CATCHWORDS

DEFAMATION - Privilege - qualified privilege - whether available to consumer organisation in respect of article in consumer magazine published by it dealing with potentially dangerous product - whether defence of qualified privilege established - whether reply of malice established.

TRADE PRACTICES - Interpretation - exclusion of liability by s 65A of Trade practices Act 1974 - application of section to consumer magazine published by consumer protection organisation.

Trade Practices Act 1974 s 65A

Sun Earth Homes Pty Ltd v Australian Broadcasting Corporation (1993) 45 FCR 265

Camporese v Parton (1983) 150 DLR (3d) 208

Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211

Adam v Ward [1917] AC 309

Horrocks v Lowe [1975] AC 135

BOWIN DESIGNS PTY LIMITED v JOHN VINCENT JOYCE & ANOR

 

No NG 758 of 1992

Lindgren J

Sydney

6 December 1996

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)         No NG 758 of 1992

GENERAL DIVISION                  )

          BETWEEN:

BOWIN DESIGNS PTY LIMITED

                     First Applicant

JOHN VINCENT JOYCE

                    Second Applicant

          AND:

AUSTRALIAN CONSUMERS ASSOCIATION

                          Respondent

CORAM:    Lindgren J

PLACE:    Sydney

DATE:     6 December 1996

                      MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.   The application be dismissed.

2.   The applicants pay the respondent's costs.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)         No NG 758 of 1992

GENERAL DIVISION                  )

          BETWEEN:

BOWIN DESIGNS PTY LIMITED

                     First Applicant

JOHN VINCENT JOYCE

                    Second Applicant

          AND:

AUSTRALIAN CONSUMERS ASSOCIATION

                          Respondent

CORAM:    Lindgren J

PLACE:    Sydney

DATE:     6 December 1996

                    REASONS FOR JUDGMENT

                      TABLE OF CONTENTS

 

GENERAL INTRODUCTION...................................... 2

INTRODUCTION TO FACTS..................................... 3

THE PLEADINGS............................................ 11

THE EVIDENCE............................................. 18

     The period down to 15 August 1989................... 18

     The period from 15 August 1989 to 17 December 1991.. 29

     The period from 17 December 1991 to the publication

     of the article at the end of June 1992.............. 42

     Publication of the article as a result of the mailing

     of the July 1992 issue of "Choice" magazine on 26

     June 1992........................................... 80

     The period after publication of the article......... 80

REASONING................................................ 93

     The imputations said to have been conveyed by the

     matter complained of................................ 93

     General legal nature of the various qualified

     privilege/qualified protection defences............ 110

     General nature of the various "comment" defences... 115

     ACA's defence of qualified privilege at common law. 118

     ACA's defence of qualified privilege under

     sub-s 22 (1) of the NSW Act........................ 138

     ACA's "code" defences of qualified protection

     in Queensland and Tasmania......................... 152

     ACA's various comment defences..................... 152

     Claims under the TP Act and the FT Act............. 153

     Fraud and negligence............................... 155

CONCLUSION.............................................. 155

GENERAL INTRODUCTION:

The first and second applicants ("Bowin" and "Mr Joyce" respectively) seek to recover damages from the respondent ("ACA") arising out of the publication of an article in the July 1992 issue of "Choice" magazine published by ACA (the article will also be referred to sometimes as "the matter complained of").  The article was entitled "From Gas Heater to Flamethrower".  It related to a portable gas heater known as the "Mod-n-aire MS12" ("the MS12" and "the MS12 heater") manufactured by Bowin.  Mr Joyce is the managing director of Bowin.  A photocopy of the article with line numbers added for reference purposes is annexed to these Reasons for Judgment.

Bowin and Mr Joyce claim that ACA's publication of the article gives rise to causes of action in defamation, fraud and negligence, and statutory causes of action based on contravention of various provisions of the Trade Practices Act 1974 ("the TP Act") and of the Fair Trading Act 1987 (NSW) and equivalent legislation in the other States and Territories of Australia ("the FT Act" - references to sections of the FT Act will import references to the relevant provisions of the New South Wales Act as well as to those of the Acts of the other jurisdictions).

INTRODUCTION TO FACTS

Mr Joyce is a senior and experienced mechanical engineer of standing in his profession.  He and his wife are the directors of Bowin.  Bowin has been designing and manufacturing gas heaters since 1977.  Through Mr Joyce, Bowin designed the MS12 in 1983.  Manufacture of it commenced in January 1984.

The heater is linked to a "bayonet" gas outlet by means of a 1.5 metre flexible hose of _ inch diameter.  Beginning in March/April 1987, the hose for the MS12 was manufactured and supplied to Bowin by Thomas Gooden & Son (Industries) Pty Ltd ("Gooden").  In oral evidence, Mr Joyce said that although other manufacturers had previously supplied Bowin with hoses for the MS12, Gooden was the only manufacturer that could (apparently as from March/April 1987) provide hoses of the colour and with the flexibility that Bowin required.

In mid-1989, a problem with the hoses came to light: there were instances of the hose becoming detached from the heater.  The evidence does not suggest that there was any defect of design or of quality control in respect of the heater itself: rather, the defect was in the hose supplied by Gooden.

At both the heater and the bayonet ends of the hose, there were crimped brass fittings.  The problem was that the hose became detached from the crimped brass fitting which remained screwed into the back of the heater.  If gas was flowing at the time, it was enabled to escape.  If the heater was burning at the time, there was risk of ignition of the escaping gas, and consequently of fire.  I need not discuss the process by which this could occur.  The evidence did not explore this question and there was no occasion for it to do so.  Obviously, the risk of ignition was of short duration since the heater had lost its supply of gas.  This is not, however, to minimise the seriousness of the risk: there were instances of fire, fortunately without serious consequences, but, as is common knowledge, any fire can have disastrous results for the person and property.

The first incident of which Bowin and Mr Joyce became aware occurred on 3 May 1989 when a Mrs Clark telephoned Bowin complaining that a child had "tripped over [the] unit and ripped [the] hose out" (Bowin's service call report no. 003046).  Bowin maintained a computerised system of "service call reports".  When someone contacted Bowin about a need for service, details would be immediately typed into the computer and a print-out would be handed to the appropriate serviceman.  The serviceman would record on the print-out details of the service call which he made, including his name, the date of the service call, the serial number of the heater (if the consumer had not already supplied this to Bowin), the work done and the cost of labour and materials.  As well, the form provided for a "fault code" to be inserted.  Bowin's fault code M/11 signified "HOSE FAULT" and featured on many of the service call reports in the case.

In the case of Mrs Clark, the serviceman called on 8 May 1989, the serial number of the heater which he inspected was 3935, the work done was "fit new hose", the labour in question was that of a "service call" costing $40.00 and the materials supplied were a "20103 hose" costing $25.52.  All hoses supplied by Gooden for the MS12 bore the product number 20103.  The serviceman recorded Bowin's "fault code" as "M13".  The fault code "M13" signified Bowin's general category which covered any fault not specified in any other category and was said by Mr Joyce to indicate "full service".  No doubt this first incident was seen by the serviceman as due, not to a product fault, but to human intervention.  The evidence showed that heater number 3935 had been manufactured by Bowin (and issued with its hose) some two years earlier on 4 May 1987 for Grace Bros, Belconnen.  

Over the period from May to August 1989, there were further instances of detachment of hoses from the MS12.  For example, on 3 July 1989 a complaint by Mrs A James was recorded as being "heater burst into flames".  The serviceman recorded:

     "Heater beyond repair.  Order and supply new one.  Hose has ripped from heater and burnt heater and carpet."

The serial number of Mrs James' heater was 4418.  It had been manufactured on 23 February 1988 for "AGL Sydney Ltd, Mortlake" and Mrs James had bought it in July 1988, that is to say, a year earlier.  There was a one-year warranty on the MS12 and the particular heater was replaced by Bowin without charge to Mrs James. 

It will be necessary to consider later the effect of the evidence relating to the extent of the incidence of the hose problem.

John Musster ("Mr Musster") became the Purchasing Manager of Bowin on 1 July 1989, two days before Mrs James' complaint was received.  On 15 August 1989 a meeting took place between representatives of Bowin and of Gooden.  Present were Mr Musster, Christopher Sheehan who was Bowin's Financial Controller, and Mr Joyce, representing Bowin, and Gerald Gooden ("Mr Gooden") and a Mr Lawrence, who was apparently an engineer, representing Gooden.  Gooden hoses then held by Bowin were returned to Gooden for checking.  So far as the evidence reveals, in relation to hoses supplied by Gooden to Bowin after the meeting in August 1989, there was no further instance of a hose becoming detached from its crimped brass fitting.

However, unfortunately further incidents were to occur involving heaters which Bowin had manufactured and sold
previously.  For a long while it appeared that the last incident to occur was one in September 1990, involving the heater of a Mrs Gard of Matraville.  But, as will be seen, a further incident was to occur some 21 months later, in mid-1992, virtually contemporaneously with publication of the article, although it became known only after publication.

On 12 December 1990, about three months after the failure of the hose attached to Mrs Gard's heater, Mr Musster wrote a memo to Mr Joyce about the hose problem.  As will be seen, Mr Joyce's evidence is that the memo was inaccurate in certain respects. 

Mr Joyce did not find the services of Mr Musster to be satisfactory.  Mr Musster ceased to be employed by Bowin on 17 December 1991, some 12 months after writing his memorandum to Mr Joyce.

In early 1992, Mr Musster telephoned Clare Bonham of ACA making allegations against Bowin, not only in respect of the MS12, but also in relation to other Bowin products.  He wrote to Ms Bonham on 24 February 1992 enclosing a copy of a memo dated 12 December 1990 from him to Mr Joyce.   According to Mr Joyce, this version of the memo of that date differed from that which Mr Musster had in fact given to him on 12 December 1990.  Indeed, Mr Joyce's evidence is that he saw the second version for the first time when it was produced by ACA in 1992.  However, nothing turns on the difference between the two versions.

From the time when Mr Musster first contacted ACA down to the publication of the article at the end of June 1992, ACA conducted an investigation into the MS12 hose problem.  ACA made inquiries of Mr Joyce, Mr Gooden, the Australian Gas Association ("AGA"), the Federal Bureau of Consumer Affairs ("the Bureau"), the New South Wales Fire Brigade, the Australian Gas Light Company ("AGL"), Mr Musster, and some of the owners of MS12s who had complained to Bowin (particulars of them had been supplied to ACA by Mr Musster).  AGA is an association of gas appliance manufacturers and gas suppliers which lays down standards for the manufacture of appliances and receives some recognition from government.  AGL is, relevantly, a major retailer of gas appliances. 

The person at ACA who had general responsibility for the MS12 project was Des Shales ("Mr Shales"), Project Manager.  The particular journalist at ACA who wrote the article was Peter Cerexhe ("Mr Cerexhe").  It will be necessary later to analyse in some detail the steps taken by them and others on behalf of ACA leading up to publication because, as will be seen, ACA's conduct is relevant to its defence.

The July 1992 issue of "Choice" which contained the article was mailed by ACA on 26 June 1992 to 140,403 subscribers.  As well, copies were supplied free of charge to approximately 150 persons and institutions, including various consumer organisations in Australia and overseas, a number of Federal and State Government Departments, hospitals and health related organisations, libraries, technical and other expert advisers, representatives of the media and universities.  Libraries stocked the magazine and representatives of the media took it with a view to its contents' becoming available to the public.

Following publication, various public media became interested in the subject matter of the article.  During July 1992 the MS12's problem was featured three times in the press, thirteen times over the radio and four times on television.  A Mr G Sirmai of ACA was interviewed on television and radio in relation to ACA's investigation of the heater.

It may be questioned why the article would be written and its subject matter further canvassed in these ways, in light of the fact that the last known incident had occurred as long ago as September 1990.  The answer is ACA's suggestion, voiced in the article, that it was not unlikely that there remained in consumers' homes MS12 heaters with hoses manufactured by Gooden prior to August 1989 with the latent propensity to disconnect.

Bowin and Mr Joyce led evidence of the detrimental effect which the publication of the article had.  There was evidence directed to showing that the MS12 had become unmarketable and that there was some "overflow effect" on other Bowin products.  There was also evidence showing steps taken to "contain" the damage sustained and otherwise to mitigate Bowin's loss.  There was evidence of the personal effect of the publication on Mr Joyce.

At the time of publication, so far as Mr Joyce and ACA knew, the last incident which was to occur was that concerning Mrs Gard's heater in September 1990.  However, on 8 July 1992, Mr Joyce received a letter dated 26 June 1992 from Mrs W Bentley in Western Australia about her MS12 serial number 4862 which she had bought some four years earlier.  Her letter complained that when the heater was connected to the gas outlet but not burning, "it suddenly blew the hose fitting off where it was attached to the heater".  She said that a lot of gas escaped and asserted that if no-one had been home or if her children had been left alone or someone had been smoking, "there could have been a disaster".  According to Bowin's records, heater no 4862 had been manufactured on 6 April 1988 for "Vemax".

On 8 July 1992 Mr Joyce wrote to Mrs Bentley pointing out that the hose was not manufactured by Bowin but was bought by it from another company and that although the period of four years far exceeded the warranty period, he would seek a credit from the manufacturer of the hose and hoped to pass on to her within seven days the amount which she had outlaid for repair.

As well, Mr Joyce telephoned Mr Gooden and followed this up with a letter recommending that a "safety notice" be published throughout Australia.  As a result, Gooden published a "Product Safety Notice" in a form approved by the Bureau.

THE PLEADINGS

By their application, Bowin and Mr Joyce seek a declaration that ACA has, in trade or commerce in Australia, engaged in conduct in contravention of ss 52, 52A, 55 and 55A of the TP Act and ss 42, 43, 49 and 50 of the FT Act.  They seek injunctive relief, an order for corrective advertising and such other orders as the Court might deem fit pursuant to s 87 of the TP Act and s 72 of the FT Act, damages pursuant to s 82 of the TP Act and s 58 of the FT Act, and damages under the general law for defamation, for fraud and for negligence, together with interest and costs.   Of these various remedies, only that of damages was addressed in submissions.

By their second further amended statement of claim, the applicants plead a holding out by ACA of itself as possessing special skill and competence in relation to certain matters.  These are the investigation of the activities of manufacturers, wholesalers, retailers and providers of goods and services, the giving of advice to consumers, the giving of advice on consumer protection generally, and the preparation and production of a fair, balanced, unbiased, reliable, truthful and correct magazine publication (4,5 - bold numerals are references to the numbers of paragraphs in the pleading).  It is pleaded that the article in the July 1992 issue of "Choice" magazine which ACA caused to be distributed for public reception by consumers throughout Australia (6), conveyed five imputations which defamed Bowin and Mr Joyce, and six representations or aspects of advice, knowing and intending that consumers would rely upon them in determining whether or not to deal with Bowin and Mr Joyce in Bowin's business.  The five imputations are repeated as "particulars of representations and/or advice".  They are at the heart of the case and are as follows:

     "(i)   that the Applicants and each of them were reckless in and about the manufacture and sale of dangerous appliances, namely gas heaters;

 

      (ii)  that the Applicants and each of them were irresponsible and reckless in that they knowingly distributed dangerous appliances, namely gas heaters;

 

      (iii)that the Applicants and each of them were careless and reckless in failing to take the appropriate steps to recall or remove dangerous appliances, namely gas heaters, from consumers;

 

      (iv)  that the Second Applicant was dishonest in his claim that any danger in and about the gas heaters was limited and had been rectified;

 

      (v)   that the Second Applicant, although a board member of the Australian Gas Association, knowingly supressed [sic] the truth concerning gas heaters manufactured by his company, from the Association and consumers." (7)

It is pleaded that these five imputations were defamatory of the applicants and of each of them (8).

The additional representation, which is not also pleaded as an imputation, is as follows:

     "that the Applicants and each of them had not informed the Australian Gas Association that gas hoses on the heaters lead [sic - led] to fire; ..." (9)

It is pleaded that the imputations, representations, and/or advice:

     "(a)are and were unfair, unbalanced, biased, unreliable and untrue;

 

      (b)are and were made by the Respondent knowing them to be untrue or with reckless indifference as to their truth or falsity; and

 

      (c)alternatively to paragraph (b), are and were made by the Respondent negligently and in breach of its duty of care to the Applicants and each of them." (10)

It will be noted that para (b) pleads fraud and para (c) pleads negligence.  It is further pleaded that by publishing the matter complained of and the imputations, representations and/or advice referred to, ACA, in trade and commerce, engaged in conduct that was misleading or deceptive in contravention of s 52 of the TP Act and s 42 of FT Act, and, as well, contravened ss 52A, 55 and 55A of the TP Act and ss 43, 49 and 50 of the FT Act. (11)

Further, it is pleaded that "a certain person or persons previously connected with the applicants" made available and/or provided, in trade and commerce, certain information to ACA giving rise to one or more of the imputations, representations and/or advice referred to, and thereby engaged
in conduct in contravention of ss 52, 52A, 55 and 55A of the TP Act and ss 42, 43, 49 and 50 of the FT Act, and that ACA:

     "(a)aided, abetted, counselled, procured and induced;

 

      (b)was directly and/or indirectly knowingly concerned in and conspired with, the said person or persons to effect each of those contraventions." (12)

(The only "person or persons previously connected with the applicants" referred to in the evidence is Mr Musster.)

