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Steamships Trading Company Ltd v Paul & Thompson Pty Ltd [1973] PGSC 44; [1973] PNGLR 5 (1 February 1972)

Papua New Guinea Law Reports - 1973

[1973] PNGLR 5 - Steamships Trading Co. Ltd. v Paul & Thompson Pty. Ltd.

[1973] PNGLR 5

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

STEAMSHIPS TRADING COMPANY LIMITED &

AE HOLMES

V

PAUL THOMPSON PTY LTD &

L & SPROUL PTY LTD

Port Moresby

Minogue CJ Frost SPJ Clarkson J

30-31 August 1971

1 February 1972

APPEAL - Defamation - Question of fact - Powers of Court on appeal - Whether absence of good faith - Advantage of trial judge in assessing demeanour and conduct of witnesses - Supreme Court (Full Court) Ordinance 1968 s. 20 (1)[iv]¹�- Defamation Ordinance 1962, ss. 16 (2), 17[v]²�.

N1>DEFAMATION - Appeal - Absence of good faith - Question of fact - Advantage of trial judge in assessing demeanour and conduct of witnesses - Defamation Ordinance 1962, ss. 16 (2), 17[vi]³.

N1>DEFAMATION - Damages - Appeal - Aggravation of mischief by conduct of counsel - Whether award of aggravated damages justified.

Held

(Per Minogue C.J. and Frost S.P.J.)�In hearing an appeal on a question of fact pursuant to s. 21 (c) of the Supreme Court (Full Court) Ordinance 1968, the Full Court has authority to draw inferences of fact, and the appeal is to be treated as a rehearing upon the evidence appearing in the record of proceedings. In order to succeed, the appellant must convince the Court that the trial judge�s decision was wrong, due consideration being given to the advantages the judge had in hearing the evidence.

Da Costa v. Cockburn Salvage and Trading Pty. Ltd. [1970] HCA 43; (1970), 124 C.L.R. 192, at pp. 211-214, and Whiteley Muir & Zwanenberg Ltd. v. Kerr (1966), 39 A.L.J.R. 505, referred to.

In the course of the hearing of a suit for defamation in which the substance of the allegation was that the credit manager of a retailing company had made a statement to the prejudice of the respondent companies� business reputation to the credit manager of another retailing company, counsel for the respondents tendered in evidence recent balance sheets and profit and loss accounts of the respondents companies. Counsel for the appellants forcefully cross-examined witnesses called for the respondents on the material contained in these documents with a view to demonstrating that the financial position of the respondent companies was not as liquid as it was made out to be. He referred to other building companies which had suffered business disasters, and questioned the non-payment of accounts by the companies. In his final address, counsel for the appellants made strong comments about the financial position of the respondents, such as �a more appalling state of financial instability it would be difficult to find�, �they are on very shaky ground indeed�, and �no financier ought to be prepared to lend them a penny�. The trial judge held that the statement made by the credit manager was made in the absence of good faith and that the cross-examination and the comments of senior counsel called for an award of aggravated damages.

On appeal to the Full Court,

Held further

N1>(1)����� (Per Minogue C.J. and Frost S.P.J., Clarkson J. dissenting) that an appeal on the ground that the trial judge had erred in law in holding the defamatory statement to have been made in the absence of good faith, should not be allowed, as the case was one in which the demeanour and conduct of the witnesses were of prime importance, and the findings of the trial judge could not be divorced from his assessment of the witnesses.

N1>(2)����� (Per Minogue C.J. and Frost S.P.J., Clarkson J. not deciding) that an appeal on the ground that the trial judge had erred in increasing the quantum of damages having regard to the aggravation of the plaintiff�s injury due to the conduct of the case by senior counsel at the trial should be allowed. In the circumstances an award of aggravated damages was not justified. Whilst counsel�s attack on the financial standing of the respondents was in strong terms, it was the respondents who had introduced the issue of their liquidity into the case, and furthermore the state of the respondents� finances was relevant to the issue of malice.

Uren v. Australian Consolidated Press Ltd. (1965), 83 W.N. (Pt. 2) N.S.W. 229, referred to by Frost S.P.J.

Decision of Prentice J. in Paul & Thompson Pty. Ltd. v. Steamships Trading Company Ltd. [1971-72] P. & N.G.L.R. 136 reversed on this aspect.

Appeal

The following statement of the facts is taken from the beginning of the judgment of Frost S.P.J.: �This is an appeal against the judgment of the trial judge awarding the plaintiffs a single sum of $2,000 for damages for defamation given in four actions which by interlocutory order were consolidated and heard together. The plaintiffs delivered one amended statement of claim the effect of which was to put forward a joint claim by the two plaintiffs against the two defendants, to which the defendants filed a single statement of defence. Although this was done by consent, the procedure was unusual. The appropriate procedure was provided for under ss. 32 and 33 of the Defamation Ordinance under which the two actions brought by each plaintiff could have been consolidated and separate judgments given with damages apportioned against both defendants. But these provisions do not appear to have been drawn to the attention of the court.

At the trial the respondents contended that the appellant Holmes, who was the branch accountant of the appellant, Steamships Trading Company Ltd., had published orally defamatory matter on two separate occasions referring on each occasion to both plaintiffs. Each publication was admitted on the pleadings and there was no dispute that the statements referred to both respondents. It was held that there was on each occasion a publication of defamatory matter concerning both respondents, but that each occasion was one of qualified protection under s. 16 (1) of the Defamation Ordinance 1962. The first publication proved was one to the respondents� employee Mrs. Danks-Brown and Mrs. Paul, the wife of the managing director of both respondents and also the secretary to each company. The second publication was a statement made by the appellant Holmes in a telephone conversation with Mr. Kevin Darcey, the accountant in charge of the New Guinea Company Ltd. His Honour held that the respondents had failed to show that the protection in respect of the first occasion was defeated by an absence of good faith but held that the onus was fulfilled in respect of the statement to Darcey.

