Credit Suisse. Important aspects of the context in which the statements were made are provided by the identity of the author or the maker of the call and the identity of the recipient. 7. In the circumstances, I am satisfied that the manner in which the publication is pleaded does disclose a reasonable cause of action. I do not think it has a tendency to cause prejudice or embarrassment to ASIC and I do not think it is otherwise an abuse of the process of the Court. The statements in the terms pleaded, if proved, establish a viable cause of action. That aspect of the defendant's objection is accordingly rejected. 8. The second objection relates to the particulars of identification. The entity referred to in the pleaded statements is not referred to by name and is indeed referred to somewhat enigmatically as "the Entity". All that is said as to its identity is the point made in point 5 of the matter complained of, "ASIC not able to advise the name of the Entity but it is able to advise they are related to Swift Trade, Select Vantage and Merlito. Peter Beck is associated with Swift Trade." 9. The particulars of identification provided in the statement of claim (as the basis on which it is contended that the persons to whom the matters complained of were published would have identified the plaintiff as the person about whom the statements were made) specified that Mr Schlaepfer formerly was a trader at Swift Trade, that he is the principal of Select Vantage and since 2011 has been a Director and President and corporate secretary of that entity and that he is the sole shareholder of Merlito. 10. The particulars also include a reference to an ASIC publication circulated after the alleged publication of the matters complained of. The plaintiff's entitlement to rely upon that particular may be a matter for debate at trial, potentially raising the application of the principles stated by the Court of Appeal in Fairfax Media Publications Pty Ltd v Pedavoli (2015) 91 NSWLR 485; [2015] NSWCA 237, but in any event the objection is that the particulars are incapable of identifying the plaintiff. 11. The defendants submitted, first considering the particulars of identification taken alone, that the very general reference in the matter complained of to the entity being "related to" the three named entities by no means points unequivocally to a single person, let alone Mr Schlaepfer. Mr Richardson, who appears for the plaintiff, submitted that the particulars point to Mr Schlaepfer, and no other person, in "flashing lights". To a degree, the determination of this issue will turn on the way in which evidence about knowledge of the relevant entities comes out at trial. 12. A discrete aspect of the objection relating to the particulars of identification rested on the obvious tension between, on the one hand, the particulars of identification and, on the other hand, the particulars of extrinsic facts pleaded in par 18 of the statement of claim. There, in sub-par (e), it is alleged that the true innuendos pleaded in par 16 of the statement of claim would have been conveyed to persons who knew, among other things, that at and before the publication of the defamatory matter two brokers, Morgan Stanley and Macquarie Securities, had ended their arrangements whereby the first plaintiff's businesses had direct access to the Australian market and no other Australian brokers had replaced them. 13. The point sought to be made was the obvious tension between, on the one hand, understanding based on the extrinsic facts being founded in knowledge about the plaintiff's businesses or companies and, on the other hand, the alleged identification in the particulars in par 8 resting on identification of the plaintiff himself (not his companies) as the relevant actor. 14. While there is an obvious tension between those propositions, I do not think it can be concluded that the particulars of identification are incapable of identifying the plaintiff nor that any conclusion that the plaintiff was the "entity" referred to in the matter complained of would necessarily be unreasonable. 15. In this respect I would accept the submission put by Mr Richardson on behalf of the plaintiff that the defendant's submissions entail a measure of precision which, in the context of an application of the present kind, is perhaps unrealistic. 16. Mr Richardson submitted that there is no contradiction between the company and the person being a relevant actor because, in this context (that is, the context of trading in the stock market), people tend to equate people and companies in terms of trading activities. 17. I am not persuaded that the matter complained of is incapable of being understood to be about the plaintiff in the relevant sense. 18. The third objection is that the imputations pleaded in pars 12(a) and (b) are incapable of being conveyed by the matter complained of in its natural and ordinary meaning as opposed to by way of true innuendo. Those imputations are: 1. the first plaintiff was engaging in unlawful market manipulation. 2. the first plaintiff was engaging in criminal conduct by layering the stock market. 