Finally, it is pleaded that as a result of the publication of the matter complained of and the imputations, representations and/or advice, the applicants were greatly injured in their character, credit, reputation and business, have been held up to public ridicule and contempt throughout Australia, and have suffered and will continue to suffer loss and damage. (13)

It is also pleaded that Bowin incurred expenditure in an endeavour to mitigate the effect of the matter complained of by the remedial action which it took, and has suffered loss.  Particulars of this loss are given as follows:

     "(i)   Discarded stationary - $5,0000.00 [sic - $5,000.00];

      (ii)  Advertising of discounted heaters - $2,280.00;

 

      (iii)Major advertising - $10,000.00;

 

      (iv)  Advertising subsidy - $23,772.90;

      (v)   Videos - $30,261.00." (14)

Paragraph 15 is as follows:

     "15.Further, the matter complained of and the imputations pleaded in paragraph 7 hereof were calculated to cause and did cause actual damage to the Applicants and each of them.

 

          Particulars of Aggravated and Exemplary damages:

 

          The second Applicant asserts that damages are affected by reason of the following facts and matters:

 

          (a)The Respondent's conduct in causing and/ or participating in each of the publications hereunder of and concerning the Applicants and for the purpose of promotion of the matter complained of:

 

              (i)     14 July, 1992 - interview with Mr G. Sirmai of the Respondent at 7.30 am 2WS News;

 

              (ii)    14 July, 1992 - interview with Mr G. Sirmai of the Respondent at 11.00 am on ‘Eleven AM’ ATN 7;

 

              (iii)   14 July, 1992 - interview with Mr G. Sirmai of the Respondent at 5.30 pm ‘Sydney Extra’ TCN 9;

 

              (iv)    14 July, 1992 - interview with Mr G. Sirmai of the Respondent at 6.00 pm ‘Seven Nightly News’ ATN 7;

 

               (v)    15 July, 1992 - interview with Mr G. Sirmai of the Respondent on ‘Tony Delroy Show Late Night’ ABC radio;

 

               (vi)   21 July, 1992 - interview with Mr G. Sirmai of the Respondent at 5.30 pm ‘Sydney Extra’ TCN 9;

 

               (vii)  21 July, 1992 - interview with Mr G. Sirmai of the Respondent at 2.55 pm ‘Consumer Watch’ 2GB
Radio;

 

               (viii)21 July, 1992 - article in ‘The New England’ entitled ‘Warning on gas room heater hose’;

 

               (ix)   7 August, 1992 - Talkback interview with ‘Ted’ on ‘Sattler File’ 6 PR radio; and

 

               (vii)     [sic]

                       September, 1992 - article in ‘Choice’, entitled ‘Mod-N-Aire Gas Heater: More News’

 

          (b)The Applicants and each of them were particularly injured in the First Applicant's business and the Second Applicant was particularly distressed and embarrassed by:

 

              (i)     the nature and falsity of the imputations and representations; and

 

              (ii)    the failure of the Respondent to make any or any adequate inquiries prior to the publication of the matter complained of;

 

          (c)The contumelious disregard of the Applicants rights and reputations."

I need not give an account of all aspects of ACA's defence.  ACA admits that it published the article in each State and Territory of Australia.  It puts in issue whether the pleaded imputations are capable of being or are in fact borne by the article, or are capable of being or are in fact defamatory of the applicants.  In answer to the claims based on the TP Act and the FT Act, ACA pleads s 65A of the TP Act and s 60 of the FT Act.  These two sections are to the effect that none of the provisions in the respective Acts on which the applicants rely apply to a publication by a person who carries on a business of providing information, in the course of carrying on such a business.

There remain the special defences to the case in defamation.   In respect of publication in New South Wales, qualified privilege at common law and the statutory defence of qualified privilege under s 22 of the Defamation Act 1974 (NSW) ("the NSW Act") are relied on.  So is the statutory defence of comment on a matter of public interest under ss 29-33 of the NSW Act.

In respect of the "code" States of Queensland and Tasmania, ACA relies on the code defences of qualified protection.

In respect of publication in all other jurisdictions (the Australian Capital Territory, the Northern Territory and the States of Victoria, South Australia and Western Australia), ACA relies on the defence of qualified privilege at common law.

In relation to "fair comment" in respect of jurisdictions other than New South Wales, ACA relies on the defence of fair comment on a matter of public interest as defined or modified by local statutory provision.

By their amended reply to the defence of statutory and common law qualified privilege in New South Wales, qualified protection in Queensland and Tasmania, qualified privilege at common law in all other jurisdictions, comment in New South Wales, and fair comment in Queensland, Western Australia, Tasmania, and the Northern Territory, the applicants plead that ACA was actuated by express malice in publishing the matter complained of and/or published it with an absence of good faith.  In reply to ACA's statutory defence of comment on a matter of public interest in New South Wales, the applicants plead that when the comment was made, ACA's alleged servant or agent did not have the opinion represented by the comment (cf sub-s 33 (2) of the NSW Act).

THE EVIDENCE

The period down to 15 August 1989

Mr Joyce and Bowin

It is necessary, particularly in view of the claim in defamation, to know something of the standing and reputation of Mr Joyce and of the business of Bowin.  Mr Joyce's affidavit evidence of these matters was not challenged and I accept it. 

Mr Joyce is a mechanical engineer by trade, having been apprenticed originally to the Southern Electrical Authority in Queensland.  He holds a diploma in electrical engineering.  In the period from 1962 to 1967 he worked in the United Kingdom  where he specialised in aerodynamics and became Chief Development Engineer for the Lotus Car Company.  On his return to Australia in 1968 he formed Bowin.  His wife, Pamela Hilary Joyce is the only other director.  Bowin is their "family company". 

From the time of its incorporation, Bowin carried on the business of designing and manufacturing products.  Bowin's early customers included Ford Australia Limited, British Leyland and the State Rail Authority of New South Wales.  From the late 1970s/early 1980s, Bowin designed and manufactured products for the gas industry.

Mr Joyce was responsible for the design of the suspension of Ford Falcon racing cars which competed in the motor car race which used to be called "The Bathurst 500".  He re-designed the suspension for the Leyland Marina motor car in or about 1976.  He was responsible for the aerodynamic design of the first gas turbine powered car that raced in "The Indianapolis 500" in 1968.  In the early 1970s, he designed the lighting for use in double decker railway carriages used in New South Wales.

Through Mr Joyce, Bowin commenced designing and manufacturing gas heaters in 1977.  Mr Joyce was responsible for the introduction of gas log fires into Australia.  Bowin won a contract with the State Government of New South Wales for the design, manufacture and supply of gas heaters for use in public schools and other public buildings in the State.  To the date of Mr Joyce's affidavit (19 August 1993), Bowin had supplied at least 40,000 heaters to State schools under the contract.

As noted earlier, in 1983 Mr Joyce designed the MS12, and the first MS12 was manufactured by Bowin in January 1984.  In 1984, Bowin received the "Australian Design Award", which, Mr Joyce says, was "in respect of the MS12".

In 1985, Mr Joyce designed the "SST" heater, which was the first electronically controlled gas heater in Australia.  In the same year, he studied Japanese manufacturing techniques with the Japanese Manufacturing Association in Tokyo.  Bowin was one of the first companies in Australia to introduce the "Just in Time" system of manufacturing practised in Japan.  This method of organising production apparently involves manufacturing only sufficient quantities of a product to meet orders, and purchasing components and materials only in sufficient quantities to enable production in those quantities and according to that time scale.  Mr Joyce asserts that it is a feature of the method that it enables the manufacturer to achieve "total quality control".  He says that in 1986, in recognition of Bowin's introduction of the method, it received the "TEAM Award" ("Towards Excellent Australian Manufacturing") from the State Government of New South Wales.

From approximately 1987 and 1988 respectively, Bowin was involved in research, technology and development for low emission burners for gas appliances, at the request of the Education Department of New South Wales and of the South California Gas Company.  Bowin holds patents in relation to "low-nox" burners in Australia and in the United Kingdom and has "patents pending in other countries throughout the world".

It has been a feature of the case that Mr Joyce was, at relevant times, a member of various governmental and industry bodies having roles in relation to gas heaters.  In 1987 he was appointed by the Commonwealth Government as a member of "the Foley Committee" which inquired into the standards and quality control observed in manufacturing in Australia.  He has, from time to time, been a guest lecturer at the University of New South Wales and at Macquarie University on design, manufacture and quality control.  He was a member of the Board of the Technology Transfer Council which was established by the Commonwealth Government to "introduce new manufacturing philosophies into Australian industry", until that Council ceased to exist as an independent entity.  He is a member of the federal council of the Gas Appliance Manufacturers' Association of Australia ("GAMAA") and of the AGA's Air Quality Committee and Appliance Quality Review Committee.

There was other evidence of the good reputation enjoyed by Bowin and Mr Joyce, the detail of which I do not find it necessary to recount.

Bowin experienced growth of approximately twenty per cent per year over the ten years down to the date of Mr Joyce's affidavit, 19 August 1993.  Bowin has employed, at any one time over that period, forty to fifty people.  Mr Joyce says that Bowin's fortunes were continuing to improve until the publication of the article in the July 1992 issue of "Choice".

I accept that Mr Joyce personally, and through him, Bowin, have built up an enviable reputation in mechanical engineering in Australia.  In particular, I accept that this reputation has included, as an element of it, a known interest in promoting quality control and safety.  In this respect, the reputations of Mr Joyce and Bowin were particularly vulnerable to an assault of the kind which they allege against ACA.

Revelation of the Hose Problem - 3 May 1989 to 23 June 1989

Mr Joyce became aware that there was a problem with the hoses supplied by Gooden for the MS12 in May and June 1989.  According to Bowin's service call records, the first four incidents were as follows:

 

Mr Joyce's evidence was that he became aware of the first, second and fourth of these incidents within a day of their being reported to Bowin, and that after the second of them he instructed Bowin's service coordinator, Mrs Champion, to inform him of any further complaints of similar hose problems.

The immediate response of Mr Joyce to the Hose Problem - 23 June 1989 to 15 August 1989

Mr Joyce telephoned Mr Gooden and reported two failures "in the last two weeks" from a product manufactured about twelve months previously.  Apparently he treated the complaint of Mrs Clark on 3 May 1989 as being of a different kind, no doubt because the disconnection had been due to a child's having tripped over the hose.  It appears that he was referring to the Hancox and Jeppesen incidents.  Why he did not refer to the Yousef incident is not clear, but it seems  that the reason was that his telephone conversation preceded the serviceman's call on 28 June relating to her heater.  Of all the incidents noted, Mrs Clark's on 3 May 1989 seems to be the only one where the immediate cause of the separation of the hose was a sudden extraneous cause.  Mr Joyce asked Mr Gooden to check all hoses prior to delivery to Bowin to ensure that they were properly crimped, and told him that he (Mr Joyce) intended to inspect the hoses in stock and would advise Mr
Gooden of the outcome.  Mr Gooden undertook to inspect Gooden's production process.

Next, Mr Joyce inspected and tested a large number of hoses which had been supplied by Gooden.  He held the brass fitting that attaches to the heater in a vice and pulled at the hose.  With some pressure and a working of the hose backwards and forwards, he was able to pull some of the hoses from their brass fittings, but in many cases he could not do so.  He checked approximately 100 hoses in this way and concluded that "unless a deal of force and persistence was applied to the hoses, they would not become detached from the fitting in the field under normal operating conditions".  He said that notwithstanding this opinion, he instructed employees of Bowin to gather about 100 of the hoses in stock and return them to Gooden for inspection and testing.  In fact, Bowin returned 102 hoses to Gooden on 23 June.

At about the same time (23 June) Mr Joyce caused Bowin's sales and service personnel to inspect all MS12s held in store or on display for sale at each of the AGL showrooms in Sydney and at AGL's bulk store, for the purpose of determining whether or not the hose could become detached from the heater.  The service personnel informed him that the hoses inspected were satisfactory.

A further step taken by Mr Joyce was that he caused employees on Bowin's production line to inspect and test hoses supplied by Gooden before connecting them to the MS12s as they were manufactured.

As noted earlier, on 1 July 1989 Mr Musster became employed by Bowin as its Purchasing Manager.  Bowin's purchase of hoses from Gooden became part of his responsibility. 

On 3 July 1989, there was a further complaint which is recorded on the service call report form as follows:

Mr Joyce says that this was the first time he had become aware of any damage being caused by fire.  He gave an instruction that Gooden hoses were not to be used further in the production of the heaters and caused all such hoses on hand to be returned to Gooden for inspection and testing.  Copies of Bowin's "Quality Defect Return" forms in evidence show that fifteen 20102 model hoses supplied by Gooden (this model was not used on the MS12) were returned on 1 August, that 365 model 20103 hoses (used on the MS12) were returned on the same
day (1 August), and that two 20103 model hoses which had already been re-worked by Gooden were again returned to Gooden on 7 August.  Mr Joyce gave evidence that the 365 were all the 20103 hoses remaining in stock as at 1 August.  With the 102 20103 model hoses which had been returned earlier on 23 June and the two which had been returned on 21 July 1989, the 365 made a total of 469 that had been returned, not taking into account more than once the two which were returned a second time on 7 August.  In some cases, the return forms referred to potential danger to the end-user.  

Mr Joyce carried out a test on a number of heaters in Bowin's factory.  While the heater was burning, he detached the hose.  He found that the heater ceased burning and that he could not "simulate a fire".

There were these four further incidents at the end of July 1989:

During the period when these incidents occurred, Mr Joyce spoke to Mr Gooden asserting that "a major safety issue" was involved and had to be "addressed with all urgency".  Mr Joyce asked to meet with Mr Gooden and his engineers.

The meeting on 15 August 1989

A meeting took place on 15 August 1989 attended by Mr Gooden and a Mr Lawrence, representing Gooden, and Mr Joyce, Christopher Sheehan, the Financial Controller of Bowin, and Mr Musster, representing Bowin.  Mr Joyce said that he was greatly concerned and questioned whether the hoses were being manufactured in accordance with the relevant Standard.  Mr Gooden assured him that they were and that the hose had been "thoroughly inspected by the AGA laboratories".  Mr Joyce said that he needed to be assured that he did not have "hundreds of hoses that will fail".  Mr Gooden said that a thorough check had been carried out of the process in Gooden's factory and
that apparently there had been a "small number which [had] crept through [Gooden's] quality control".  He said that all of the hoses which Bowin had returned had been thoroughly tested and re-crimped to give Bowin further confidence in the hose.  According to Mr Joyce, he (Mr Joyce) said:

     "My greatest concern is for the safety of our customers and secondly, the good name of our company.  We are spending a great deal of time and money to ensure that we produce a high quality product that is safe.  I intend to report the matter to the Australian Gas Association and the Australian Standards Association.  If their advice is such that the product should be recalled, I will request you to recall the products and meet the expenses required to recall the products."

Mr Joyce said that Bowin would "monitor the situation in the coming 12 months" and that if the evidence suggested that there was "a serious quality control problem" extending beyond a few isolated failures, Bowin would move to recall the product and would expect Gooden to meet the full cost.  Mr Gooden agreed, or at least acquiesced, saying that he expected that no more incidents would be reported.

Mr Joyce was to concede in cross-examination that "in hindsight" he had not been "totally reassured" by Gooden that there were not hundreds of hoses that would fail (T 406.36-.37).  It is convenient to note at this stage the distinction, which was to be drawn in the article, between the "prompt action" which Bowin and Mr Joyce took in respect of identification of the fault, the ordering of new hoses and the
fixing of the problem for future MS12s on the one hand, and the failure to take any steps to inform existing owners of MS12s on the other hand.