At the hearing before this Court no point was taken concerning the unusual procedure adopted at the trial. There was no appeal against his Honour�s finding that the words complained of were defamatory, having the meaning that the respondents were bad payers, nor did the respondents dispute that each occasion was one of qualified protection. The judgment was challenged on two substantial grounds, first that the learned trial judge erred in law in holding that the statement to Kevin Darcey was made in the absence of good faith and secondly that he erred in increasing the quantum of damages, having regard to the aggravation of the injury due to the conduct of the case by appellants� senior counsel at the trial (who was not counsel for the appellants on the appeal).�

Counsel

Hughes, Q.C., with him Griffin, for the appellants.

Melville, Q.C., with him Wood, for the respondents.

Cur. adv. vult.

1 February 1972

MINOGUE CJ: This is an appeal against a judgment in which the learned trial judge awarded the sum of $2,000 damages for defamation in four consolidated actions. Although the procedure adopted gave rise to some difficulty and was the subject of some criticism during the argument on the appeal, the interlocutory order for consolidation and the order of the learned trial judge to the same effect were made by consent on the ground as was quite evident that in each of the four cases substantially the same questions were involved and in the result I have felt able to dispose of the appeal without having to pronounce upon procedural niceties. Leave was given for the plaintiff to deliver a single amended statement of claim the effect of which was to put forward a joint claim by the two plaintiffs against the two defendants to which the defendants delivered a single statement of defence.

At the trial the plaintiffs contended that the defendant Holmes acting within the course or scope of his employment by the defendant company had published orally defamatory matter on two separate occasions referring on each occasion to both plaintiffs. Each publication was admitted on the pleadings and it was also admitted that the statements referred to both plaintiffs. The learned trial judge held that there was, on each occasion, a publication of defamatory matter concerning both plaintiffs but that each such occasion was one of qualified protection within the terms of s. 16 (1) of the Defamation Ordinance 1962. The first publication proved was to the plaintiffs� employee Mrs. Danks-Brown and to Mrs. Paul, the wife of the managing director of both plaintiffs and also the secretary to each. The second publication was contained in a statement made by the defendant Holmes in a telephone conversation with a Mr. Kevin Darcey. His Honour held that the plaintiffs failed to show that the first publication lost its protection by the absence of good faith but held that that onus on the plaintiffs to show such absence was discharged in respect of the statement to Darcey and it is in respect of that statement that he awarded the sum of $2,000 damages.

There was no appeal against his Honour�s finding that the words complained of were defamatory or that each occasion was one of qualified protection. The judgment was challenged on the ground that he erred in law in holding firstly that the statement made by Holmes to Darcey was made in the absence of good faith, and secondly, that the quantum of damages should be increased having regard to the aggravation of the plaintiffs� injury due to the conduct of the case by senior counsel at the trial.

The facts are fully set out in the reasons for judgment of the learned trial judge and I do not propose to restate them other than in summary form and to note what appears to be an error made by his Honour. Each of the plaintiff companies was in business in the construction field in Rabaul and had been so engaged for some years. The companies were closely related to each other having at least a managing director in common and Mrs. Paul as a director and secretary of each. They were carrying out some large contracts and bought materials from the three major suppliers in Rabaul including the appellant company. This company had originally extended what appeared to be generous credit terms but because of difficulties in the building industry in Rabaul, towards the end of 1968 it decided to tighten its credit policy with relation to the plaintiff companies. I should add that the appellant company had for some time been viewing with concern the tardiness in payment of accounts by the plaintiff companies and as early as April 1968 had been pressing for more prompt payment. On 12th March, 1969, the branch manager of the appellant company wrote a personal and confidential letter to Mr. Paul, the managing director of both the plaintiff companies, therein delivering what was in effect an ultimatum that from the end of March a credit allowance of $7,500 or 30 day terms, whichever should first arise had been fixed for both accounts.

In early 1969 two other construction companies in the New Britain area were in difficulties and creditors� meetings had been called. By 18th April, 1969, the appellant Holmes who was the accountant of the appellant company had taken over as branch manager during the absence on leave of Mr. Corbett the manager. The former had for some time previously had discussions with Darcey who was the accountant of the New Guinea Company, one of the other major suppliers in Rabaul and the credit position of the plaintiff companies had been from time to time discussed. The exchange of information between the two credit managers was said to come squarely within the terms of s. 16 (1) (c) and (e) of the Ordinance and neither at the trial nor before us was it sought to assert otherwise.

On 18th April, 1969, Holmes signed and despatched a letter to The Manager, Paul and Sproul Pty. Ltd. advising him that as that company�s account would have reached the credit limit of $7,500 by the following Monday morning, i.e. 21st April, it would be necessary for payment to be made before further credit could be extended. It is this letter which sparked off the events which have led to the actions with which we are concerned. On 21st April, Mrs. Paul, who appears to have taken umbrage both at the action of Holmes in despatching the letter and in his attitude towards her when she discussed the position with him on that day, telephoned him to say that, �We (referring to her husband and herself) will close the account� and she requested him to make it up to date and she would pick it up on the following morning. Subsequent to this conversation, Mrs. Paul had a letter typed which purported to confirm her conversation with Holmes and in which was mentioned her request for the accounts of both plaintiff companies to be cancelled as from mid-day (of 21st April). The letter, which was signed by Mrs. Paul, went on to say:

�As we have no confidence in your accountant we request that all matters relating to settlement of this account be forwarded to us from your Port Moresby office. We are writing to your Port Moresby office in order to lodge a complaint concerning Mr. Holmes� unreasonable attitude to discuss this matter.�

On 22nd April, Mrs. Paul went to the office of the appellant company and had a conversation with Holmes during which he said to her �Your credit has been cut off�. He meant the credit of both companies. In what I have no doubt was an acrimonious conversation, Mrs. Paul said that she had not asked for the credit to be cut off and that she had merely asked for the account to be closed as she and, I gather, her husband, had no wish to deal with the appellant company any further. Holmes replied that the credit had been cut off and it was all the same to him. Mrs. Paul then asked whether he had told people that their credit had been cut off to which he replied that he had told people that their credit had been stopped and Mrs. Paul got in the last word with the remark, �Well, that�s all I wanted to know, goodbye�.