1. The objection is based on the description of the conduct attributed to the "Entity" in the matter complained of, which is that it is "layering the market". 2. In short, the submission was that the ordinary reasonable reader would not understand that term and certainly would not understand it to mean unlawful market manipulation, still less criminal conduct. 3. In my view this is a matter which must properly be left to the jury. There is ample authority for the proposition that the Court should be careful in taking issues from the jury. The question whether the term "layering" is one known to or within the knowledge of the ordinary reasonable reader is, in my view, quintessentially a jury question. 4. The fourth objection relates to the two true innuendos pleaded in pars (a) and (b) of par 16 which are: (a) the first plaintiff's companies, Merlito Securities and/or Select Vantage, engage in stock market manipulation. (b) the first plaintiff's companies, Merlito Securities and/or Select Vantage, engaged in market manipulation to such a serious extent that two brokers terminated their relationships with them. 1. An objection to the ambiguity resulting from the use of the conjunction "and/or" is to be rectified by agreement by splitting out each imputation into two. The defendant's objection related to a different question, which was the fact that the only act or condition attributed in the imputation is attributed to the companies, not the plaintiff, Mr Schlaepfer. 2. The task in considering such an objection is to determine whether an imputation distils some act or condition attributed to the plaintiff which is capable of reducing his reputation in the eyes of ordinary decent folk. 3. Mr Richardson submitted that the imputation could be dealt with by teasing out the fact that the plaintiff had a role as principal of those companies and that that would make plain why the conduct attributed to the companies was capable of having an impact on Mr Schlaepfer's individual reputation. He submitted, however, that it should not be necessary to make that change, since conduct attributed to an entity described as the plaintiff's company is plainly capable of being sheeted home to be something likely to reduce Mr Schlaepfer's reputation. 4. There is always a difficult question of judgment in circumstances where the defamatory publication sued on describes a company in which an individual has some governance role. I am inclined to think that the imputations do adequately distil some attribution directed at the plaintiff by reason of the description of his being the person who effectively, as the imputation has it, owns the companies said to have engaged in the conduct described. 5. In reaching that conclusion I have regard to the matter to which I have already referred, namely, what I would understand to be a conception within the trading industry and the stock market that people do tend to equate the conduct of a company with the conduct of the person known to stand behind that company. 6. The last objection is to imputation 16(d), which is: The first plaintiff had authorised such serious manipulation of the markets as to warrant the Head of Market Supervision at ASIC contacting the Head of Compliance of a large broking house and warning him of the risks of doing business with his companies Merlito Securities and/or Select Vantage. 1. The objection is one of form. It is submitted that the imputation is insufficiently precise by reason of the inclusion of the term "authorised". As is well established by the authority of the decision of the Court of Appeal in Drummoyne Municipal Council v Australian Broadcasting Council (1990) 21 NSWLR 135 in considering an objection as to form on the basis that an imputation is insufficiently precise, it must be recognised that almost any imputation is capable of greater or lesser specificity. The point at which the line will be crossed into impermissible imprecision is one to be considered as a matter of practical justice and having regard to the terms of the matter complained of. 2. The difficulty for the plaintiff in the present case is that the matter complained of describes the conduct of something referred to as "the Entity" in circumstances where it is not clear whether that entity is a person or a corporation but with the obvious suggestion that it might be the person who stands behind the named corporations. That is the plaintiff's case. 3. It may be accepted that there is a range of conduct which might be denoted by the term "authorised" and that there is a measure of imprecision in the imputation for that reason. However, I am minded to think that this is a case in which the plaintiff can do no better based on the content of the matter complained of as presently pleaded than to distil the attribution in the terms in which it is distilled. 4. For those reasons, the defendant's objections are rejected. 5. I direct the parties to bring in short minutes of order with a view to bringing the proceedings back before the Court for a second listing. 6. I order the defendants to pay the plaintiff's costs of today's application. ********** 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: 07 December 2017