The period from 15 August 1989 to 17 December 1991

Period from the meeting on 15 August 1989 to the failure of Mrs Gard's MS12 on 17 September 1990

According to Mr Joyce, on 18 August 1989 he telephoned Mr Robin Williams ("Mr Williams") of AGA in Melbourne.  Mr Williams had no recollection of the conversation and conceded that the conversation as deposed to by Mr Joyce may have occurred.  What follows is Mr Joyce's account of the conversation.  Mr Joyce, reported that Bowin had been experiencing failures with the flexible gas hoses fitted to the MS12, that so far the failures had not resulted in serious accidents, but that there had been "a fire which, fortunately, was contained within the heater".  (In fact, by 18 August there had been two cases of fire recorded in Bowin's service call reports, that of Mr T Hancox on 8 June and that of Mrs James on 3 July, but it is not clear that by 18 August Mr Joyce himself had become aware that there had been a fire in the Hancox case.)  Mr Joyce explained that the problem was that the hose pulled out of the crimped brass fitting which screwed into the back of the heater.  He and Mr Williams agreed that it was not obvious how a heater could catch fire, since burning would cease upon disconnection of the hose.  In answer to a question from Mr Williams as to whether the hose was "approved", Mr Joyce said that Mr Gooden had assured him (Mr Joyce) that it was, that he had met with Mr Gooden and had returned all stock to Gooden for inspection, but that he was "not happy with the hose at all".  Mr Joyce continued:

     "My concern, Robin, is that if the design of the product was different, these failures could not have occurred.  I believe that the standard for gas hoses is inadequate and the whole matter requires investigation.  Gerald Gooden tells me that the tests for these hoses requires placing a weight on the end of the hose, but I cannot get the hose to fail on a straight pull.  I can get it to fail by working it from side to side.  I believe some design changes are required."

The conversation continued as follows:

     "RW:`John, the standard for hoses has been around for a long time.  I have been involved with the Standards Committee.  In fact, I am the Chairman of the Standards Association Committee for gas hoses.  I believe that the code is more than adequate to meet your needs and involves far more than a pull test.  I am not sure that you are familiar with the code.'

 

     JJ:  `Well, Robin, I want this matter taken up with the Committee.'

 

     RW:  `Well, if you have concerns with the design of the hose, would you please put it in writing to me and I will take the matter up with the Committee.'

 

     JJ:  `Thank you.  I will write to you.'"

Mr Joyce then wrote to Mr Williams a letter dated 20 August 1989, the first paragraph of which was as follows:

     "I am writing to you with regard to the SAA Code for Flexible Gas Hoses.  I am led to believe, that you are the Chairman of this Committee."

The letter advised that over the preceding two months, Bowin had had "about 10 instances of the hose coming out of the crimped fitting".  In his affidavit, Mr Joyce said that in fact up to that time there were only the nine instances described earlier.   The letter advised that the date of manufacture of the faulty hoses was "1987 and 1988".  He advised that he had stopped production and had returned the hoses in stock to Gooden for testing.  He said that in due course the hoses had been returned by Gooden to Bowin "stamped tested" and that Bowin had recommenced production but was "still unhappy with the product and [had] brought in the manufacturer for further discussions".

According to Mr Joyce's letter, Gooden had advised Bowin that it was modifying its crimping dies to overcome the problem.  Mr Joyce advised that Mr Gooden had told him that the test carried out to ensure that the hose would not come out was a "pull test" which Gooden's hose passed.  Mr Joyce advised Mr Williams that he had discovered that it was possible for the hose to be inserted less than the full measure before crimping.  The last three paragraphs in Mr Joyce's letter to Mr Williams were as follows:

     "Needless to say I am less than satisfied with the present code which appears to only cover the direct pull on the hose.  On examination of the crimped fittings used by the manufacturer, I observed that the inner stem protruded past the outer by about 1mm, a quick sketch will soon show that the geometry of forces around the end of this stem, will obviously lever the hose from the crimping due to the direction of forces and the order of mechanical advantage.  Furthermore, either a sight hole or an identifying mark are necessary to allow inspection of the correct insertion depth of the hose in the fitting.

 

     I would appreciate your raising of this matter as an item of urgency with your committee, to attempt to minimise the potential for accident.  The manufacturer is aware of my concerns and is looking into the matters raised, but with the potential dangers inherent with this type of failure and new laws on product recall, I believe the issue should be addressed rather quickly.

 

     Looking forward to hearing further from you in the future, ...." (emphasis supplied)

In oral evidence, Mr Williams agreed that he understood the "potential dangers" to which the letter referred to include the possibility of fire.

It will be noted that Mr Joyce wrote to Mr Williams in the latter's capacity as chairman of a committee of the Australian Standards Association. 

On 24 August 1989, Mr Williams replied on the letterhead of AGA.  He referred to the relevant standard as "Australian Standard AS 1869 - Hose and Hose Assemblies for Liquefied Petroleum Gases (LPG), Natural gas and Town gas".  He acknowledged that he was the Chairman of "Committee RU/1 - Industrial Hoses" which, he said, was charged with the responsibility for that Standard.  He expressed the view that the Standard's requirements adequately covered the question of the strength of connections and advised that they had been in place for many years, both in British Standard BS 3212 and in various issues of AS 1869 going back to 1976.  He described the relevant tensile strength test and flexing resistance test, and said this:

     "While we have had problems with crimped fittings on hoses before, after they have satisfied our approval requirements, the problems have generally been found due to assembly faults or changes of ferrule design e.g. by the number of barbs being reduced from the original and hence the clip or crimping not securing the hose to the fitting."

He said that he was prepared to raise the matter at Committee RU/1's next meeting scheduled for early December, 1989, and in the meanwhile would pass the matter on to his "Approvals Officer" with a view to having the Committee's "Inspector" obtain samples for check-testing.

Mr Joyce says that when an inspector from AGA attended Bowin's factory to carry out "routine inspections" of the production line during the following weeks, he asked the inspector what was being done by the AGA about the Gooden hoses and was told, "we are checking out the crimping ... and retesting the hoses".

In 1990 there were further instances of failure of the hose.  According to Bowin's service call reports, they were as follows:

Mr Musster's memorandum to Mr Joyce dated 12 December 1990

On or about 12 December 1990, Mr Joyce received a typed report from Mr Musster on the subject "Faulty hose - service call code M11".  The report asserted that Gooden had taken over supply of hoses to Bowin on 23 March 1988 (the correct date was March/April 1987), that the first recorded complaint was that of Mrs Clark on 3 May 1989, and that the most recent was that of Mrs Gard on 17 September 1990. 

Mr Joyce says that the memo was inaccurate in numerous respects.  For example, the opening paragraph referred to the hose's tendency to become separated from its bayonet connector and/or from its heater connector, but, according to Mr Joyce, there had been experience only of a problem of the latter kind.  The memo referred to a small number of failures of hoses connected to Bowin heaters other than the MS12, but, according to Mr Joyce, only those connected to the MS12 had been problematical.  The memo referred to the number of recorded faults of the MS12 as twenty-eight, but, again according to Mr Joyce, only those referred to above in these Reasons had been recorded.  The memo referred to problems with the ½ inch hose (Gooden model 20102) as well as the _ inch hose (Gooden model 20103), but, yet again according to Mr Joyce, only the latter, being the kind connected to the MS12, had caused a problem. 

More generally, the memo referred to three cases which "could possibly represent the tip of an iceberg": that of Mrs James on 23 July 1989 whose heater had "burst into flames"; that of Mr Goode on 30 June 1990 whose hose had come off and caused burning of the carpet and a slight burn to his son; and that of Mrs Pethybridge on 3 July 1990 where there had been burning of the carpet and destruction of the appliance.  Mr Musster's memo asserted that from 23 March 1988 to 6 July 1989, Bowin had produced "close to 2,400 units" and that the relatively small proportion which had revealed problems might be only, again, the "tip of an iceberg".  His memo said that in the same period, Bowin had purchased from Gooden 1583 _ inch hoses and 350 ½ inch hoses.  The memo included the following:

     "It is these [sic - those] hoses that were supplied prior to August 15, 1989 that concerns [sic] me.  As it is possible to conclude that in the very near future they will display their inherent fault."

and

     "On average it appears that it can take up to two seasons of domestic use for the hose to separate it-self from its `connectors'."

It will be recalled that the hose problem became evident in the winter of 1989.  The further winter of 1990 had passed by 12 December 1990, the date of Mr Musster's memo.  In the last passage quoted, Mr Musster seems to be emphasising that the hose problem can be expected to reveal itself, at least in some cases, even after two winters' use.  If one disregards the winter of 1989, this amounts to an assertion that in the case of some heaters, the defect could be expected to become evident not earlier than after the winter of 1991 - a time which was yet to arrive.  Moreover, the memo does not necessarily suggest that if a problem has not emerged immediately following a second winter's use, one will never emerge.

Mr Musster's memo concluded by claiming that it was fortunate that no legal action in respect of property damage or human life had been brought against Bowin, and that if any such
proceeding were to be commenced, Bowin must be in a position to:

     "(A)Prove that there is a third party who is ultimately responsible.

 

      (B)We had no knowledge that there was an inherent fault and therefore innocent [sic] of such charges.

 

      (C)We knew about the faults.  Have documented all reported faults and investigated cause of damage/fault.  Taken all relevant steps to advise third party of such faults.  And finally put in to motion the necessary procedure to ensure that the possible danger is totally eliminated."

As previously noted, this "first version" of Mr Musster's dated 12 December 1990 is not that of which he was to give a copy to ACA, although nothing turns on the differences between the two versions (the second version repeated the allegedly erroneous statements in the first).  In any event, Mr Joyce says that after he saw the second version in 1992, he checked his file and found a copy of it (Mr Musster must have created this before he ceased to be employed by Bowin in December 1991).

Following receipt of the memo, Mr Joyce spoke to Mr Musster at length.  He suggested that if Mr Musster checked, he would find that the faulty hoses had come from a very small batch.  (This was a claim that Mr Joyce was to make several times but which he finally conceded to be unsustainable on the evidence.)  He told Mr Musster that he did not wish him to
address legal issues or to prove that Bowin was not at fault or that someone else was at fault.  He said:

     "All I am asking you to do is document the details of the customers, dates, faults and returns so that we can then supply it to Goodens.  John, I am not trying to make a profit in the claim against Goodens."

Mr Joyce says that Mr Musster did not provide him with a report amended in accordance with the discussion. 

Following the conversation, Mr Musster, on the letterhead of Bowin, wrote to Mr Gooden on 25 January 1991.  The heading was erroneous:

     "Meeting of August 15th, 1990 [the year should have been 1989]".

Notwithstanding that Mr Joyce had told Mr Musster that the only problem experienced was with the _ inch hose, the letter persisted in complaining of faulty ½ inch hoses as well.  Similarly, notwithstanding what he had been told by Mr Joyce, Mr Musster continued to allege a problem of separation from "the affix bayonet connector and/or from the little cc female connector".  The letter claimed that various undertakings had been given by Gooden at the meeting on 15 August 1989.  The letter enclosed an invoice covering costs incurred by Bowin and requested payment.  Gooden's reply dated 19 February 1991 protested about inaccuracies in the letter.  Mr Joyce, who had
been unaware of Mr Musster's sending of the letter, rebuked him about its inaccuracies.  He said:

     "Why are you writing things like `keeping a low profile'.  We have got to do whatever is necessary to fix this issue.  That was the purpose of monitoring the hoses for the 12 month period."

He told Mr Musster to contact Mr Gooden and resolve the matter.  This led to further correspondence between Mr Musster and Mr Gooden and payment by Gooden to Bowin (on 23 August 1991) of $2,646.97, in satisfaction of Bowin's claim for reimbursement of expenses.

On 16 May 1991, Bowin returned one hose to Gooden as defective because of a problem described in the "Quality Defect Return" form as "loose fitting".

Over the period from 1989 to 1991, Mr Joyce attended meetings of the Executive Council of GAMAA.  At two of the meetings he raised the hose problem for discussion.  The meetings were held in Melbourne, the first in late 1989 or early 1990, the second on 27 August 1991.  At the first meeting, Mr Joyce told those present that Bowin had "experienced some hose failures" and said that he wanted to draw the attention of other manufacturers to the situation.  He asked those present to have a check made with their service divisions as to whether they had encountered a similar problem.  He told them that he had "had a fire", that he had informed Robin Williams of AGA
about the hose failures, and that he wanted the relevant "Standards Australia code" investigated to ensure that it was adequate.  Some of those present undertook to make inquiries within their own companies and to report to Mr Joyce.  He also sought the advice of members as to whether a "recall" was warranted.  He said words to the following effect:

     "How would you react if you had a couple of hoses come off?  How would you treat that?  Would you treat that in a manner that you would look at it as a recall or would you treat it as a small incident at this stage?"

In response, one of those present said words to the following effect:

     "John, you would want to be careful moving to something like a recall on just a small number because we don't want to cause panic for the whole industry because everybody uses hoses."

There were other replies apparently to a similar effect.

At the second meeting (on 27 August 1991), two of the other members of the Executive Council of GAMAA reported that their companies used hoses, in one case 40,000 a year, but that no failures had come to light.  Mr Joyce requested that the matter be referred to a "technical committee" of GAMAA for investigation of the manufacturing standard for flexible hoses.

In his discussion with the members of the Executive Council of GAMAA, as in the approach which he had made to Mr Williams of AGA noted earlier, Mr Joyce's primary concern seems to have been with the adequacy of the industry's manufacturing standard.  This was relevant to heaters to be manufactured in the future, but not, at least directly, to those previously manufactured and sold to customers.  However, it is true that Mr Joyce sought the advice of his colleague fellow manufacturers as to the desirability of a "product recall".  No doubt their negative response can be attributed by the cynic to unawareness of all the facts, the informality of the inquiry and response, or even self interest; and by a person more sympathetic to Mr Joyce, to disinterested expertise and experience.  The evidence does not show that Mr Joyce expressly sought his colleagues' views on the desirability of the issue of a product safety notice of the kind that was ultimately to issue in July 1992, but no doubt an inquiry as to the desirability of a product recall would have afforded the opportunity for those present to advise that such a notice should be published.

The period from 17 December 1991 to publication of the article at the end of June 1992

Mr Musster contacts ACA - ACA's immediate response

As noted earlier, on 17 December 1991, Mr Musster ceased to be employed by Bowin.  As was later discovered, he apparently took some records of Bowin, or copies of them, with him. 

In about February 1992, he telephoned ACA and spoke to a "researcher" there name Clare Bonham.  According to her, he said that he had serious concerns about the safety of a number of Bowin's products and that he believed that Bowin's response to the problems was "inadequate, if not irresponsible".  He said,

     "There are problems with some of the heaters and I believe this constitutes a possible serious threat to human safety.  I feel some responsibility for putting the heaters into people's homes and I now spend my life waiting to hear that a heater which I have sold has caused serious injury to a child."

Ms Bonham suggested that Mr Musster write to her and provide any written or photographic evidence which he might have to support his claims.  Ms Bonham mentioned Mr Musster's  allegations to Mr Shales, a project manager with AGA.  Mr Shales, in turn, mentioned it to Robin Williams at AGA and asked him whether AGA knew of the problem.  Mr Williams said that he had no knowledge of it and Mr Shales undertook to put his inquiry in writing to AGA. 

Mr Musster wrote to Ms Bonham on 24 February 1992.  The letter comprised four pages.  Annexed to it was a copy of the second version of Mr Musster's memo to Mr Joyce dated 12 December 1990; copies of what purported to be extracts of Bowin's service call data relating to fault code M11 ("FAULTY HOSE") for the period 3 May 1989 to 17 September 1990; and some photographs of MS12s.

The letter related to more than the hose problem experienced with the MS12.  It was headed,

     "GAS SPACE HEATER - UNFLUED (UNVENTED) & FLUED.

     MANUFACTURE [sic]: BOWIN DESIGNS PTY LTD

     BRAND/TRADING NAMES: MOD-N-AIRE, MOD-N-FLAMES & BOWIN"

In the opening paragraph, Mr Musster claimed to be writing because of his "personal concern regarding the quality and standard of the above-mentioned range of domestic gas space heaters".  He claimed to have been a "senior management employee" of Bowin from July 1989 until his resignation on 17 December 1991.  He said,

     "I resigned from the position of `Sales & Marketing Manager', because I believed that I was compromising my personal values for the purpose of `selling goods that morally should not have been sold'."

In successive sections of his letter he dealt with the subjects of "FAULTY HOSES",  "LNS WALLMOUNTED & FREE STANDING GAS SPACE HEATER", "THE SIMILARITIES BETWEEN THE FAULTY HOSES AND THE LNS GAS HEATER", "THE SST ELECTRONIC", "THE FEDERATION FIRE" and a "SAFETY TILT SWITCH" under those headings.

It is unnecessary to set out the letter in full.  Officers of ACA who gave evidence acknowledged that such a letter from an obviously disaffected former employee demanded close scrutiny and verification before ACA could adopt any of its allegations.  In relation to the faulty hoses, the letter began by quoting from Mr Musster's memo dated 12 December 1990.  The letter included this:

     "On average it appears that it could take a number of seasons of domestic use for the hose to work itself free. e.g.

     `Heater burst into flames' - Heater age; 17 months.

     `It burnt the carpet and destroyed the appliance' - 15 months.

 

     `Burnt carpet with slight burns to his son' - 15 months."

Mr Musster alleged in his letter that separation arose because of the portability of the MS12: according to the letter, its movement and the winding of the hose around it between seasons had been the cause of the hose's working free from its brass fitting.  The section of the letter dealing with the MS12 concluded with the following:

     "(A)You will have a gas leak until such time it is detected.