The defamatory matter which is the subject of this appeal is contained in a telephone conversation held with Darcey. He was asked whether in April 1969 about or shortly after 21st April, he had a conversation with Holmes in relation to the plaintiffs. He said that such a conversation had taken place but he could not remember who telephoned whom and went on to state that during the course of the conversation it was mentioned by Holmes that he had seen Mrs. Paul that day and that she was going to close their account with Steamships but that in any case he (Holmes) had cut off their credit and so far as any further purchases were concerned they would be on a strictly cash basis. The only other reference to the content of this conversation occurred in cross examination and is as follows:

N2>�Q.���� And he told you, passed on to you the information that in effect there had been a dispute between Paul and Sproul and Paul and Thompson and Steamships Trading Company Limited which had resulted in those companies closing their accounts. He added that in any event as far as he was concerned his credit was going to be cut off?

N2>A.������ Yes, all future dealings on a cash basis.�

The learned trial judge found that this conversation took place on 22nd April, after the second visit of Mrs. Paul to Holmes. I can see no warrant anywhere in the evidence for such a finding. It seems to me that the conversation could equally have taken place at some time on 21st April.

This error has caused me some concern in approaching this appeal because as I read his Honour�s reasons for judgment he has placed a good deal of reliance upon events happening on 22nd April, and upon the failure of Holmes to communicate some of those events to Darcey in arriving at his conclusions of the former�s lack of good faith.

However, before I turn to such analysis as is necessary of those reasons I think it necessary to first consider the approach of this court to an appeal against the judgment of the judge at first instance. This appeal was brought as an appeal as of right. By s. 10 (a) (b) of the Supreme Court (Full Court) Ordinance 1968 an appeal as of right is limited to questions of law and questions of mixed fact and law. I have had the advantage of reading the reasons for judgment about to be handed down by my brother Frost and agree with and adopt what he says both in relation to the powers of the Full Court and to the grant of the leave requested by counsel for the appellants. The requirements of good faith are set out in s. 16 (2) of the Defamation Ordinance and it is to this section that one must look when evaluating the evidence. I think that a good deal of what Windeyer, J. said about negligence in Da Costa v. Cockburn Salvage and Trading Pty. Ltd[vii]⁴�(with which I respectfully agree) is applicable to a decision on the presence or absence of good faith and I am also inclined to apply his treatment of the decision of a trial judge as being the equivalent in all respects of the verdict of a jury unless from his reasoning it appears that he had in some way misdirected himself. In other words is the finding �such as reasonable and fair men might not unfairly arrive at�? However, Mr. Hughes for the appellants late in his argument asked us to grant leave to appeal on the question of fact so far as such leave should seem necessary.

I turn now to examine the learned trial judge�s reasons in the light of the assertion that he erred in holding that the statement by Holmes to Darcey was made in the absence of good faith. In the first place he found that Holmes was not using the occasion for the protection of the interests of either Darceys or the defendant company but in the exercise of some animus against the plaintiffs.

If this is affirmatively proved then the publication could not be saved by s. 16 (2) [c]. The learned judge accepted Darcey's version of the conversation which I have previously set out and which conflicted with Holmes' version. He did not regard Holmes as a witness of truth and found that he mosrepresented the facts to Darcey in that he had not informed Darcey that the initiative for the closing of the accounts had come from Mrs. Paul and the plaintiffs. He went on to find that Holmes had also suppressed the receipt of the letter by Mrs. Paul on 21st April, and that he had not advised his own staff members that credit had been cut off, nor that he had said to Mrs. Paul that he was awaiting to see events and then he would issue instructions, meaning, as I understand it, that he had not definetly decided to stop credit. The learned judge also found that Holmes did not reveal to Darcey that Mrs. Paul had complained to Port Moresby about his (Holmes') attitude to her. None of these latter findings can, in my view, be supported by the evidence but none the less I feel that there was sufficient in the evidence, reinforced as it was by the learned judge's conclusions as to Holmes' demeanour and as to the type of man he was, to support his finding that his statement to Darcey had been made out of spite towards the plaintiff companies and their secretary and with a complete lack of regard to the possible consequences to their business reputations. In my view this is a case where the demeanour and conduct of the withnesses are of prime importance and I would not be prepared to allow the appeal on the first ground.

The second ground of appeal has caused me greater difficulty. Counsel's attack on the financial standing of the plaintiffs was certainly strong in terms but in coming to the conclusion that the appellants should be mulcted in aggravated damages I am of the opinion that his Honour has misdirected himself in two ways. Firstly he placed heavy reliance on counsel's cross-examination of the plaintiff's witnesses overlooking in my opinion the fact that the financial position of the plaintiff companieswas brought into the case by their counsel and the liquidity was put in issue by him. Further the state of both the plaintiff companies' finances was material in considering the actions of both Mrs. Paul and Holmes on 21st and for that matter 22nd April, and a detailed analysis of those finances could in my opinion be most relevant in the consideration of the credibility of the main actors in the Monday drama, or perhaps more accurately comedy drama. I cannot see anything in the cross-examination nor in the other evidence on this point which could be regarded improper. In the second place, as I read the learned trial judge note of the final submission of counsel, senior counsel for the appellants dealt seriatum with publication of defamatory matter to Mrs. Paul, Mrs Danks-Brown and to Darcey, all of which were in issue. He began with an analysis of the case in relation to the publication to Mrs. Paul then followed the publication to Mrs. Danks-Brown and finally dealt with the publication to Darcey. It was in criticising Mrs. Paul evidence of the companies' financial position and in assessing the presence or absence of good faith in so far as it could be deduced from the actions of both parties and in assessing the relationship between Mrs. Paul and Holmes on 22nd April, (at a time which could easily be later than the conversation with Darcey) that counsel made the remarks quoted by his Honour in his judgement. On the issue of publication to Mrs. Paul the counsel for the respondent conceded that his Honour could not be satisfied that the remarks made to her were made with such absence of good faith as to destroy privilege. I cannot see how counsel's criticism uttered in relation to this issue. Accordingly I think his Honour has erred and I would allow the appeal on this ground. In my opinion the appeal on liability should be dismissed, the appeal on the question of damages allowed and the plaintiffs' damages should be reduced to $500.