 

      (B)If the appliance has a flame (pilot or Burner box) you will have an uncontrolled fire.

 

          1 - the gas leak will create a `flashback'.  This uncontrolled fire will cause the heater to catch light.

 

          2 - the fire will spread to the `Flexible Hose' giving it a blow-torch effect.

 

          3 - from here on it is any ones [sic] guess as to what will happen next.

 

     There are thousands of these units out there, waiting like a `time bomb for the right moment to ignite'." (emphasis supplied)

After dealing with other subjects, the letter turned to Mr Joyce.  It asserted that Mr Joyce was the managing director of Bowin, that all decisions referred to in the letter were made by him, and that he had a veto on all decisions which affected the profitability of Bowin.  Mr Musster offered to answer questions and to "qualify" to the best of his ability all statements which he had made.

On 9 March, having read Mr Musster's letter, Mr Shales faxed Mr Williams of AGA's Melbourne office referring to a discussion which they had had at ACA's office in Sydney the preceding month and asking whether AGA knew of a hose-related fault with the MS12.  The letter said:

     "Since [the meeting between Messrs Shales and Williams at ACA's office in Sydney in February] we have had other inquiries and now feel that we should now look into these matters urgently.  The problems seem to relate mainly to MS12 heater which it is claimed has a hose related fault. 

 

     If there really are problems with this heater it is in everyone's interest to clarify the situation as quickly as possible."

The reference to "other inquiries" seems to have been a reference to Mr Musster's letter.  On 16 March, Mr Williams wrote to Mr Shales, advising that AGA had no knowledge of the problem but would appreciate receiving further details, and that on receipt of them he could pursue the matter through ACA's inspector in Sydney "and of course the manufacturer".

Also in March 1992, ACA established a "project team", consisting of Mr Shales as project manager, Mr Cerexhe as journalist and a Mr Robert Drake as policy officer, to investigate the issues raised by Mr Musster's letter.  A memo from Mr Shales of 18 March to certain ACA staff informed them of the formation of the project team which was to meet that day, and said:

     "The information we have been given is detailed and specific and appears credible.  The conclusion that there is a problem is inescapable; the degree of the problem is not so clear ... If the information supplied to us is correct we should be very concerned and I believe we need to act quickly in a carefully considered way.  The first step must be to identify the significance of the information we have been given."

An "agenda" for the first meeting of the project team recorded this item for discussion:

     "DISCUSS AND CLARIFY CONTEXT/SCOPE OF PROBLEM".

There were typed minutes of the meeting which recorded, inter alia, that it was claimed that there were 28 cases of MS12 hose failure known to Bowin as at 12 December 1990 and 7 cases of failure of the same hose on other models; that there had been a hose problem and that Bowin had known about it and rectified it in respect of stock on hand, but had done nothing about, and was not concerned about, products which had already been sold.

In one form or another, the impossibility of knowing how many more defective heaters remained in consumers' homes was to become an issue between ACA and Mr Joyce.  As will be seen, at the end of the day Mr Joyce conceded that he did not know how many there were or what the upper limit of the number was.  But similarly, ACA acknowledged that there might be none.

On 18 March 1992 Mr Shales followed up his fax of 9 March by telephoning Mr Williams.  Mr Williams pointed out that he had replied two days earlier on 16 March.  Mr Williams said that Mr Shales' inquiry was of too vague a nature to be taken further.   But Mr Shales replied that the question was reasonable and that he would have expected Mr Williams to raise the matter with Mr Joyce, who, after all, was, he asserted, a member of the AGA's Appliance Quality Review Board.  Mr Williams said that he felt unable to do so at that stage.

Inquiries made by ACA from first meeting of ACA project team on 18 March 1992 to publication of the article

Following the first meeting of the ACA project team, Mr Drake wrote to the New South Wales Fire Brigade on 20 March, inquiring whether it had any information about possible problems with the MS12 or "incidents of leaking or separated hoses on gas heaters causing gas leaks or fires."  The letter said that "due to the possible public risk", ACA was proceeding as quickly as it could.  It invited a response by facsimile or telephone.   There was no response and no follow up by ACA prior to publication of the article.

On 20 March, Mr Drake wrote to Mr Garry Johnson of the Bureau in relation to the "portable gas space heater" manufactured by Bowin which, according to his letter, might go under the brand names "Mod-n-Aire", "Mod-n-Flames" and/or "Bowin".  He identified the model as the MS12 and described the problem as being the working loose of the flexible hose from the bayonet connector (in fact the problem appears to have been almost entirely associated with the heater end).  He asked whether the Bureau had information about possible problems with the MS12 or incidents of leaking or separating hoses on gas heaters causing gas leaks or fires. 

The letter elicited a reply dated 23 March from Mr J J Wunsch, the Director of Product Safety of the Bureau.  Mr Wunsch advised that the Bureau had no information about the MS12 but asked Mr Drake to keep the Bureau informed if he should receive further complaints or information about the alleged hazard.

On 31 March a meeting was held at the premises of ACA between Messrs Shales and Cerexhe of ACA and Mr Musster.  Mr Musster had brought with him an MS12.  He indicated where (at the heater end) the hose levered its way out of its brass fitting.  He told Messrs Shales and Cerexhe that the problem had been overcome for all stock after August 1989 but that the problem affected earlier MS12 and other model heaters "going back at least to January 1986".  He said that 3,400 MS12s were produced during the period from January 1986 to August 1989 and that the problem affected the MS12 in particular, because of its portability; that with the MS12, the hose separated mainly at the appliance end rather than at the bayonet end;  that a child "burnt its hand in one case"; that there was "a danger if the PVC hose burns back too"; that Bowin had sought compensation which eventually Gooden had paid; and that Bowin had not informed its own insurer about the fires, although Gooden's insurance assessor had come to Bowin's premises and spoken to him (Mr Musster) "about the fires".  In answer to a question, he said that as far as he knew no fire had been serious enough for the fire brigade to be called.  Finally, he said:

     "There could be an explosion if the gas leak from the hose led to a build up of gas in the room.  Eventually this could be ignited - a flashback.  An explosion is possible."

Over a period of several days following this meeting with Mr Musster on 31 March, Mr Cerexhe and another employee of ACA attempted to identify and contact the customers named in the extracts from Bowin records supplied to ACA by Mr Musster.  This investigation was relevant to the reasonableness of ACA's conduct in publishing the article.  In paras 7-13 of his affidavit sworn 12 November 1993, Mr Cerexhe gave an account of his telephone conversations with the following persons on the following dates in which the customers said, inter alia,
the things attributed to them below:

On 1 April, Mr Shales wrote three letters: one to Bowin for the attention of Mr Joyce; one to Mr P Greenhalgh, the General Manager of AGA in Canberra; and one to Mr Williams of AGA in Melbourne.  The letter to Mr Joyce was ACA's first contact with him.  In the letter Mr Shales advised that ACA had been given information which caused it concern that some gas heating products manufactured by Bowin may have been sold to consumers with faults making them potentially dangerous.  Mr Shales asked that Bowin "clarify this matter" for ACA.  As well, the letter advised that ACA was discussing the matter with AGA.  It advised that the assertion had been made that 3,400 MS12s had been sold before August 1989 fitted with a gas connecting hose which might become detached from its end
fittings and so constitute a fire hazard.  Mr Shales' letter referred to the allegation that fires had in fact been caused in this way and that Bowin was aware of them.  After referring to the allegation that Bowin was aware of failures of the hoses in the field, the letter went on,

     "Although our information is that some stock held by Bowin Designs may have been modified our concern is that units may have been sold which are still in the field fitted with faulty hoses.

 

     I feel you would agree that we are right to be concerned about these claims and feel it is important that they are clarified as a matter of urgency."  (emphasis supplied)

Mr Shales forwarded a copy of that letter to Mr Greenhalgh in case AGA wished "to initiate some course of action".  He asked Mr Greenhalgh for information as to the current approval status of other gas heaters manufactured by Bowin, namely the "SST Electronic" and the "Federation Fire".

Although Mr Shales' letter to Mr Williams does not say so, apparently it enclosed copies of the other two letters of 1 April.  It advised Mr Williams that ACA had approached AGA in Canberra.

On Friday 3 April, Mr Drake of ACA replied to the letter dated 23 March from Mr Wunsch of the Bureau, enclosing copies of ACA's letters dated 1 April to Bowin and to AGA.

On the same day (3 April) Mr Joyce received ACA's letter dated
1 April.  He immediately telephoned ACA and spoke to Mr Cerexhe (Mr Shales was on leave).  There is no substantial difference between the two men as to most of the content of the conversation.  Mr Joyce suggested that the source of the allegations made to ACA was Mr Musster.  Mr Cerexhe said that ACA was not at liberty to disclose its source.  Mr Joyce suggested that ACA should treat information coming from Mr Musster with suspicion, that Mr Musster was currently taking legal action against Bowin, and that "he may have malicious intent to harm the company".   Mr Joyce agreed that Bowin had experienced a problem of faults in hoses supplied by Gooden but not of the dimension which had apparently been suggested by Mr Musster to ACA.  Mr Joyce told Mr Cerexhe that the suggestion that 3,400 hoses were defective was ludicrous.  Mr Joyce said that he was happy for representatives of ACA to attend Bowin's premises and to inspect its records and see the way in which Bowin's factory operated.  Neither Mr Cerexhe nor any other representative of ACA was ever to take up this invitation.  I digress to note that this fact featured in the applicants' submissions and that in reply ACA submitted, first, that the evidence shows that Mr Shales and Mr Cerexhe did not believe that on such a visit, Mr Joyce would disclose to them any evidence which might be in Bowin's possession of the extent of the problem, and secondly, that the cross- examination of Mr Joyce elicited a concession that in fact Bowin had no records establishing that the problem was a small or limited one.  Mr Cerexhe told Mr Joyce that he would appreciate having a reply to ACA's letter and that Mr Shales might have further questions to put to Mr Joyce after he returned from leave.

On Monday 6 April, Mr Cerexhe telephoned the Natural Gas Company (a division or subsidiary of AGL) and asked a Mr Pye there whether the company had a record of any problems with the MS12.  Mr Pye informed him that there had not been any "recall" of the heaters.  Later in the day, Mr Pye telephoned Mr Cerexhe and told him that the company's records did not disclose "returns of MS12 heaters" but that the records related to Sydney only.  He said that the company had not received "any noticeable level of complaints" about the MS12.

On Tuesday 7 April, Mr Joyce wrote to ACA.  The letter referred to ACA's letter dated Wednesday 1 April and to Mr Joyce's telephone conversation with Mr Cerexhe on the preceding Friday, 3 April.  The letter included the following:

     "It has been claimed that 3400 MS12 heaters sold prior to August 1989 are defective due to a faulty gas connection hose.

 

     Prior to August 1989 the company sourced its gas hoses from two suppliers.  One of the suppliers Thomas Gooden and Sons commenced supply of hoses to our company in March 1987 and prior to August 1989 had supplied 1935 hoses.  In mid 1989 we became aware of a small number of hoses failing in the field and consequently we advised the manufacturer and the Australian Gas Association of this matter.

 

     A delivery of 398 hoses delivered to our company in mid 1989 was then thoroughly checked for quality control and we felt it wise after examination to return the hoses to the manufacturer for thorough testing.  We are a JUST-IN-TIME manufacturer which means we do not purchase materials in large batches.
The purpose of this procedure is to maintain deliveries in small quantities to match our manufacturing demand and to allow a stringent control on the quality of goods delivered.

 

     Fifty of the hoses when delivered were immediately used to fill an order to AGL a day or so before it was decided to return the goods to the manufacturer for checking, therefore the delivery to AGL was recovered from AGL's store and replaced with hoses which had been thoroughly checked by the manufacturer.

 

     Our service staff were alerted to maintain a close watch on all products using hoses to ascertain whether a major problem existed or alternatively, determine if it was only small number of poor quality hoses amongst otherwise good quality product.

 

     Finally it has been determined that

 

     (a)  no faulty product has been detected in suppliers other than from Thomas Gooden and Sons,

     (b)  no faulty product has been found other than from production in 1987 and 1988,

     (c)  no faulty product has been reported since September 1990,

     (d)  the total number of suspected product has been very small.

 

     You may wish to make an appointment with the writer to discuss this matter further as I would be pleased to assist you in any way.  The company prides itself on its attention to quality issues and indeed quality had been the driving force behind the company's production philosophy."(emphasis supplied)

On the same day, Tuesday 7 April, Mr Cerexhe had a telephone conversation with Mr Gooden.  Mr Gooden acknowledged that there had been a problem with the hoses which his company had supplied for the MS12.  He said that the problem had been experienced "about three years ago"; that he was not sure what the problem was; that Gooden had re-crimped the hoses; that there had been a suggestion that the hose "was coming away" although Gooden had found no evidence of this; and that the hose was manufactured to the relevant Australian Standard.  In response to a question as to whether Bowin had returned a lot of hoses, Mr Gooden said "No.  But we checked their stock."

On Wednesday 8 April, Mr Cerexhe asked Mr Musster whether MS12s had been recalled from gas showrooms and was told that they had not been.  He asked Mr Musster when the latest service calls had occurred in connection with the MS12 hose problem, to which Mr Musster replied "a couple of hoses detached in 1991, but I don't have any records."  In relation to this, Mr Cerexhe acknowledged in cross-examination that he knew that he would have to go to Bowin if he wanted to check the records.  He asked Mr Musster if AGA was informed about the problem and Mr Musster replied:

     "As far as I am aware, there was no notification to the AGA.  The faulty hoses had a lot of tension, which puts pressure on the point where the plastic enters the metal fittings.  The more you move the heater, the quicker the hose will come out.  It usually took a few winters."

It appears clear that Mr Musster wished to convince Mr Cerexhe that even if his inquiries revealed that there had been no recent instances of hose separation, he should not be led by this to conclude that there was no longer a latent problem in the field.  In the course of the conversation, Mr Musster gave to Mr Cerexhe the names of persons from whom he (Mr Musster) had received service calls for hose problems with MS12
heaters, and in some cases addresses and dates as well.  Mr Musster added:

     "Replacement of hoses was ongoing through to August 1989.  I was still purchasing manager, and became sales and marketing manager on 1 September 1990.  As we found faulty hoses, Gooden added free hoses to our orders.  No money changed hands.  This was still going on for some time.  It was only last year that Gooden paid the account relating to the period July-August 1990."

On Monday 13 April, Messrs Shales, Stephen Fisher (a technical officer at ACA) and Cerexhe attended a meeting at AGL's laboratory at Camperdown with Robert Petersen (Research Manager), Jim Gallagher (Sales Manager and "chief inspector") and Andrew Benattos (components testing officer) of AGL.  The ACA representatives took with them the heater which Mr Musster had delivered to ACA on 31 March.  According to Mr Cerexhe, Mr Gallagher appeared to try to pull the hose off the heater and it appeared to him (Mr Cerexhe) that it would not come off.  The hose fitting was cut open by one of AGL's laboratory staff and inspected.  According to para 22 of Mr Cerexhe's affidavit sworn 12 November 1983, the following conversation took place:

     "JG:`The hose is plastic, with no metal mesh incorporated.  It is crimped in one spot only, and there are no serrations to help hold the hose in place and stop it slipping.  It relies on friction.  The crimp is not across a broad surface.'

 

     PC:  `Is there a design problem with the hose?'

 

     JG:  `No.  It's a quality control problem if some of these hoses have been disconnecting.'

 

     PC:  `Is the hose of an acceptable standard?'

 

     JG:  `Yes.'

 

     PC:  `Does this design indicate a lower safety margin due to the features pointed out by the technician?'

 

     JG and RP:        `Yes.'"

On the same day (13 April) Mr Cerexhe telephoned Mr Pye of AGL and asked whether he had any more information to confirm whether or not Bowin had ever recalled stock of the MS12 from AGL's showrooms.  Mr Pye said that Mr Cerexhe would need to send a fax if he wanted to make a formal inquiry, adding:

     "There are many ways the product could have been collected by the manufacturer without any record."

On Thursday 16 April, Mr Williams wrote to Mr Shales in reply to Mr Shales' letter of 1 April.  Mr Williams advised that he had pursued ACA's inquiry with his "Approvals Officer" and established that there had been a problem some three years earlier.  He advised as follows:

     "The manufacturer, Bowin Designs, wrote to me in my capacity as Chairman of Standards Australia Committee RU/1 - Industrial Hose.  As a result of some ten incidents of 1987/88 hoses parting from the crimped fitting, the implication was that Standard AS 1869 was inadequate.  Mr. Joyce indicated that the standard only covered a direct pull on the hose whereas the fault could occur from a sideways movement.

 

     In my response, I was not sure that Mr. Joyce, Managing Director of Bowin Designs, was completely familiar with the Standard AS 1869 but my view was that the requirements cover adequately the strength
of connections i.e. hose and coupling compatibility.