FROST SPJ (After setting out the statement of facts set out above, his honour continued):

In the notice of appeal it was stated that "the appeal lies without leave", and at the hearing counsel for the appellants argued the case on that basis. However, the first ground of appeal clearly involved questions of fact, and the grounds as to the award of damages, questions of mixed fact and law, as counsel for the appellants later submitted. At the outset of his argument, counsel for the respondent drew attention to s. 20 (1) of the Supreme Court (Full Court) Ordinance 1968, which is the relevant provision for appeals in civil cases, and which provides that an appeal lies to the Full Court from a judge (a) on a question of law; (b) on a question of mixed fact and law; and (c) with the leave of a judge or the Full Court, on a question of fact. He then argued that the appellant should be restricted to questions of law, which in effect meant that, so far as the first ground was concerned, the appellant would have to show that there was no evidence to support the finding, or not more than a scintilla. Counsel for the appellants then sought leave for the appeal to be heard on a question of fact. The application was opposed, although counsel for the respondents very properly conceded that the respondents were not prejudiced by the application. On the whole I consider that leave should be given as the appellants� grounds are plainly substantially referable to questions of fact.

The question then arises as to the powers of the court upon an appeal on questions of fact. The usual express provisions to be found in the legislation providing for appeals in the Australian States, to the effect that the appeal should be by way of rehearing and conferring power on the court to draw inferences as to fact are not to be found in the Ordinance or in the Appeal Rules. The only usual provision is the power conferred to give such judgment as ought to have been given in the first instance (s. 21 (c)). Although the matter was not argued before this Court, in my opinion, it sufficiently appears from the power to hear appeals, with leave, on questions of fact that the authority to draw inferences of fact is also conferred (see Da Costa v. Cockburn Salvage & Trading Pty. Ltd. (supra)), and it is not to be supposed that the legislature intended the appeal to be treated other than as a rehearing upon the evidence appearing in the record of proceedings. The appellant must accordingly convince this Court that the learned trial judge�s decision was wrong (Whiteley Muir & Zwanenberg Ltd. v. Kerr[viii]⁵, per Barwick C.J.) due consideration being given to the advantages the judge had in hearing the evidence (see the authorities cited by Windeyer J. in Da Costa v. Cockburn Salvage & Trading Pty. Ltd. (supra) at pp. 209-210). As has been remarked in more than one of the defamation cases, the advantage in such cases is not inconsiderable.

It is convenient to adopt the learned trial judge�s statement of the facts, as it depends upon his assessment of the witnesses. But there is one exception. His Honour found that Holmes� conversation with Darcey took place after Mrs. Paul�s second conversation with Holmes on 22nd April, 1969. Holmes did not in fact state whether the conversation with Darcey took place either before or after the second conversation with Mrs. Paul. It is plain from Darcey�s statement that Holmes said he had seen Mrs. Paul that day, that it could have taken place on either 21st or 22nd April, 1969. In the second conversation with Mrs. Paul on 22nd April, in which Holmes told Mrs. Paul �I have told people your credit has been stopped�, there is some evidence that the conversation with Darcey took place before that second conversation. Indeed, Mr. Melville was prepared to submit that the conversation had taken place on 21st April, 1969. But, in my opinion, there is no evidence upon which it could be held that the conversation with Darcey took place after rather than before the second conversation with Mrs. Paul, so that the facts upon which the finding of absence of good faith was made must be confined to the events of 21st April.

I now turn to the law applicable as to proof of malice. It is to be noted that counsel for the appellants accepted that the learned trial judge made no error upon the law, and this was the submission of counsel for the respondent also. The law is to be found in the provisions of the Defamation Ordinance, s. 16 (2), which provides for the circumstances in which a publication is made in good faith, and s. 17, which states the burden of proof. The sections are as follows:

N2>�16(2) For the purposes of this section, a publication is made in good faith if:

(a)����� the matter published is relevant to the matters the existence of which may excuse the publication in good faith of defamatory matter;

(b)����� if the manner and extent of the publication do not exceed what is reasonably sufficient for the occasion; and

(c)����� if the person by whom it is made is not actuated by ill-will to the person defamed, or by any other improper motive and does not believe the defamatory matter to be untrue.

N2>17.���� Where a question arises as to whether a publication of defamatory matter was or was not made in good faith, and it appears that the publication was made in circumstances which would afford lawful excuse for the publication if it was made in good faith, the burden of proof of the absence of good faith lies upon the party alleging the absence.�

In fact the learned trial judge did not specifically refer to either of those sections, although plainly he had them in mind. The burden of proof as stated in s. 17 is the same as at common law. Counsel for the respondents submitted that the effect of s. 16 (2) is to prescribe four elements of good faith, proof of the absence of any one of which defeated the protection of the occasion, and this was not disputed by counsel for the appellants. Upon this submission the words in sub-par. (c) �and does not believe the defamatory matter to be untrue� are to be construed disjunctively, which I consider is correct. See Queensland Newspapers Pty. Ltd. and Hardy v. Baker[ix]⁶, per Webb J. (as he then was).

N1>For a statement of the law applicable to the proof of absence of good faith, the learned trial judge accepted a passage from Fleming, The Law of Tort, 3rd ed. p. 550, which was cited at the hearing by counsel for the plaintiffs. The passage is as follows:

�Absence of genuine belief in the truth of the statement however, puts the publisher beyond the pale of privilege, because, save in exceptional circumstances, one who knowingly asserts a falsehood must be using a privileged occasion for a dishonest and improper purpose.�

Dr. Fleming cites as authority the judgment of Brett L.J. in Clark v. Molyneux[x]⁷, in which the distinction is drawn between a statement known to be false, which ends the matter, and a statement which the defendant did not know to be true, or made recklessly, from which an improper motive may be inferred. This distinction does not appear to be fully brought out by the learned author. Further the causal relation of the second clause to the first is not entirely justified as the knowing assertion of a falsehood is a narrower state of mind than absence of genuine belief in the truth of the statement.

N1>The proper construction of s. 16 (2) (c) was also dealt with by Webb J. (as he then was) in Queensland Newspapers Pty. Ltd. and Hardy v. Baker[xi]⁸�which was not referred to by counsel. However counsel for the appellants made no submission that the learned trial judge had made any error of law in adopting the passage by Dr. Fleming, or in particular, that it was not open under s. 16 (2) (c) to infer the existence of an improper motive from the absence of genuine belief on the part of the publisher that the defamatory matter was untrue, for which there is authority in the judgment of Sir William Webb (supra). Counsel may have had in mind that his Honour seems to have found that Holmes did believe the statement to be untrue.