     ..................................................

 

     Anyway, getting back to the hose on the MS12, I understood from the appliance manufacturer that there were no serious accidents fortunately from the ten failures but production was stopped and the hoses returned to Thomas Gooden for examination and testing.  Modifications to the crimping dies were made to improve the strength of the assembly.

 

     AGA retested the Gooden/Esdan hose assemblies, through our AGL agent laboratory, and they satisfied the requirements for markings, hydrostatic pressure, flexing resistance, hose and coupling compatibility.  Indeed, the tensile force which was exerted up to the failure point far exceeded the standard requirement in each case.

 

     Mr. Joyce did contact me after receiving your letter and I suggested that he discuss the matter with you direct, explaining the situation as he had to me by telephone.  I understand he has subsequently written to you about the matter.  We have received no complaints since our retesting work was completed over two years ago now.

 

     ................................................."

On 21 April, Mr Shales, having returned from leave and been informed by Mr Cerexhe of developments, telephoned Mr Joyce.  According to Mr Shales, their conversation included the following:

     "JJ:`The problems Musster is referring to include all hose problems rather than only problems of disconnection by Gooden hoses.  Some of the problems relate to out of tolerance bayonet fittings or incorrect threads.  The quality control problems which we experienced were with one batch of hoses only.'

 

      DS:`Would you agree that you may not have found all of the heaters which may have this problem?'

 

      JJ:`I agree that we may not have found all, but I
don't believe that this warrants a general recall.  We have done everything possible short of a general recall.'

 

      DS:`We will be writing to you again asking specific questions and seeking specific assurances.  If you can give us those assurances in writing then we, and consumers generally, can have confidence.'

 

      JJ:`I will provide you with answers and assurances.'" (emphasis supplied)

On 29 April, Mr Shales wrote to Mr Williams advising that Mr Joyce was claiming that AGA had been informed that there had been problems or incidents concerning hoses fitted to heaters manufactured by Bowin.  The letter continued as follows:

     "To assist us in determining the extent to which the ACA should be concerned about this matter can you confirm the correctness of this claim and if possible give us some details of the communication?  I appreciate that any correspondence between Bowin Designs and the AGA could be said to be in confidence but the public interest in the matter such as this should override any such reservation." (emphasis supplied)

The applicants submit that ACA went to publication two months later without having made all appropriate inquiries reasonably necessary for it to determine the extent to which there remained cause for concern.

On 30 April, Mr Cerexhe spoke with Mr Musster and Mr Shales wrote a further letter to Bowin.  Mr Cerexhe asked Mr Musster whether any service calls in 1991 had related to the MS12 hose problem.  Clearly, Mr Cerexhe was still interested to establish whether there was evidence more recent than 17 September 1990 of an ongoing problem.  Mr Musster told Mr Cerexhe that he had spoken with the then Service Manager of Bowin, Michael Arratoon, in November 1991 and had been told that there had been a couple of calls during the 1991 winter.  Mr Musster told Mr Cerexhe that Mr Arratoon was no longer employed by Bowin.  Mr Cerexhe asked Mr Musster to find Mr Arratoon so that he (Mr Cerexhe) could speak to him.  Mr Musster agreed to try to find him.  Mr Musster told Mr Cerexhe that the suspect hoses could be recognised by consumers in that they were "cream" but that "there may be other shades, a little stronger or weaker in colour" and that they were "made from at least 1986 to August 1989".

The letter which Mr Shales wrote to Bowin on 30 April 1992 is important.  It had been foreshadowed in the telephone conversation between Mr Shales and Mr Joyce on 21 April.  It included, as its substantial part, the following:

     "Our problem is this.  Everyone concerned agrees there is/was a problem with the hoses supplied with some heaters manufactured by Bowin Designs.  Our difficulty is obtaining an understanding of the measure of the problem which can be substantiated by reference to contemporaneous documentation or something equally credible.

 

     It would help us in this endeavour if you could let us have answers to the questions below:

 

     –    From service records it appears that dates of manufacture of affected models are from 1986 to 1988 inclusive.  On what basis do you claim to have prevented large numbers of heaters with suspect hoses from being sold?

 

     –    We now have further information that Bowin Designs attended service calls as recently as winter 1991.  Can you comment on this?

 

     –    What percentage of all suspect hoses sold with all heaters manufactured by Bowin Designs do you believe you have recovered, replaced or repaired?

 

     –    You have said that stock was recalled from the AGL store (or Natural Gas Co. showrooms).  However they have informed us they can find no record of this.  We cannot accept that AGL or Bowin Designs would allow stock movement without proper documentation.  Can you support your claim with documentation or in any other way?

 

     –    We understand that Thos. Gooden has paid compensation to Bowin Designs for service calls and replacement hoses and heaters due to this fault.  Do you acknowledge this?

 

     –    You claim to have informed the AGA of the problem in mid 1989.  However, the AGA has said it has no knowledge of this.  Do you have copies of correspondence to support this claim?  We have queried the AGA again on this matter.

 

     –    Attached is a copy of a memorandum from your Sales and Marketing Manager, dated 12 December 1990.  It appears your company had detailed knowledge of a problem with these heaters and has failed to take steps to notify consumers of at least the potential risk from a faulty hose.  We have spoken to several consumers who experienced fires due to the failure of the hose of a Mod-n-Aire heater.  The potential for disaster is certainly serious.  Do you propose to recall affected hoses and/or heaters or notify consumers of a potential danger?

 

     –    Can you indicate how a hose of the type we are discussing could be identified in terms of type, date of manufacture or any other way?

 

     I look forward to your early reply which I am optimistic will help us to clarify this matter." (emphasis supplied)

In its submissions, ACA makes much of the fact that it did not receive a letter from Bowin replying to these inquiries, notwithstanding a telephone request made by Mr Shales to Mr Joyce on 15 May (see later).

On 1 May, Mr Petersen of AGL telephoned Mr Cerexhe.  According to para 25 of Mr Cerexhe's affidavit sworn 12 November 1993, their conversation was to the following effect:

     "RP:`AGL sold around 1,911 MS12 heaters from 1986 to 1992, all from AGL stores.  Figures for 1986 to 1989 should be around 4/7ths of this total.  We sell about 50% of gas room heaters sold in New South Wales.'

 

     PC:  `Have you found any record of Bowin Designs recalling or exchanging faulty stock of MS12 heaters from your shops?'

 

     RP:  `There is no record of an exchange of heaters in the central store or any showroom.  However, this doesn't mean it didn't happen.  We were not aware of any problems until you informed us.'"

On 4 May, Mr Shales telephoned Mr Williams of AGA.  According to Mr Shales, he asked Mr Williams for a reply to his (Mr Shales') fax of 29 April.  Mr Williams said that he had already provided Mr Shales with all of the relevant information in his (Mr Williams') letter of 16 April.  The conversation continued as follows, according to Mr Shales' affidavit:

     "DS:`It seems to me that Bowin Designs did not formally advise the Association of the problem.  Your letter of 16 April seems to indicate that the manufacturer wrote to you in your capacity as Chairman of the Standards Committee rather than as an officer of AGA."

 

     RW:  `Well, whichever way you look at it, I received notification.'

 

     DS:  `Is there a formal agreement between manufacturers and the AGA that problems of this nature are formally notified?'

 

     RW:  `No, but there is an expectation that the AGA would be notified.  I will check the AGA Rules and advise you further on this.'

 

     DS:  `We have also sent a further letter to Bowin Designs asking for copies of correspondence relating to notification to the AGA.'

 

     RW:  `Could you fax me a copy of that letter?'

 

     DS:  `Yes.  I will do that.'"

Mr Shales says that following the conversation he forwarded to Mr Williams a copy of the letter from ACA to Bowin dated 30 April.

The next day, 5 May, Mr Williams of AGA wrote to Mr Shales advising that he had little further to add to his letter of 16 April.  Mr Williams' letter continued as follows:

     "AGA received no information of field problems or fires from the MS12 heaters.  The correspondence in August 1989 with Bowin Designs concerned some ten instances of hose failure but, fortunately, no serious accidents.  The manufacturing date on the hoses in question was 1987 and 1988; it is a standard requirement for hoses - and an AGA code requirement for appliances  - that the date of manufacture, or serial number relating to date of manufacture, is incorporated on the hose (or on the appliance data plate).  The letter was written to me in my capacity as Chairman of the Standards Australia Committee for gas hose and hose assemblies (Committee RU/1).  I did not in fact raise this matter with the Standards Committee as, in my reply to Bowin Designs, I outlined the various tests which I believed to be adequate over many years of experience.  Failure to meet such requirements, subsequent to AGA approval, has generally been due to unauthorised design changes or a quality  control problem.  My earlier letter indicated the retesting of the hoses in question and the satisfactory performance.

 

     Finally, with regard to your question number 6, in the letter to Mr. Joyce of Bowin Designs, in my previous letter I indicated that AGA did receive information on the hose problem in 1989, as confirmed above also.  Again, AGA has received no information of incidents with the MS12 heater either at that time or since." (emphasis supplied)

The sentences underlined by me in the above passage were to be quoted by ACA in the article (at lines 275-289).  On the same day (5 May) Mr Williams faxed a copy of that letter to Mr Joyce, commenting on the fax cover sheet, "nobody seems to believe anybody in this matter!"

Also on the same day, Mr Cerexhe telephoned "Standards Australia" and spoke to Keith Jordan of Australian Designer Award Productions in relation to the statement on Bowin's letterhead, "WINNER OF AUSTRALIAN DESIGN AWARD 1984".  According to para 26 of Mr Cerexhe's affidavit, he asked Mr Jordan whether the MS12 had received an Australian Design Award and was told that it had, in August 1984.  Mr Cerexhe asked Mr Jordan whether it was appropriate that the current letterhead of Bowin should show the award, to which Mr Jordan replied:

     "It's not within the guidelines to keep that on the letterhead after so many years.  Design awards last for 2 years.  Then the company has a choice either to re-submit the product for reassessment; or get a `dated' logo; or, by paying a fee of $300 per annum,
continue to use it on their letterhead, but not in promotions.  Bowin Designs does not have a licence for that purpose at the moment.  We are currently going through the Yellow Pages across Australia to find out who is using the Award improperly.  We are tightening up on this."

By internal office memo dated 6 May, Mr Petersen advised other officers of AGL about ACA's investigation.  He requested AGL's Manager, Appliance Service to have servicemen calling on customers over the next few months check for loose hoses on MS12 heaters and to advise him (Mr Petersen) of any found in that condition.  He advised AGL's Manager, Research & Development that after a number of discussions with ACA, ACA had agreed that the problem was not a major one and that a product recall was not necessary.  In oral evidence, Mr Petersen said that Mr Shales had expressed that view to him a few days before 6 May.  More precisely, Mr Petersen's evidence was that he had told Mr Shales that he (Mr Petersen) thought that a recall was not necessary and that Mr Shales had replied to the effect that he was satisfied that AGA was "taking appropriate action".  Mr Shales' evidence, however, was that he had not said this.

On 8 May, Mr Shales wrote a memo to Mr Cerexhe recording some of the things he believed ACA did "know" and some of the things it did not know "in relation to this story".  The memo continued as follows:

     "BOWIN DESIGNS has manufactured and sold an unknown number of heaters with faulty hoses.

 

     These faulty hoses can cause fires which are potentially very serious.

 

     BOWIN DESIGNS has been aware for some time of the supply of these hoses and the fact that they can cause fires.

 

     Apart from unsubstatiated [sic] oral assurances the only action we can confirm that BOWIN DESIGNS has taken it:

 

     -    to inform the chairman of the appropriate standards committee of a problem with some hoses.  (We dont [sic] know the nature of this infomation [sic] as we have not yet be [sic] able to see copies of the correspondence).

     -    to have some hoses replaced or reworked by Thos. Gooden.

 

     It is a reasonable assumption that there is an unknown number of faulty hoses in the field.  (It could be one or one hundred or in fact none ... we dont [sic] actually know that all faulty hoses have not been replaced.)

 

     As far as we can tell no authority with a brief to act in the publics [sic] interest has been informed.  (Although the AGA was incidentally informed apparently to a very limited extent via Robin Williams)  Indeed, there seems to be no procedure in place for this to happen.  (We are getting a copy of the AGA rules so we can better understand this).  A major focal point of our article should be that a system does not exist or, if it does, it doesn't work.

 

     It has been entirely fortuitous that this matter has received any public exposure.

 

     The ingredients of this scenario are very similar (close to identical) to the ingredients of the Minstral fan story.

 

     The AGA has not acted in poor faith, done anything reprehensible or been less than honest in any part of this matter.  The closest they have come to knowing anything about the problem is apparently a reference to faulty hoses in a letter to the standards committee.  (The AGA system has been shown to have holes in it you could drive a bus through)." (emphasis supplied)

In submissions, the applicants pointed to the concession in the memo that, for all ACA knew, all faulty hoses had been replaced and none remained "in the field".  In response, ACA sought to emphasise the preceding sentence, "It is a reasonable assumption that there is an unknown number of faulty hoses in the field".

On the same date, 8 May, Mr Shales wrote to Mr Williams at AGA a letter reading as follows:

     "Thank you for your letter of the 5/5/92.  Some matters which arise from it are:

 

     It appears that Bowin Designs has not advised the AGA of any aspect of this matter.  I accept that John Joyce could have taken the view that by advising the chairman of the appropriate standards committee, who also holds the senior technical position with the AGA he was also advising the AGA but we believe this procedure and actions that follow should be tightened up.

 

     Can you advise if there is a formal requirement for a manufacturer to advise the AGA of an incidence of faulty hoses or of safety related incidents involving gas appliances?

 

     Can you address our request made in the letter to you (29/4/92) for a copy of the correspondence between yourself and John Joyce on the matter of the hoses.  I have asked John Joyce and he has said it is confidential.  I pointed out that I felt you would have no objections to letting us have a copy and he said he would raise the matter with you.

 

     I am concerned that some four weeks after I started making inquiries about this matter I am no further advanced in my objective of getting some measure of the problems associated with this matter.  The situation at this date appears to me to be as follows:

 

     BOWIN DESIGNS has manufactured and sold an unknown number of heaters with faulty hoses.

 

     These faulty hoses can cause fires which are potentially very serious.

 

     BOWIN DESIGNS has been aware for some time of the supply of these hoses and the fact that they can and have caused fires.

 

     Apart from unsubstatiated [sic] oral assurances the only action in this matter we can confirm that BOWIN DESIGNS has taken is:

 

     -    to inform the chairman of the appropriate standards committee of a problem with some hoses.  (We don't know the nature of this information as we have not yet be [sic] able to see copies of the correspondence).

     -    to have some hoses replaced or reworked by Thos. Gooden.

 

     An inescapable conclusion is that there is an unknown number of faulty hoses in the field.

 

     No authority with a brief to act in the publics [sic] interest has been informed.  Indeed, there seems to be no procedure in place to ensure that this must happen.

 

     It has been entirely fortuitous that this matter has received any public exposure.

 

     We remain concerned specifically about the BOWIN heater and also about the general principle that potentially dangerous goods can be available in the market place without any public accountability." (emphasis supplied)

On 11 May Mr Williams replied, referring to Mr Shales' facsimile of 8 May and various telephone conversations.  Mr Williams advised that he had "little to add" to his letters of 16 April and 5 May.  He said that he had, notwithstanding Mr Shales' acknowledgment of the confidentiality of approval matters as between a manufacturer and AGA and AGA's agent laboratories, in fact copied the 1989 letters between Bowin and Mr Williams.  However, he advised that he understood that the matter had been placed by Bowin in the hands of the police and of its solicitors, and that accordingly it might not be "politic" for AGA to send the copies to Mr Shales.  He stressed, however, that there was nothing confidential in them so far as he was concerned, and that Mr Shales was welcome to call at his office in Melbourne to read them.   Finally, Mr Williams emphasised that AGA was a "watchdog" for consumers as much as ACA was, and that AGA approval was a protection for consumers, manufacturers, suppliers, gas utilities and distributors.   Mr Williams forwarded a copy of the "Rules Governing the AGA Appliance Approval Scheme" to Mr Shales for his information.  Neither Mr Shales nor any one else from ACA was to take up Mr Williams' invitation to inspect the correspondence between Bowin and AGA at Mr Williams' office.  But if the invitation had been taken up, ACA would not have seen evidence that the extent of the incidence of the problem in relation to heaters manufactured before August 1989 had been established or that owners of such heaters had been warned.  Indeed, Mr Joyce's references in his letter dated 20 August 1989 to "the potential dangers inherent in this type of failure", to "new laws on product recall", and to the urgency of the matter would have come to notice.