N1>In stating his reasons for judgment the learned trial judge first decided that Holmes� statement to Darcey was not a fair description of events; �it misrepresented the actuality�. However, as counsel for the appellant argued, if malice is to be found in the intrinsic contents of the statement, the question is not whether the statement was true, but whether Holmes might honestly and on reasonable grounds have believed that what he said was true. Adam v. Ward[xii]⁹�per Lord Atkinson. Further, considerable latitude is to be allowed the defendant for such a belief is not inconsistent with even excessively strong words (ibid.).

N1>Counsel for the appellants based an argument upon the next matter to which the learned trial judge turned, which was the occasion of the first publication. Counsel submitted that the finding that no improper motive had been shown was manifestly inconsistent with the finding of malice in respect of the publication to Holmes because the substance of the statement on each occasion was the same. But, on the whole, I consider that the learned trial judge was influenced by the argumentative nature of the conversation, and also appears to have held, and the conclusion I consider was open in all the circumstances, that the respondents were not likely to be injured by the publication (Defamation Ordinance s. 19).

N1>The learned trial judge�s main reasoning was set out after his conclusions, which he stated were that when Holmes made the defamatory communication to Darcey he was not acting in good faith and that he was not using the occasion for the protection of the interest of either his or Darcey�s company, but in the exercise of some animus against the companies, which can be taken only as a finding of proof of an improper motive constituting an absence of good faith. His Honour�s reasons for the finding were strongly challenged by counsel for the appellants. During the argument attention was drawn to the precise words of the specific question to and answer given by Holmes the truth of which the learned trial judge stated at the outset of his reasons, he was unable to accept. The passage from the transcript is as follows:

N2>�Q.���� And I put it to you as soon as Mr. Corbett went on leave and you were in charge of the store, you seized at the opportunity to�you hoped to destroy these companies� credit?

N2>A.������ No.

N2>Q.������ You realise that was the possible consequences (sic) of your action?

N2>A.������ No.

N2>Q.������ You did not?

N2>A.������ No.�

The learned trial judge referred to this passage as follows:

�When asked did he realize the possible consequences of his action (in informing Mr. Darcey that the two companies� credit had been cut off), he replied �No�. I am unable to accept the truth of his reply.� There was some discussion whether the learned judge was under a misapprehension as to the effect of the passage cited, but it now seems to me that his Honour was intending to set out not the precise words, but merely sufficient words to identify the question and answer. However, in my opinion, the answer could not itself be treated as inherently dishonest or unreasonable. Indeed the fact was that the Rabaul merchants ignored Holmes� information and continued to supply the respondents. Accordingly, as from the judgment it does not appear that the answer was rejected because of the demeanour of Holmes, this reason to support a finding of malice cannot stand. The learned trial judge then referred to Holmes� statement in cross-examination, in justification of his action in cutting off the respondents� credit, that an account cannot be closed until it was paid. Again I do not consider that it could be said that this was an opinion which could not be honestly held. The learned trial judge then referred to the terms of the statement made to Darcey, and concluded that, �Mr. Holmes misrepresented what he must have known to be the facts of the situation, namely, that the plaintiff companies had indeed closed their accounts. By saying that the companies were going (which his Honour stressed by underlining) to close their account, but in any case he had cut off their credit, he conveyed the impression that the dissatisfaction initiating a calling off of credit was his and that credit had in fact been cut off.� Now his Honour found that Mrs. Paul had in the telephone conversation of 21st April, 1969 �instructed Holmes to close the accounts, make them up to date and she would pick them up tomorrow morning�, (adopting some evidence by Holmes) but even so I consider that it is weighing the words with too fine a scale, to attribute so much significance to the future or purposive use of the word �going� and to infer from the rest of the passage even a lack of honest belief in its truth on the part of Holmes.

Counsel for the appellants next challenged the learned trial judge�s finding that �the application of the upper limit sanction directed by Mr. Corbett�s letter of 12th March, 1969, had not been called for; as one of the plaintiff companies was still some $4000 below the figure indicated.� It was this situation of fact upon which counsel for the respondent strongly relied. He contended that as it was never suggested by the appellants that Paul & Thompson Pty. Ltd. had exceeded the credit limitations permitted in that letter, sufficient proof of which is shown by the facts that the plaintiff Paul & Sproul only was written to, and that each account was treated separately; in making the statement that credit was cut off which was wide enough to cover both companies, Holmes was plainly stating an untruth in so far as the statement implied that Paul & Thompson Pty. Ltd. was a bad payer. However no distinction was made between the two plaintiffs at the trial and I agree with counsel for the appellants that, having regard to the Pauls� owning the share capital in both companies, and Mrs. Paul approaching Mr. Holmes on 21st April, and instructing him to close both accounts it was reasonable for the appellants to act on the footing that each company should be treated in the same way. Other reasons for the finding of malice which I consider cannot be supported are those based on Holmes� reaction to the reference in the letter of 21st April, 1969, as to the complaint of his own unreasonable attitude, because as I have said that, in my opinion, there was no evidence that the letter had been delivered prior to Holmes speaking to Darcey.

In his reply counsel for the appellants submitted that on analysis the proper view of the judgment might be that his Honour found that there was acceptable evidence of Holmes� disbelief of his statement to Darcey, and also as a separate ground, that Holmes was actuated by spite or a motive improper in the law of defamation, that is, that the occasion was used otherwise than for the reason which justified the protection afforded it by law. I agree with this analysis. Counsel for the appellants then argued that these conclusions could not be supported. He submitted that if Holmes� statement to Darcey was not a precise statement of events, it was consistent with an honest belief by Holmes in its truth, or an absence of belief that it was untrue.

However, in my opinion, there are three main grounds upon which the judgment as to liability can be supported and having regard to which I am not convinced that it was wrong.