On 12 May, Mr Shales wrote to Mr Greenhalgh, the general manager of AGA in Canberra, forwarding a copy of his (Mr Shales') letter to Mr Williams of AGA's Melbourne office. The letter to Mr Greenhalgh referred to the fact that some of the failures of the MS12 had resulted in fires in private homes and that Bowin had been aware of those failures and fires for some time.  The letter asserted that it had been ACA's objective for some four weeks "to gain some measure of the concern [it] should feel about this matter."  It further asserted that apart from "unsubstantiated oral assurances" the only action which ACA had been able to confirm that Bowin had taken was to inform the chairman of the relevant Standards Committee of a problem with some hoses and to have some hoses replaced or reworked by Gooden.  The letter continued:

     "Bowin Designs has not been able to supply us with one piece of contemporaneous documentation, a disinterested independent referee or anything else to substantiate the claims they have made about action they have taken in regard to this matter."

The letter advised that ACA would continue to make inquiries about the problem of the MS12's hose but went on to express more general concern that the AGA approvals system had broken down in this case.  Mr Shales asserted ACA's belief that a minimum requirement of any regulatory system, be it statutory or industry-based, is that incidents such as the present one be reported to the regulating authority, especially where the component failure had "serious public safety ramifications".  The letter expressed ACA's belief that the matter had not been reported correctly to AGA, and, more importantly, ACA's belief that the AGA approvals system or other agreements which it has with its members might not make formal notification of problems such as the present one, mandatory.  The letter asked AGA to confirm "what notifications are required between the AGA and its members in regard to matters of this nature".  The letter concluded as follows:

     "An essential element of any regulatory system which impinges on public safety is accountability to the public.  This element of public accountability does not seem to be present in the case of the AGA.  We urge the AGA to seriously consider enabling consumer representation at some effective point within its system and seek your comment on this proposition.

 

     The Consumers' Association continues to believe that the AGA Approval system generally works well to ensure that safe, high quality gas appliances are available to consumers and we look forward to a continuing good relationship with the AGA and the gas industry in general."

On 13 May, Mr Shales wrote to Mr Gooden.  The letter stated ACA's belief that the problem had been rectified but asserted that ACA could not "get a measure of how many suspect units may still be in the field."  It told Mr Gooden that it understood that some steps had been taken by Bowin and Gooden to repair or re-work some of the hoses but that the instances of hose failure occurring in the field indicated that some faulty hose assemblies had been sold to consumers.  The letter continued,

     "Accordingly, as part of our effort to gauge the extent of the problem we ask if you could assist us with answers to the following questions.  It would greatly assist our understanding of your answers if your replies can be substantiated by reference to contemporaneous documentation, disinterested third party referees or similar.

 

     –    How many hose assemblies of a similar construction to those units fitted to the Mod-n-Aire MS12 which were subsequently found to be faulty have been supplied to the industry in
total?

 

     –    Have hose assemblies of a similar construction to those units fitted to the Mod-n-Aire MS12 which were subsequently found to be faulty been supplied for fitment to any other heater manufactured by Bowin Designs or any other manufacturer?

 

     –    How can consumers identify a hose assembly which may be faulty in the way those units which failed on the Mod-n-Aire MS12 were?

 

     –    Can you suggest any way we can come to a credible understanding of how many suspect hoses of the type referred to above may still be in consumers' homes?

 

     We ask you to appreciate our concern in this matter and that you will therefore give it your earliest attention." (emphasis supplied)

On 15 May, Mr Shales telephoned Mr Joyce.  The conversation is important.  Mr Shales' affidavit version of it is as follows:

     "DS:`I am ringing to ascertain whether you will be replying to my letter of 30 April.'

 

     JJ:  `I do not feel that we will be able to provide you with a reply because this relates to matters which are now before the police.'

 

     DS:  `Any matters other than that relating to the heater problem between you and any third party are not relevant, and should not prevent you from letting us have copies of the correspondence.  I can't see why you can't let us have copies of that correspondence.'

 

     JJ:  `I have already told you that we told the AGA of the problem with the heaters and you have been in contact with the AGA and they have confirmed this.'

 

     DS:  `They have confirmed that you reported to Robin Williams that there is a problem concerning hose failure, but I have not been able to see the correspondence, and suspect that it was not disclosed that fires had been involved.'

 

     JJ:  `Well, we may not have disclosed that fires were involved.'

 

     Later in the conversation, words to the following effect were said:

 

     JJ:  `I will reply to your letter within a few days.  I have had pressure from other work which has prevented me from doing this.'

 

     DS:  `I understand this, but I look forward to your reply as soon as possible.'

 

     At another time during the conversation words to the following effect were said:

 

     JJ:  `The documents supplied to you are incorrect and you need to be very careful about how you handle them.'

 

     DS:  `If you believe that some of our information is incorrect, would you please let us know specifically, in writing, what information you disagree with.'

 

     Later again in the conversation, words to the following effect were said:

 

     JJ:  `I told Robin Williams about the instances of fires in homes.'

 

     DS:  `That is different to what Robin Williams has told us.  In any case, it is central to our concern that the AGA Rules do not require formal notification about matters such as this.'" (emphasis supplied)

On 18 May, Mr Petersen of AGL wrote to Mr Cerexhe reporting, in the first instance, AGL's opinion on the MS12 and flexible hose which had been produced to, and tested at, AGL's Camperdown laboratory on 13 April.  He reported that AGL's "assessment [was] that the hose connection, although not the optimum design, was satisfactory for its purpose", and AGL's conclusion "that any faulty hose connection made at the same time as the sample would have been due to poor quality control rather than to a design fault."  The letter advised that AGL's records showed that some 1,900 heaters had been sold by AGL from 1985 to 1992 and that AGL believed that the number sold in the period in respect of which ACA had indicated that there were problems, would have numbered less than one hundred. 

The letter advised Mr Cerexhe that AGL had not kept store records which would establish, one way or the other, whether Bowin had replaced suspect stock in AGL's store.  It said that it was possible that one of the store operators remembered and that Mr Petersen would contact Mr Cerexhe the following week if he obtained any more information.  The letter continued by emphasising that AGL had no record of any hose problems with the appliance in question, notwithstanding that AGL's "Utilisation Safety Committee" had a database on all incidents reported to AGL and action taken to remedy any problem found.   The letter expressed concern, however, about information provided by Mr Cerexhe that there had been "about four fires allegedly caused by faulty hoses" and asked for details so that AGL could investigate them.  It concluded by accepting ACA's evidence that there had been a problem with some MS12 flexible hose connections manufactured in the 1980s, that the problem appeared to have been limited to a relatively small number of appliances, and that AGL had no evidence of any faults at the time or since.  Mr Petersen advised Mr Cerexhe that AGL "therefore" felt that it would be "inappropriate to undertake a recall or other course of action which would be an over-reaction to the issue", but that AGL had requested its appliance repair personnel to check any MS12s seen in the field and to report any faulty hoses.  (ACA went to publication with knowledge that Mr Joyce of Bowin and Mr Petersen of AGA were taking the stance that to institute a product recall was not called for.)

Mr Petersen gave oral evidence that subsequently he told Mr Shales that he did not have the information as to whether Bowin had replaced stock of AGL "because someone was on leave at the time and [AGL] didn't have records".  He also said that he told Mr Shales that AGL had found no heaters in the field with problems and asked him again for details about the four fires so that AGL could investigate.

Mr Petersen said that he telephoned Mr Shales once more before publication of the article and told him that he (Mr Petersen) had checked with the AGL storeman who had returned from leave and that the storeman did recall some exchange of stock by a manufacturer at about the relevant time.  He again asked Mr Cerexhe for details of the four fires and Mr Cerexhe undertook to supply them.

On 4 June, Mr Gooden wrote to Mr Shales in reply to his letter dated 13 May about the problem which, he (Mr Gooden) said, Gooden had encountered "some time ago."  He advised that Gooden had commenced manufacturing gas hose assemblies in 1984 and had begun supplying them to Bowin in 1985 or 1986.  He said that Gooden did not have detailed records which would enable it to trace the sale of hoses through to each customer between 1984 and 1988, but was endeavouring to collect as much information as possible.  He advised Mr Shales that one of Gooden's employees who had been concerned with the matter was overseas at the time and that upon his return, "in about one week's time", Gooden would communicate with Mr Shales further.  Gooden did not contact ACA and no-one on behalf of ACA followed up Mr Gooden's undertaking before the article was published towards the end of the month.

On 15 June, Mr Cerexhe wrote to Mr Petersen of AGL supplying him with the names and telephone numbers of consumers who had been contacted by ACA.  The names supplied were Mrs James, David Males, Mr Hancox, Mr Bradburne, Mrs Gard and Mrs Zuber.  The letter advised that in all cases except that of Mrs Zuber, the problem had related to the MS12.  The letter stressed that it was vital that the privacy of the individuals be "protected to the utmost"; asked that the information not be passed on to anyone else; and made clear that the names and telephone numbers were supplied on the basis that Mr Petersen was to contact the consumers personally and that if he wished that they be approached in any other way, ACA's approval should first be sought.  The letter concluded:

     "We will proceed with the article in CHOICE on the subject.  If further information comes to you, other than what we have already discussed at our meetings, please call and keep us informed."

On 15 June, Mr Cerexhe prepared a form of letter to Mr Wunsch
of the Bureau which bore date 19 June but which was not sent until much later (see below).  The letter referred to ACA's letter to the Bureau dated 20 March and enclosed an advance draft copy of the proposed article.  The letter asserted that ACA had gone as far as it could with its investigations and believed that a "public safety issue" arose and that the Bureau should "investigate the matter so as to confirm the scale of the problem (that is, how many heaters with faulty hose connections are still in consumers' homes?)".  The letter said that ACA had not been able to get satisfaction from Bowin "that the problem ha[d] been contained and that there [was] nothing to be concerned about."  The letter asserted that while ACA did not expect that there would be a large number of faulty products in the market, nevertheless the nature of the fault was such that there could be loss of life. 

In fact, as at 19 June 1992, the particular "advance draft copy" of the article intended to be enclosed with the letter had not been written.  As Mr Cerexhe was to be away from Sydney for some 11 days, he left instructions for the letter to be sent to Mr Wunsch with the advance draft copy of the article once it was finalised.  However, on his return to the office he learned that it had not been sent.  Therefore he amended the letter and it became the letter dated 10 July 1992 from ACA to Mr Wunsch referred to below.  Accordingly, it was sent a fortnight after publication, rather than a week before.

Publication of the article as a result of the mailing of the July 1992 issue of "Choice" magazine on 26 June 1992

The July 1992 issue of "Choice" which contained the article was "delivered to Automail on Friday 26 June 1992 for mailing to subscribers" and the other persons referred to earlier.  In a later section of these Reasons for Judgment I deal with the imputations and representations alleged to arise from the article.

The period after publication of the article

Mr Joyce's reaction and response to the article

Mr Joyce read the article on Friday 3 July 1992.  In his oral evidence, he described his reaction and feelings as follows:

 

     "I was absolutely devastated when I read this article.  The inferences from this was that the company was reckless, that it was taking the lives of thousands of people in its hands and not worrying about their welfare through what we were doing.  That it was irresponsible in not having reacted supposedly being aware of all these dangers.  That it had not properly informed the correct authorities that we were aware of some incidents; ... These things were just not true.  It just portrayed an image of someone who was totally dishonest, irresponsible.  I had spent 25 years creating a company which I was proud of, that was respected by its peers, I was very proud of it.  I had, myself, over those years worked very hard in total quality control, management philosophies, etcetera.  And all this was now being challenged.  I'd given talks, as a guest speaker, at Universities where managers of major companies were present.  Some of them were suppliers of ours." (T 224)

     "It was saying that we were reckless, that we're irresponsible and that just was not true.  We're not a reckless company, I'm not a reckless managing director, I'm not irresponsible and the company didn't act irresponsibly. ... And I'm not dishonest." (T 225.07-.11)

Having read the reference in the article to the Bureau (lines 414-417), Mr Joyce immediately (on 3 July) telephoned Mr Wunsch and had a lengthy conversation with him.  He referred to the article's statement that the Bureau had been requested to carry out a thorough investigation of Bowin.  Mr Wunsch claimed that he was not aware of any such request by ACA or of the name "Bowin" or "Mr Joyce".  He said, "This is completely [sic] news to me".  The next day, 4 July, Mr Joyce faxed to Mr Wunsch a letter attempting to give a summary of their telephone conversation on the preceding day and asking for Mr Wunsch's confirmation of its correctness.

On 10 July, Mr Cerexhe forwarded a copy of the article to Mr Wunsch.  Mr Cerexhe's covering letter was, for present purposes, in terms not substantially different from the draft dated 19 June described above.   The statement at lines 414-417 of the article,

     "We have alerted the federal Bureau of Consumer Affairs to these concerns and have requested a thorough investigation take place without delay"

was, of course, incorrect.  The "alerting" and "requesting" took place after publication because of the delay in the sending of Mr Cerexhe's letter to which I have referred.

Receipt by Mr Joyce on or about 8 July 1992 of letter dated 26 June 1992 from Mrs W Bentley

On or about 8 July, Mr Joyce received the letter dated 26 June 1992 from Mrs W Bentley in Western Australia referred to earlier.  It will be recalled that her complaint was that the hose had become separated from the back of the heater and that much gas had escaped, but that the heater had not been burning at the time.  On the same day, 8 July, Mr Joyce wrote to Mrs Bentley  a letter which, omitting formal parts, was as follows:

      "I have received your letter of request for a credit of a faulty gas hose fitted to one of our appliances.  I notice that other work was carried out on the appliance as well, including repair of a switch.

 

     The hose in question is not manufactured by our company and is bought in items [sic] from another company and the four years [sic] time frame would normally exceed any warranty given to us by the supplier.

 

     I feel your claim however, appears to be valid and we will request a credit from the supplier to enable a credit to be passed to you.  In the meantime we are obtaining details from Metro Air of the detail [sic] of charged [sic] relating to the fitting of the new hose and I trust will be in a position to forward a credit to you within 7 days.

 

     There is a question which we have which puzzles us and that is:

 

          *   When the hose is fitted in the factory we use a white paste to fit the hose to the heater.  The hose you returned has white teflon tape around the thread.  Has the hose ever been replaced before by anybody else?

 

          *   From where was this heater purchased?

 

     Trusting you may be able to clear this issue for us."

Further on the same day (8 July), Mr Joyce wrote to Mr Gooden, forwarding a copy of Mrs Bentley's letter.  He advised Mr Gooden that he had examined the hose which Mrs Bentley had returned, that it was from "the original batch manufactured in 1987" and that the hose had pulled out of its fitting.  Mr Joyce's letter continued,

     "*   I can no longer maintain the opinion that further failures are unlikely to occur and recognise that the hoses used by my company are only part of the total number manufactured during that period.  These additional hoses have probably been fitted to a variety of gas products throughout the country.

     *    I have discussed with you before the merits of safety notice or recall and I feel the time has come for me to request that your company advise users of the gas hoses to [sic - as to] the possible risk involved in continuing to use the hoses, without having them inspected for possible fault.

 

     *    I discussed with you today, ways in which you could address the issue and my recommendation would be for a safety notice to be issued throughout Australia.  I believe this should be co-ordinated with the Federal Bureau of Consumer Affairs in Canberra. 

 

     *    The issue in Choice magazine centred on Bowin Designs and our MS12 heater - however, I believe the notice should not centre on the heater but instead the hose and the possible end uses of the hose, which is many times greater than our particular model.  To centre on the MS 12 heater would only serve to camouflage the true extent of potential risk.

 

     *    I fervently trust that there is [sic] no more failures of any kind but following receipt of the letter from Mrs W Bentley I believe action should taken without further delay."

Mr Joyce had previously, particularly in 1989, given thought to the desirability of a product recall or other communication with the owners of heaters, but it was not until the Bentley incident that he became convinced that this was necessary.  That incident and Mr Joyce's letter to Mr Gooden are evidence of the reasonableness of the view expressed in the article that there was cause for concern that there remained dangerous MS12s in consumers' homes.

On 14 July, Mr Gooden replied advising that a Product Safety Notice had been prepared and submitted to the Bureau for approval, and that once approval was obtained Gooden would proceed to publication without delay.

On 15 July, Mr Wunsch called on Bowin and on 16 July he called on Gooden.  He conversed with Mr Joyce and Mr Sheehan on the former visit and inspected documents shown to him.  He subsequently (on 28 July) wrote a letter to Mr Joyce which included the following:

     "I also confirm that my inspection of all the available documentation which was presented to me satisfied my requirements to enable me to assess the need for recall action."

The letter went on to refer to factors which Mr Wunsch had taken into consideration including, in particular, field inspections which were by then being undertaken by Gooden and Gooden's publication of the Product Safety Notice which he had seen in a Sydney newspaper, and concluded that "further specific action" by Bowin did not appear to be required at that time.