First, it is necessary to analyse the state of facts as at the time when Mrs. Paul telephoned Holmes and instructed him to close the accounts. The learned trial judge found as a fact that she considered herself treated rudely and unreasonably by him, which indicates that his Honour preferred her version of the interview to Holmes�. She had asked Holmes how much she owed, he said he had got to work it out, in effect saying �just run away little girl�. She then discussed the matter with her husband, they decided not to deal any longer with the appellants, or as Mrs. Paul said on the telephone to Holmes, there could be no future in carrying on trading with the respondents. She asked for the accounts to be made up to date, and said she would pick them up in the morning. The reason for the visit was the letter of 18th April, 1969, addressed to Paul & Sproul Ltd. to the effect that as the account would have reached the limit of $7,500 fixed by the appellant on 21st, �it will be necessary for you to let us have a cheque before further credit can be extended to you.� Counsel for the appellants submitted that as at the date of the interview, credit was already suspended and I consider that this was a reasonable analysis of the events. However, after Holmes� request for money, and Mrs. Paul�s telephone request that the accounts should be closed, in my opinion, the reality of the matter was that the respondents had withdrawn their request for further credit and, significantly, for the reason that they no longer wished to deal with the appellants and not for any such reason that they lacked the financial resources to pay in due course. Hence the request for the accounts to be made up. This was an unusual situation as Holmes was aware and his actions showed. Prior to Mrs. Paul�s visit he had taken no steps to cut off the respondents� credit, and when he did take action, it was incomplete; he was waiting to see events. I consider that his actions showed that he had doubts whether he was justified in taking the drastic step of cutting off the respondents� credit.

Now when Holmes telephoned Darcey the imputation is unchallenged that the respondents were bad payers. In my opinion there was a failure to disclose the truth of the matter in three respects, first that the accounts were not closed for any reason concerned with inability to pay; secondly that the respondents contemplated payment; thirdly Holmes was still awaiting events before he completed cutting off credit. The fact that for reasons associated, no doubt, with the present litigation, payment was not in fact made, the accounts being disputed as to the greater part, and the balance being paid into a trust account pending the resolution of that dispute, is not significant. As to the outstanding balance of the account, no more credit had been extended than the appellant had allowed, having regard to its assessment of the respondents� finances and the fact that the credit limit had been reached would thus not have afforded Holmes reasonable grounds for belief that the respondents were bad payers quite apart from the clearly to be understood promise of payment.

I have accordingly reached the conclusion that there was intrinsic evidence in the statement to support the finding of absence of good faith even although his Honour considered that he was able to go so far as to hold that, in all the circumstances, Holmes believed the imputation in his statement (which it was his purpose to convey) to be untrue, which falls squarely within the words of s. 16 (2) (c).

Secondly, I do not consider that that finding, which involves the rejection of Holmes� evidence, can be divorced from his Honour�s assessment of the witnesses, to which I shall also refer under the next ground.

Thirdly, the learned trial judge found that the communication to Darcey was made out of spite towards the respondents and Mrs. Paul. It is to be noted that the existence of an improper motive is not inconsistent with a belief in the publisher that the statement was true. Watt v. Longsdon[xiii]¹⁰, per Greer L.J. His Honour reached this conclusion after observing the demeanour of Mr. Holmes in the box and scrutinizing his evidence. In my opinion, even after excluding the evidence as to Mrs. Paul�s intention to complain to the Head Office at Port Moresby, there remains sufficient extrinsic evidence to support this conclusion because of the interview on 21st April, in which Mrs. Paul considered herself rudely treated. It is supported also by the probability that Holmes was annoyed that Mrs. Paul had seized the initiative and closed the accounts before he had himself taken action. This finding depends very much on the advantage which the learned trial judge said he had, of observing the personalities both of Mrs. Paul and of Mr. Holmes, and his Honour�s view that he could �understand that Mrs. Paul�s excitable and abrupt personality, and manner of speaking, might well irritate and arouse the animus of a man of Mr. Holmes� apparent temperament�. Because of that advantage, in my opinion, an appellate court could not be convinced that the conclusion was wrong.

The other ground of appeal concerns the award of aggravated damages. It was not submitted that his Honour applied any wrong principle of law. In my opinion, the cross-examination of the respondents� witnesses at the trial did not go beyond �a legitimate litigating of the issues open� to appellants� counsel. Uren v. Australian Consolidated Press Ltd.[xiv]¹¹, per Walsh J. The reference in that cross-examination to the other building companies which had suffered financial disasters was clearly related to justifying the exchange of credit information between the appellant and other suppliers, and thus to establish that the occasions of publication were protected. It was the respondents� counsel who raised the issue of the liquidity of the respondents� financial resources, and the cross-examination based on the financial records to rebut any finding of liquidity did not, in my opinion, go beyond the due bounds. The fact that Mrs. Paul proved to have an explanation for writing off bad debts in the sum of $23,000 was no reason to hold that to question her on the matter was objectionable. It was Mr. Paul who volunteered the answer that the figures in the balance sheets, from the point of view of liquidity, �looked grim on paper�; to counsel�s question that because of their financial position the respondents �were hanging on by the skin of their teeth�, Mr. Paul did not disagree but answered �Possibly so�. He agreed that the respondents �were paying when they could�. It was quite legitimate to investigate the reason for non payment of the outstanding balance of the accounts. In my opinion it could not be said that �the defendants sought to ridicule the balance sheet of the company by avoiding reference to the important questions of work in hand and unpaid for�. Criticisms made in cross-examination were related to lack of liquid funds and that was a matter for consideration together with money owing for work in hand.

N1>I have had more difficulty in deciding whether the comments made by senior counsel at the trial of the action justified an award of aggravated damages. The comments were certainly strong, especially �a more appalling state of financial instability it would be difficult to find�, and �they are on very shaky ground indeed�; �No financier ought to be prepared to lend them a penny�. His Honour underlined the verb �are� in citing the second comment, but this seems too fine a standard to apply to counsel�s final address. Some of the comments were not without substance��They were operating on other people�s credit ... there was no evidence of the real value of the plaintiff companies contracts.� In fact the only evidence as to the value of those contracts was that given by Mr. Paul, which seems the point of the criticism. However, on the whole I agree with the learned Chief Justice that in a case tried by a judge alone it is proper to have regard to the context in which those comments were made. The comments in question appear in a single isolated passage in the course of an apparently well ordered address when counsel was addressing himself to the question whether the publication to Mrs. Paul was protected or not, and in particular to the probability whether Mr. Corbett had agreed to a variation of the credit limits fixed in the letter of 12th March, 1969. Whether his Honour drew the attention of junior counsel to those particular comments when counsel was asked to deal with counsel�s conduct of the trial in relation to damages does not appear. Whilst the comments are strong they were relevant to the issue of protection being dealt with, and as the learned Chief Justice pointed out, on that general issue the appellants succeeded. The appellants also succeeded on the particular issue, as the learned trial judge held there was no variation.

N1>Whilst the learned trial judge had the advantage of hearing counsel�s final address, there is no suggestion in the judgment that the finding of aggravated damages was based on the manner of delivery. As, in my opinion, so many of the learned trial judge�s strictures on particular points in the cross-examination and address cannot be supported, I consider that it would be wrong to support the finding merely because of the admittedly strong comments which remain, and considered out of context.

N1>For these reasons I would allow the appeal as to damages. Counsel for the respondents submitted that the damages actually awarded were of quite a moderate order having regard to the fact that the two respondent companies suffered injury because of the defamatory statement, and the sum of $2,000 could be supported even without the element of aggravation. But I see no reason to differ from the learned trial judge�s view that a suitable verdict would be $500 in the absence of circumstances of aggravation. I would therefore reduce the damages to $500.

N1>I agree that there should be judgment in accordance with the order proposed by the Chief Justice.

CLARKSON J: I have read the judgments of Minogue C.J. and Frost S.P.J. in this appeal and find it unnecessary to deal with a number of preliminary matters.

I agree with Frost S.P.J. that if leave is required to sustain the appeal on the first ground, leave should be given.

Further, I take the view that if the plaintiffs at the trial proved that the defendant Holmes, when speaking to the witness Darcey, was actuated by spite as the learned trial judge found, no lawful excuse for publication was provided by s. 16 (1) (e) of the Defamation Ordinance and it is therefore unnecessary to consider many of the submissions made to us on the law.

Both the other members of this Court, in considering the first ground of appeal, refer to findings by the trial judge which they say cannot be supported but go on to conclude that sufficient remains, coupled with the trial judge�s observations on the demeanour of the witnesses to support the finding that Holmes� statement to Darcey was made out of spite.

I am conscious of and hope I do not underestimate the great advantage the trial judge had in seeing and hearing the witnesses and the corresponding disadvantage we have who only read the transcript. This is a matter to which I must return after considering the facts.

There are three occasions which are of importance. The first is the conversation between Mrs. Paul and Holmes on 21st April; the second is the telephone conversation between Holmes and Darcey during which the publication to Darcey occurred; and the third is the conversation between Holmes, Mrs. Paul and Mrs. Brown�during which publication of the defamatory matter again occurred.

The trial judge proceeded on the basis that this last conversation took place before Holmes� telephone conversation with Darcey, but it was accepted before us that this was not so. In fact, counsel for the plaintiffs submitted that Mrs. Paul�s conversation with Holmes and his conversation with Darcey both took place on 21st April, and that Mrs. Paul and Mrs. Brown saw Holmes on 22nd.

Whether the conversation with Darcey was on 21st or 22nd April, is unimportant, but it is clear that the last of the three occasions was when Mrs. Paul and Mrs. Brown saw Holmes and that was on 22nd April.

This error of the trial judge led him to impute to Holmes at the time of his conversation with Darcey knowledge which he had not then yet obtained.

Whether or not a man acts or speaks out of spite is usually a matter of inference and the issue was so determined here. In effect the trial judge concluded that because Holmes could not have believed what he said, he must have been actuated by spite. It therefore becomes necessary to look at what Holmes said, the circumstances in which he said it and the inferences drawn.

The trial judge reached the conclusion that when Holmes spoke to Darcey he was not acting in good faith. He then goes on to explain why and refers to five matters.

1. The trial judge said: �When asked did he realise the possible consequences of his action (in informing Mr. Darcey that the plaintiff companies� credit had been cut off), he replied �No�. I am unable to accept the truth of his reply.�

I think the trial judge read too much into this reply. It was put to Holmes in cross-examination that he had a basic dislike of Paul and that as soon as the witness became acting manager he sought the opportunity to destroy the credit of Paul�s companies. This was at the least a somewhat bold assertion which was not even led from Paul himself and which the trial judge did not accept.

The relevant portion of the transcript is as follows:

N2>�Q.���� And I put it to you as soon as Mr. Corbett went on leave and you were in charge of the store, you seized at the opportunity to�you hoped to destroy those companies� credit?

N2>A.������ No.

N2>Q.������ You realize that was the possible consequences of your action?

N2>A.������ No.

N2>Q.������ You did not?

N2>A.������ No.�

Presumably the word �realize� in the above passage should read �realized� because the succeeding statement by counsel was �You did not� in the past tense.

The highest it can be put is a statement by Holmes that when talking on a previous occasion to a fellow credit manager with whom he ordinarily discussed such matters and saying that he had stopped the credit of two of the companies concerned he did not then realize the possibility that the companies� credit could be destroyed. Whatever significance attaches to this exchange I think it is going too far to say, as the trial judge did, that �when asked did he realize the possible consequences of his action ... he replied �no�.� The witness was not in fact asked whether he realised the possible consequences of his statement to Darcey.

2. The trial judge criticizes Holmes� assertion that an account cannot be closed until it is paid. He says that the action of Mrs. Paul in telephoning him, delivering the letter, and asking for a final account to be made up �is capable of only one interpretation as a matter of English�, namely that she had �closed� the accounts.

Two comments may be made: firstly, as previously mentioned when Holmes spoke to Darcey he had not then received the letter from Mrs. Paul; secondly, I am quite unable to agree that Holmes must have known that the companies had indeed �closed� their accounts. I think the meaning of �closed� in this context is ambiguous and that a credit manager may well insist that an account is not �closed� in the company�s books until it has been paid or otherwise settled.

It should also be remembered that the evidence was that a number of people in a number of places were operating on the account. If the account was �closed� on 21st April, what happened in respect to goods obtained on credit at, say, Kieta on 22nd or 23rd April? Could they be added to a �closed� account? From the time Mrs. Paul indicated that she would no longer operate on the account until the account was finally settled a number of inquiries would need to be made and a number of debits or even credits made and the account then settled. For various purposes and depending on who was speaking, the account at any stage of this process might or might not have been described as �closed�.