On 22 July 1992 Mr Gallagher of AGL wrote a memo to AGL's General Manager.  It recorded the results of a survey of Mod-n-Aire space heaters sold by AGL from 1987 to 1989 inclusive.  Some 11% of those sold were surveyed.  The memo recorded that 12 out of 40 sold in 1988 surveyed (30% of the 40) had faulty hoses and that five out of 26 sold in 1989 surveyed (19% of the 26) had faulty hoses; that none of those sold in 1987 or 1990 surveyed were found to have faulty hoses; and that of the 17 hoses found to be faulty, 14 were said to have been manufactured in 1987 and three in 1988.  Mr Gallagher recommended that the hoses on all appliances sold by AGL between January 1988 and April 1990 be replaced with new hoses at Gooden's cost.  The memo stated said that the total number of appliances which would be involved in that exercise was 644.

On 24 July 1992 there was a meeting at the premises of AGL between Mr Joyce, Mr Paul Fearon of Gooden and various officers of AGL.  Mr Gallagher informed those present that AGL had sold approximately 900 Mod-n-Aire MS12 heaters in the period under review and that approximately 100 were randomly selected for inspection by AGL's staff of which 17 had shown signs of hose failure.  He reported that in those cases the hoses had been replaced.  Mr Joyce said that he believed that 225 hoses were suspect, although field checks had revealed few faults.  The minutes of the meeting recorded:

     "The barb inserted into the fitting in June 1989 at
both ends as a result of an insistence by John Joyce has resolved the problem."

An arrangement was made generally to the effect that AGL would, as agent for Gooden, replace all hoses sold via AGL in 1988 and 1989 and that AGL would undertake the task "at cost" and without seeking to make any profit from the situation.

Coverage by other media

Over the period from 14 July to September 1992, various media referred to the MS12 hose problem and in various ways to the allegations in the article.  The applicants' case is that this media exposure derived from, or was facilitated by, a Mr G Sirmai who, it was conceded, was employed by ACA at the relevant times.  The applicants refer to ACA's conduct in "causing and/or participating in" these further publications for the purpose of promotion of the article as particulars of aggravated and exemplary damages, but not as further publications by ACA constituting further causes of action. 

The content of the various radio, television and newspaper treatments of the subject which were pressed were in evidence.  Particulars of those pleaded and supported by evidence are (in chronological order) as follows:

(a)  14 July 1992      Interview with Mr G Sirmai of ACA at 7.30 am on 2WS Radio News;

(b)  14 July 1992      Interview with Mr G Sirmai of ACA at 11.00am on "Eleven AM" on ATN 7;

(c)  14 July 1992      Interview with Mr G Sirmai of ACA at
5.30pm on "Sydney Extra" on TCN 9;

(d)  14 July 1992      Interview with Mr G Sirmai of ACA at 6.00pm on "Seven Nightly News" on ATN 7;

(e)  15 July 1992      Interview with Mr G Sirmai of ACA on "Tony Delroy Show Late Night" on ABC Radio;

(f)  21 July 1992      Article in "The Courier Mail" [Brisbane] entitled "Flaming toasters a hazard - QEC";

(g)  21 July 1992      Interview with Mr G Sirmai of ACA at 5.30pm on "Sydney Extra" on TCN 9;

(h)  21 July 1992      Interview with Mr G Sirmai of ACA at 2.55pm on "Consumer Watch" on 2GB Radio;

(i)  21 July 1992      Article in "The New Englander" entitled "Warning on gas room heater hose";

(j)  7 August 1992     Talkback interview with "Ted" on "The Sattler File" on 6PR-Perth Radio [neither Mr Sirmai nor anyone else from ACA participated in this instance.]

 

(k)  September 1992    Further article in "Choice" magazine entitled "Mod-n-Aire Gas Heater: More News".

Mr Joyce gave evidence that he saw the relevant coverage on the "Seven Nightly News" on 14 July and was "devastated by the prospect that 'the whole world' was being told that [Bowin] and he [Mr Joyce] were incompetent and dishonest".  He said that he had "felt like crawling under the table and staying there" (Mr Joyce's affidavit sworn 19 August 1993, para 78). 

Responses by Mr Joyce

Mr Joyce also gave affidavit evidence of his feelings of concern about the repercussions upon himself and his
involvement with various organisations including the committees on which he served and the universities at which he gave lectures.  On 15 July 1992 he telephoned Mr B Russell, Chairman of the Board of the Technology Transfer Council, told him about the "Seven Nightly News" program of the preceding night, and said that he felt that this might bring disrepute to the Council, and so offered his resignation from the Board. Mr Russell declined to accept it.

Following the publication of the article and media exposure, many owners of heaters which Bowin had manufactured contacted it.

Mr Joyce instructed Bowin's General Manager, Mr Sheehan, to arrange for all retailer and customer inquiries arising out of the article to be directed to him and for a record to be made as to the nature of the inquiry.  The records made by Mr Sheehan were in evidence.  These revealed inquiries over the period from 14 July 1992 to 5 July 1993 inclusive and were supposed, by Mr Joyce at the date of his affidavit sworn 19 August 1993, to be continuing.  Mr Sheehan also gave evidence of his handling of the inquiries by heater owners and by Bowin's service technicians.  He estimated that his workload increased by approximately 30% as a result of the publication.

Particular aspects of loss or damage

A particular matter for which Bowin claims relates to the "Bowin SLE 1 Project".  However, its claim in this respect is not for special damages; rather, the evidence is relied on as showing that the publication had an adverse impact on Bowin for which it is entitled to general damages.

As from early 1992, Bowin was involved in what Mr Joyce described as its most important project in 25 years.  This involved a substantial investment in what he described as "the most advanced high technology gas space heater in the world".  Mr Joyce's oral evidence was that this new product was first marketed in May 1992.  It was promoted under the name "Bowin SLE 1".  It was the first of Bowin's products to be marketed under the name "Bowin" or under a name which included that word.  According to Mr Joyce's affidavit evidence, in July 1992 the Bowin SLE 1 was only a few weeks away from going into production.  Mr Joyce said that he was aware of the potential damage to the project and to Bowin from adverse publicity.  He said that telephone calls from AGL, AGA, and customers of Bowin, liaison with Gooden, and retrieval of documents, all occupied substantial time of himself and of Bowin's employees, and caused distraction from the Bowin SLE 1 Project and delay in its launch.  In addition, he was interviewed by a Channel 9 "Current Affair" team at Bowin's factory and he found this stressful.  It also caused stoppage of production in Bowin's plant for several hours.

According to Mr Joyce's affidavit, on 1 October 1992 he visited Dr Stephens in his consulting rooms at Mona Vale in preparation for his admission to Mona Vale Hospital on 8 October 1992 for a surgical operation.  When the doctor learned that Mr Joyce was the designer of gas appliances which were manufactured in his factory at Brookvale, Dr Stephens said to him,

     "You're not the one that was on the TV, the one with the flame-thrower and the potential to burn down people's homes?"

And later:

     "You're nothing but a damn villain.  That's disgusting what you have done.  If what the program says is correct, people like you have to be exposed."

According to the affidavit, Mr Joyce then insisted upon explaining the background, as a result of which the doctor said:

     "If what you say is correct, what they have done to you is absolutely scandalous because they have made you out to be nothing but a real villain, and that is certainly the way that it came across to me.  I thought at the time, isn't it great that people like this can become exposed.  You ought to be getting yourself a good barrister and fight these people because, you know, everyone believes that everything that Choice says is gospel. (Mr Joyce's affidavit sworn 19 August 1993, para 102)

Mr Joyce's evidence of his conversation with Dr Stephens was admitted over objection and subject to relevance.

A further aspect of loss and damage of Bowin of which there is
evidence relates to the difficulty which Bowin experienced in obtaining public/products liability insurance cover.  The insurer for the 1992-1993 year had been Mercantile Mutual General Insurance ("Mercantile Mutual").  Mr Ken Allam, a director of Bowin's insurance broker, Australian European Insurance (Brokers) Pty Limited, wrote to Mr Joyce on 15 March 1993 advising that Mercantile Mutual had declined to offer renewal in respect of that particular component of Bowin's insurances for the 1993-1994 year, notwithstanding that Bowin had a nil claim record for the preceding two years, being the period in respect of which Mercantile Mutual had provided cover.  Mr Joyce's affidavit evidence was that Bowin had never had a product liability claim in the 25 years during which it had been manufacturing heaters and other products.  Mr Allam's letter advised that although Mercantile Mutual had not given a specific reason for declining cover, it was "natural to assume" that its unwillingness was attributable to the article.  The letter advised that the broker had been able to place the account with AMP, but only after a very thorough canvassing of the market, including approaches to American companies.  The letter continued as follows:

     "As explained, all information relevant to your Account had to be disclosed to potential Underwriters.  Without that being done, future claims could be rejected.  The article in Choice was not news to some Underwriters who made a computer note on the Targeted Manufacturers should they encounter any future dealings.

 

     Unfortunately the rejection by Mercantile Mutual will always be on your Insurance records, also the subject matter of the Choice article must always be disclosed.

 

     In terms of the Insurance Market, the reaction was an overall rejection to even quote for your Liability Programme and quite frankly we consider it most fortunate that AMP gave it approval following some subtle pressure from me.  Companies approached were AMP, Chubb Insurance Co, Kemper Insurance, FAI, CIC, Provincial Insurance and the Commercial Union Group.  Other Companies were informally approached to gauge an indication of their preparedness to underwrite Gas Heater Manufacturers and the responses, as expected were negative.

 

     The article in Choice was most detrimental to your Liability Insurance not only now but in the future and the initial premium increase factor this year alone has been in excess of $3,000.00, let alone the same repercussion in future years.  Obviously our concern was primarily future insurability but having crossed the first 'hurdle' of the 1993/1994 Policy Year with AMP we can only hope for continuity."

A final aspect of loss and damage was the subject of an affidavit of Mr Joyce sworn 26 April 1995 and affidavits of Bowin's National Sales Manager, John Frederick Walsh, sworn 12 April 1995, and Bowin's National Marketing Manager, Cor Van Rooy, sworn 11 April 1995.  This related to adverse effect which the publication had on the names "Mod-n-Aire" and "MS12", and action in mitigation of loss taken by Bowin.  This head of loss was the subject of an amendment to the pleading which I allowed over objection on 28 April 1995.

Shortly, the evidence showed that the product fell into disrepute in the market place; that Bowin met resistance in its attempts to sell its stock of MS12s, even at a discount; that Bowin "dropped the names `Mod-n-Aire' and `MS12'"; that it discarded as rubbish associated brochures and stationery; that it promoted the name "Bowin" in place of the abandoned names; that it produced videos promoting "Bowin" products, in particular, the "Bowin SLE" model heater; that it sold off component parts of Mod-n-Aire heaters; that it advertised and effected "factory" sales of what had previously been sold as Mod-n-Aire heaters; and that it embarked upon a "public relations exercise" based on the "Bowin SLE" model.

In the above respects, Bowin claims to recover as special damages the amounts which were referred to earlier in my account of the second further amended statement of claim, totalling $71,313.90.

REASONING

The imputations said to have been conveyed by the matter complained of

Conveying of imputations generally

ACA submits that the matter complained of is not capable of bearing, and does not bear, any of the five imputations pleaded. (Whether the article gives rise to them as "representations" is determined by the same considerations.)  Whether the matter complained of is capable of conveying the imputations pleaded and whether those imputations had a capacity to defame the applicants are questions of law, while the questions whether the imputations are conveyed and, if so, whether they defamed the applicants are questions of fact: Jones v Skelton [1963] SR (NSW) 644 (PC) at 650-651; Lewis v Daily Telegraph Ltd [1964] AC 234 (HL) at 258-260; Farquhar v Bottom [1980] 2 NSWLR 380 (Hunt J) 385E, F.  Since I am the tribunal of law and fact, it will be sufficient for me to speak in terms of the conveying of the respective imputations and of their defaming the applicants, on the basis that my decisions on the legal questions of capacity will be subsumed in my discussion of these factual issues.

Does the article, read as a whole (A v Ipec Australia Ltd [1973] VR 39 (Menhennit J) at 43-44), convey the pleaded imputations to the ordinary reasonable reader?  In answering this question,  I must reject meanings which can emerge only as a result of some strained, or forced, or utterly unreasonable interpretation: Jones v Skelton, supra, at 650; Farquhar v Bottom, supra, at 385G-386A.  Aspects of the "mental schema" of the ordinary reasonable reader are described by, for example, Hunt J in Farquhar v Bottom, supra, at 385G-387B.  A distinction must be drawn between the imputations which fairly arise for which a publisher of the matter complained of is accountable, and beliefs and understandings of some readers, which, although excited in them by the publication, are in substance entertained by reason of pre-existing prejudices and for which it would be unfair to hold the publisher responsible; Mirror Newspapers Ltd v Harrison (1982) 149 CLR 293 at 301 (Mason J).

Both the legal and factual questions to which I have referred are to be decided without reference to what the publisher intended to convey or in fact believed to be true: Cassidy v Daily Mirror Newspapers Ltd [1929] 2 KB 331 at 354 (Russell LJ); Readers Digest Services Pty Ltd v Lamb (1982) 150 CLR 500 at 506 (Brennan J); Anderson v Mirror Newspapers Ltd (No 1) (1986) 6 NSWLR 99 (Hunt J) at 108.

Before I address the imputations pleaded, some general observations may usefully be made.  The first relates to the structure and meanings of the first three imputations.  All three plead recklessness (imputation 2 adds irresponsibility, and imputation 3 adds carelessness) in and about some aspect of the applicants' commercial conduct.  Those aspects are manufacture and sale (imputation 1), distribution (imputation 2), and failure to take appropriate steps to recall or remove a product (imputation 3).  The expression in imputation 1, "in and about the manufacture and sale of ... gas heaters", if construed broadly and in isolation, could be understood to encompass the whole of Bowin's business conduct.  According to this view, imputation 1 signifies nothing less than that the applicants were reckless "as manufacturers and sellers of", or "in the business of manufacturing and selling", gas heaters that were dangerous.  However, I think that this is not the true construction of imputation 1.  Whatever it might properly embrace, it does not, in my view, extend to catch a post-sale failure to take the steps referred to in, and the subject of, imputation 3.

The second general observation is that the article has two major concerns.  One is the danger or potential danger of fire associated with MS12 heaters in consumers' homes.  The other is what is portrayed as the failure of existing institutional arrangements to require disclosure to an appropriate body of defects in gas appliances that pose a danger to consumers, and to require that such defects be appropriately addressed.  The former is dealt with principally in the title, the photographs and their captions, the italicised and bold print on page 16, the introductory paragraphs, and the paragraphs under the headings "THE WEAK LINK", "BAD NEWS FROM THE FIELD", "SITTING QUIET" and "THE MANUFACTURER RESPONDS".  The latter is dealt with principally under the headings "THE GAS ASSOCIATION" and "WHERE DO YOU COMPLAIN?".  The final section of the article under the heading "TIME FOR ACTION" draws the threads together.  Particular statements in the article must be understood in the context of the focus of concern of that part of the article in which they occur.

The third general observation is that the case was conducted on the basis that the applicants' causes of action in defamation were founded on the five imputations pleaded and no others; cf sub-s 9 (2) of the NSW Act.  Accordingly, I have not been called upon to consider whether other imputations defamatory of the applicants were conveyed by the material complained of.

The five imputations pleaded

Imputation 1

     "That the Applicants and each of them were reckless in and about the manufacture and sale of dangerous appliances, namely gas heaters."

The first observation made above goes a long way to answering the question whether imputation 1 is conveyed.  The article makes plain that Bowin was a purchaser, not a manufacturer, of hoses.   The matter complained of levels no criticism at the applicants in respect of Bowin's manufacturing and selling either before or after August 1989.  The article does not suggest that prior to August 1989, Bowin was or should have been aware of the hose problem or should not have dealt with Gooden.  The article states expressly that once Bowin became aware of the defect in the hoses, it took "prompt action" and "the problem was fixed for future units" (lines 180-184).  Similarly, at lines 23-26 we are told that the hose design was changed "late in 1989" and that subsequent units "are not under suspicion".  Finally, at lines 290-292 we read, "Modifications were made to the crimping process and the AGA tested the new hoses: they were satisfactory."

In my view, the first imputation is not conveyed.

Imputation 2

     "That the Applicants and each of them were irresponsible and reckless in that they knowingly distributed dangerous appliances, namely gas heaters."

In my view, this imputation is not conveyed either.  Taking the broadest view of the import of the article, I do not think that the whole or any part of it signifies that at the time of distribution, Bowin and Mr Joyce knew or should have known
that the MS12s which Bowin was placing on the market were dangerous.

Imputation 3

     "That the Applicants and each of them were careless and reckless in failing to take the appropriate steps to recall or remove dangerous appliances, namely gas heaters, from consumers."