3. The trial judge attaches considerable importance to Holmes saying to Darcey that the companies �were going to close� their account but in any case he had cut off their credit, because it is said this conveyed the impression that the dissatisfaction initiating a cutting-off of credit was his and that credit had been cut off.

Bearing in mind what I have said about when an account may be described as �closed� I would have thought that a description of the situation as one in which the companies were going to close their accounts was fair and substantially accurate.

4. It is also said that Holmes gave the impression as mentioned above that the dissatisfaction initiating the cutting-off of the credit was his and that he suppressed information that Mrs. Paul had closed the accounts by verbal instructions on 21st and by letter delivered on 22nd.

Here there are with respect two misapprehensions: firstly, in the version accepted by the trial judge of the conversation between Holmes and Darcey, Holmes expressly said that he had seen Mrs. Paul and she was going to close their accounts. Further, there is a passage in Darcey�s cross-examination which is quoted by the Chief Justice in his judgment which would indicate that Holmes agreed that Darcey had told him that there had been a dispute between the parties.

When a debtor who owes money on a current account says he will no longer operate on the account I can see no real significance in the creditor describing the situation either as one in which the debtor was going to close the account or one in which he had closed the account.

Again the further comment is necessary that at the time of Holmes� conversation with Darcey he had not received the letter from Mrs. Paul.

If the matter stopped there I would conclude that the trial judge misapprehended the facts to a significant extent. But his conclusions are based also on observations made by him of the witnesses and their demeanour. From their demeanour the trial judge concluded that Mrs. Paul might well irritate and arouse the animus of Holmes, more particularly when she sought �to carry the fire into his camp� by writing to Port Moresby. After observing the demeanour of Holmes and scrutinizing the evidence the trial judge draws the inference that Holmes in speaking to Darcey acted out of spite.

5. This gave rise to the fifth matter to which I refer, that the trial judge thought that Holmes� attitude might have been influenced by Mrs. Paul �carrying the fire into his camp� by writing to Port Moresby. But it is clear that Holmes did not know that this had occurred, when his telephone conversation with Darcey took place.

The position which then emerges is that there were five matters together with the demeanour of the witnesses which led the learned trial judge to conclude that Holmes could not have believed what he said and that therefore he spoke out of spite. But as to the first, the trial judge read more into the exchange than I think it should reasonably bear; as to the second and third, I regret that I disagree with the exclusive meaning attributed to the words used; and as to the fourth and fifth I think it clear that the trial judge misapprehended the facts and that in each case his conclusion is not justified.

This returns me to the earlier inquiry regarding the trial judge�s assessment of the demeanour of the witnesses. I cannot see that any of the five conclusions of the trial judge to which I refer depend on a consideration of the demeanour or behaviour of the witnesses. At the very least the second and third depend on the ordinary meaning to be given to words, and the fourth and fifth are shown to be misapprehensions.

If the trial judge had not drawn inferences adverse to Holmes in respect to the five matters mentioned�and I have explained why I think he should not have done so�what is there left which coupled with his assessment of the witnesses� demeanour could have led him to the conclusion that Holmes spoke out of spite?

There is a further aspect which deserves comment.

It is established that the conversation between Holmes, Mrs. Paul and Mrs. Brown took place on 22nd April, and the telephone conversation between Darcey and Holmes took place before that, either on 21st as the plaintiffs now contend or on 22nd April. Absence of good faith was not shown to exist on the occasion of the conversation with Mrs. Paul and Mrs. Brown. The effect of the decision is then that when Holmes told Darcey that credit had been stopped he knew it to be untrue, but when he thereafter told Mrs. Paul and Mrs. Brown the same thing he did not believe it to be untrue.

Where the trial judge concludes that Holmes could not have believed what he said was true�and that he therefore spoke out of spite�and that conclusion is based on five considerations other than the demeanour of witnesses which he specifies and there is no indication that he is influenced by any other consideration, and where each of those five considerations is shown to be unreliable, I cannot think that the demeanour of the witnesses can be a critical consideration. The assessment of demeanour is an aid to, not a substitute for, evidence.

In my view the position is such as to call for a new trial.

4 MAY 1972

On 4th May, 1972, the court announced its ruling as to costs, and delivered the following reasons:

MINOGUE CJ FROST SPJ CLARKSON J: At the trial the respondents recovered $2,000 damages, including aggravated damages of $1,500. The respondents succeeded upon the appeal in retaining verdicts against the appellants but lost the appeal upon the issue of damages which were reduced by the significant sum of $1,500.

The matter for the court now to determine is the respondents� application for costs. Counsel for the appellants submitted that as each party had succeeded on one issue the order to be made should be that each party should bear its own costs. Counsel did not dispute that the appellants should pay the respondents costs of the trial.

Counsel for the respondents submitted that they should recover their entire costs of the appeal as they had succeeded on the substantial issue, which was whether the respondents should retain their verdict.

In our judgment the respondents� contention that the respondents succeeded on the substantial issue is sound and that accordingly in the exercise of our discretion we should not leave the respondents to pay their entire costs. However, in view of the appellants� success on the issue of damages which considerably reduced the verdict we consider that the respondents should not recover their full costs of the appeal, but part only, which we fix in the proportion of one half.

Order accordingly that the appellants pay to the respondents one half of the respondents� costs of appeal.

Appeal allowed in part. Order appealed from varied by substituting a judgment for $500 for the judgment of $2,000. Appellants to pay to respondents one half of respondents� costs of appeal.

Solicitor for the appellants: J. K. Smith, Esq.

Solicitor for the respondents: J. Andrews, Esq.

[iv]The effect of s. 20 (1) of the Supreme Court (Full Court) Ordinance 1968 is set out infra at p. 13.

[v]Infra p. 15.

[vi]Infra p. 15.

[vii][1970] HCA 43; (1970) 124 C.L.R. 192, at pp. 211-214.

[viii](1966) 39 A.L.J.R. 505.

[ix] [1937] St.R.Qd. 153, at p. 167.

[x](1877-78) 3 Q.B.D. 237.

[xi] [1937] St.R.Qd. 153, at pp. 167-169.

[xii] [1917] A.C. 309, at p. 339.

[xiii] (1930) 1 K.B. 130, at pp. 154-155.

[xiv](1965) 83 W.N. (Pt. 2) (N.S.W.) 229, at p. 258.