ACA submits that this meaning is not conveyed.  It submits that the ordinary reasonable reader might understand the article to be saying only that the applicants failed to act promptly and displayed bad judgment with regard to recall of the product or notification to customers, but that this falls short of an imputation of carelessness or recklessness.  According to the submission, an ordinary reasonable reader would understand the article to be consistent with the applicants' having acted out of ignorance in the erroneous but honest belief that they had "caught all suspect stock".  According to the submission, a reading of the article as conveying this third imputation would be attributable to the reader's belief or prejudice, rather than to the message conveyed by the article.

I do not think that ACA's submission should be accepted.  In my opinion the article gives rise to the third imputation.   At lines 27-36 there appears the following passage:

     "The manufacturer, Bowin Designs, has not recalled the heaters or the hoses, nor has it contacted
owners to warn them of the potential danger and of the need to take the precaution of checking the gas hose.  Yet it was aware of the problem at least as long ago as August 1989.

 

     With another winter upon us people have brought out their heaters.  Will there be a more serious fire this year?"

This informs a reader that from August 1989 down to publication at the end of June 1992, a period of nearly three years, Bowin was aware of a "problem" in the field but failed to recall or to warn.

The "problem" in question is that identified earlier, in the title, the italicised introduction below the title, the photograph and caption on the front page, the quoted dialogue in bold print in lines 1-7, and the text at lines 8-26.  The caption below the photograph of the heater with flame issuing from the loose end of the hose is:

     "The problem ... we set up this photo in our labs, but it shows what can happen if the hose separates from its fitting while the hose is on". (emphasis supplied)

The dialogue in bold print gives a particular consumer's graphic description of "flame shooting out of the end of the gas hose ... like a flamethrower."  The first paragraph of text (lines 8-15) refers to the "scare" experienced by "a number of consumers" when the hose "had come away from the heater and, if the heater was on, gas had ignited." 

The second paragraph of text (lines 16-26) refers to a sale of up to 4,000 MS12 heaters across Australia "before the hose design was changed late in 1989".  The inference which the reader is invited to draw is that the dangerous defect as described affects, if not the "up to 4,000" heaters, at least a substantial number of heaters.

There follows the allegation in the paragraph quoted earlier.  In my opinion, that passage, following as it does the earlier material to which I have referred, charges Bowin with having failed to take those steps which any responsible and careful manufacturer of such a heater, with knowledge that it had been such a serious problem, would have felt compelled to take, namely, either the recall of the product or the giving of a warning to its owners.

At lines 103-112, the article asserts that notwithstanding lengthy consultation with Bowin and others, and ACA's request to be convinced that the problem was under control, ACA has not been convinced that it was.  The reader is invited to accept that ACA would have conducted itself reasonably in not being convinced and that Bowin has been reckless or careless in not itself being convinced that a recall or warning was necessary.

At lines 179-210, the heading is perhaps more telling than the text.  Taken in isolation, the paragraph at lines 185-210 can be understood as doing no more than identifying a desirable course of action which, for various acceptable reasons (such as ignorance), Bowin has failed to take.  But, in my view, the heading "SITTING QUIET" and the other parts of the article which I have mentioned above, combine to cause lines 179-210 to be read as assigning blame.

The third imputation also arises from the passage at lines 401-417.  In the context of the article as a whole, lines 409-413 assign blame.  Again "the problem" referred to is the fire-prone MS12 heaters of which, the article invites the reader to accept, a significant number probably remain in consumers' homes.  That, according to this passage, is the problem of which Bowin was aware, and in respect of which it "chose not to institute a product safety recall or notify consumers who had bought its heaters" (emphasis supplied).

In my view, the matter complained of, read as a whole, conveys imputation 3.

Imputation 4

     "That the Second Applicant was dishonest in his claim that any danger in and about the gas heater was limited and had been rectified."

The fourth and fifth imputations relate to Mr Joyce alone.

The first of the passages which might arguably give rise to the fourth imputation occurs at lines 223-229:

     "Joyce claims the problem was limited to a single batch of hoses.  But from information in our possession it appears problems were reported from heaters manufactured across a span of three or four years.  Could only a single batch of hoses really have been involved?"

This passage occurs under the heading "THE MANUFACTURER RESPONDS".  It is part of the author's questioning of Mr Joyce's defence of Bowin's inaction, that is to say, Bowin's "SITTING QUIET" rather than initiating a recall of, or warning about, the "serious safety problem" discussed in the preceding section of the article.

In my view, the passage invites the reader to accept the proposition implicit in the question that a single batch could not have been fitted to the heaters manufactured over a period of three or four years.  But does the article impute to Mr Joyce knowledge of this fact and therefore dishonesty in offering his "single batch" explanation?

ACA's submission in relation to this passage was succinctly put by Mr Tobin QC in oral submissions as follows:

     "Now, your Honour, what we submit is, that to use the question, `could only a single batch of hoses really have been involved?' as a springboard for an allegation that a meaning of dishonesty is conveyed is to conflate scepticism with, as it were, malicious denunciation of the person as a liar." (T 51.14-.18)

He submitted that to find that imputation 4 is conveyed would
be to disregard the warning given by Mason J in Mirror Newspapers Ltd v Harrison (1982) 149 CLR 293:

     "A distinction needs to be drawn between the reader's understanding of what the newspaper is saying and judgments or conclusions which he may reach as a result of his own beliefs and prejudices.  It is one thing to say that a statement is capable of bearing an imputation defamatory of the plaintiff because the ordinary reasonable reader would understand it in that sense, drawing on his own knowledge and experience of human affairs in order to reach that result.  It is quite another thing to say that a statement is capable of bearing such an imputation merely because it excites in some readers a belief or prejudice from which they proceed to arrive at a conclusion unfavourable to the plaintiff.  The defamatory quality of the published material is to be determined by the first, not by the second, proposition.  Its importance for present purposes is that it focuses attention on what is conveyed by the published material in the mind of the ordinary reasonable reader." (at 301)

The next passage in the article which might arguably give rise to imputation 4 follows immediately the "single batch" passage noted above.  At lines 230-246, the author first states Mr Joyce's allegation that upon his being alerted to the problem in 1989, stock was recalled from gas showrooms.  There appears (at lines 236-241) what the article describes as AGA's "curious response" to ACA's request that AGA confirm the correctness of Mr Joyce's allegation.  It is possible to read the article's "curious response" reference as no more than a comment on AGL's business practice in 1989 of not keeping store records of withdrawal and replacement of suspect stock, rather than as a reflection on Mr Joyce's honesty.  The sentence at lines 242-246 invites the reader to share the author's conclusion that even the defective stock in AGL showrooms when the defect came to light was probably not all prevented from reaching consumers.  However, the final subordinate clause in the sentence ("although we've seen no records of confirmed failures later than September 1990") warns against jumping to conclusions.

Although I have found the present issue a difficult one, I have concluded that ACA's submissions should be accepted, and that the fourth imputation is not conveyed.

Imputation 5:

     "That the Second Applicant although a board member of the Australian Gas Association, knowingly suppressed the truth concerning gas heaters manufactured by his company, from the Association and consumers."

The passages in the article which arguably convey this imputation are as follows:

     (1)  "And manufacturers of gas products sit on the governing council of the AGA and its various boards.  The managing director of Bowin Designs, John Joyce, is one of these representatives." (lines 257-261)

     (2)  "Its [AGA's] Chief Technical Manager has now confirmed that Bowin Designs got in touch with him back in 1989:

         `AGA received no information of field problems or fires from the MS12 heaters.  The correspondence in August 1989 with Bowin Designs concerned some 10 instances of hose failure, but, fortunately, no serious accidents ...'" (lines 272-280)

     (3)  "And it is a serious matter that, according to
the AGA, it was not actually told by Bowin Designs that gas hoses had led to fire.  We're still pressing the AGA to send us copies of correspondence so we can see how effectively the problem and potential danger were communicated to the AGA as industry regulator." (lines 302-309)

     (4)  "There is a question whether the AGA is being adequately informed by its members of products with significant complaint or failure levels.  And that means significant either by volume or by the nature of the potential hazard though small in number." (lines 322-328)

     (5)  "Yet, in general terms, if there is a product fault you can't rely on the manufacturer to report its own product to an external authority." (lines 339-342)

     (6)  "(Disturbingly, although the AGA's Chief Technical Manager says he was informed by Bowin Designs in 1989 of 10 instances of hose failure, the December 1990 internal memo from Bowin's then sales manager to the managing director cites 28 cases of `hose-related faults'.  It doesn't appear this later and more comprehensive information was passed to the AGA.)" (lines 346-355)

     (7)  "We are concerned about gaps in the way this case was handled by the manufacturer and the AGA. (lines 372-374)

     (8)  "And it should become compulsory for manufacturers to keep the AGA informed of consumer complaints which touch upon safety issues." (lines 397-400)

I think that an ordinary reasonable reader would understand all eight passages which I have set out above as being directed principally to the absence of a system in which manufacturers were obliged to disclose defects in consumer products to an independent regulator.  That reader would understand them in the light of the headings ("THE GAS ASSOCIATION" and "WHERE DO YOU COMPLAIN?") of the sections in which they occur, and, in particular, in the light of the opening paragraphs of those respective sections:

                    "THE GAS ASSOCIATION

 

     Who's keeping an eye on this sort of thing for consumers?  One of the tasks of the Australian Gas Association (AGA) is to supervise approvals for gas products you use in the home.  Though it may appear to be an independent government regulator, in fact it is an industry body, paid for by manufacturers and the utilities (gas suppliers).

 

     And manufacturers of gas products sit on the governing council of the AGA and its various boards.  The managing director of Bowin Designs, John Joyce, is one of these representatives.

 

     .................................................

 

                   WHERE DO YOU COMPLAIN?

 

     The AGA has been a good thing for the industry and, we believe, has generally served consumers well.  However, we express some concern over its mechanism for dealing with product complaints.

 

     ..................................................."

Passage (1) above exemplifies the perceived problem described in the opening paragraph of the section of the article headed "THE GAS ASSOCIATION", namely, that the AGA is an industry body funded by manufacturers of gas appliances and suppliers of gas, and governed by a council comprising their representatives.  It is implied that there is, in effect, no-one who is "keeping an eye on this sort of thing for consumers."  Mr Joyce is referred to as an example of a manufacturer's "representative" holding office in AGA.

Passage (2) above follows an account of the provision of misinformation by AGA to ACA.  According to the article, AGA had responded to ACA's initial inquiry by advising that AGA had no knowledge whatever of any problem with the MS12, but when ACA had placed further evidence before it, its Chief Technical Manager had given the confirmation referred to at the beginning of the passage.  The immediate significance of the recounting of AGA's error is the suggestion that AGA's system of recording defects disclosed to it by its members is inadequate. 

But it is important to understand that this shortcoming is part of a more general picture which emerges in these two sections of the article.  AGS is portrayed as a "club".  Its members are not obliged to report defects and AGA is not obliged to record any that may be reported.  Any notion of "suppression of the truth" misses the point: it is entirely a matter for the individual manufacturer whether and how much to disclose.  Not to record a disclosure is unimportant in such a system because disclosure itself is voluntary.  According to the article, non-disclosure and an absence of accurate records of any disclosure made, far from pointing to blameworthy conduct on the part of any manufacturer or individual, are  referred to as but illustrations of a systemic inadequacy.

We are next told that according to AGA's Chief Technical Manager, Bowin informed AGA in August 1989 of some ten instances of hose failure, but not of any fire.  Does the article suggest that there had been fires in August 1989?  If so, does it suggest that Mr Joyce was aware of them?  If so, does it suggest that his non-disclosure of them to AGA was a knowing suppression of the truth?  It would, perhaps, be surprising if the author went so far, having regard to the central thesis of these two sections of the article, that there is no obligation on manufacturers to inform AGA of defects, although this is "expected" (line 345).  The subject passage itself does not make the suggestions referred to, and in any event the article has made clear that information supplied by AGA is liable to be erroneous. 

Lines 27-36, much earlier in the article, suggest that as early as August 1989 "Bowin Designs" had known that the MS12 had a "problem" which involved the "potential danger" of fire.  Would an ordinary reasonable reader link this piece of intelligence with the subject passage and conclude that Bowin's omission to mention that any of the ten instances reported by it in August 1989 to AGA involved fire, must have been due to a deliberate concealment by Mr Joyce.  I think not.  The passage at lines 27-36 does not go so far as to signify that Bowin or Mr Joyce was actually aware of incidents of fire.  But more importantly, the thrust of passage (2), particularly when read with passage (3) which occurs in proximity to it, is simply that after a "false start" AGA admitted that Mr Joyce had contacted it in August 1989, and that for whatever reason, AGA had no record of being informed of fires associated with the MS12.  Again, the focus of attack is AGA and the "loose" system of "control" which it administered, rather than Mr Joyce.

ACA submits that passage (3) leaves open the question whether, as a matter of objective fact, AGA was told by Bowin that the defect had led to fire.  In this regard, ACA points out that the second sentence makes it clear that ACA is still pressing AGA to supply copies of correspondence so that ACA "can see how effectively the problem and potential danger were communicated to the AGA as industry regulator."  Clearly, the passage asserts that something is "a serious matter".  On one view, the serious matter referred to is the fact that AGA, as industry regulator, believes or understands that it was not told about fire, even it was.  But even on the basis that "the serious matter" is that Bowin did not inform it that fire had occurred, I do not think that the passage imputes to Mr Joyce a knowing suppression of the truth concerning the MS12 from the AGA and from consumers.  Again, an ordinary reasonable reader would understand the article to convey at this point the meaning that it is a serious shortcoming that it is left to a manufacturer how much information it will disclose.

Passage (4) raises a question but does not label Mr Joyce as a liar.  The question again goes to a "system" which leaves it to the individual manufacturer to determine to what extent it will reveal particulars of product failures or complaints.

Passage (5) suggests that consumers cannot feel confident that manufacturers will report faults in their own products to a "manufacturers' club".  This is not a charge of dishonest concealment against Mr Joyce.

Passage (6) suggests a failure by Bowin to update AGA by reporting 18 additional incidents of hose failure which intervened between its reporting of ten in August 1989 and the writing of Mr Musster's memo to Mr Joyce in December 1990.  I do not think that this amounts to a charge against Mr Joyce of knowing suppression of the truth.  A failure to up-date is consistent with oversight, with a belief that no further relevant significant information would be conveyed to AGA by an up-dating beyond that which it already possessed, and with a belief that it was quite acceptable, consistently with the "undemanding" nature of the "system" which AGA administered, for no up-dating to take place.

Passage (7) does not accuse Mr Joyce of dishonesty.

Nor does passage (8).

In the result, I do not think that imputation 5 is conveyed to the ordinary reasonable reader.

Defamatory quality of the imputations

It was not disputed that the pleaded imputations are defamatory of the applicants.

General legal nature of the various qualified privilege/ qualified protection defences

In Australia, three classes of qualified privilege defence must be considered: the common law defence which is available in New South Wales, Victoria, South Australia, Western Australia, the Australian Capital Territory and the Northern Territory; the statutory defence provided in sub-s 22 (1) of the NSW Act; and the "code" defences in Queensland and Tasmania.  The application of these respective defences to the facts of the present case will be considered later, but it is useful, at this stage, to note their general nature. 

Qualified privilege at common law

The nature of qualified privilege at common law was described by Lord Atkin in Adam v Ward [1917] AC 309 as follows:

     "It was not disputed, in this case on either side, that a privileged occasion is, in reference to qualified privilege, an occasion where the person who makes a communication has an interest or a duty, legal, social, or moral, to make it to the person to whom it is made and the person to whom it is so made has a corresponding interest or duty to receive it.  This reciprocity is essential." (at 334)

The defence of qualified privilege is defeated if the plaintiff proves that the defendant was actuated by "express" or "actual" malice.  This requires proof that the defendant was actuated by some motive not directly connected with the privilege (an "indirect motive") and so was abusing the privileged occasion.  The improper motive usually asserted is a desire to injure the plaintiff.  Relevant matters include, but are not limited to, recklessness and failure to inquire as to the truth of the defamatory material, and the inclusion of material irrelevant to the occasion of qualified privilege.

Qualified privilege under s 22 of the NSW Act

The notion of the "interest or duty of the communicator" finds no place in s 22 of the NSW Act, and in this respect the statutory defence can be seen to be wider than that at common law.  However, the notion of the reasonableness of the conduct of the publisher is introduced.  Like malice, which is also not mentioned, any interest or duty of a person in publishing the material complained of is relevant to the issue of the reasonableness of the publisher's conduct.  Under the general law, the malice of a defendant must be proved by a plaintiff, but under s 22 of the NSW Act a defendant must prove that its conduct was reasonable as part of the statutory defence.  Sub-section 22 (1) of the NSW Act is as follows:

     "22(1)Where, in respect of matter published to any person -

 

            (a)the recipient has an interest or apparent interest in having information on some subject;

 

            (b)the matter is published to the recipient in the course of giving to him information on that subject; and

 

            (c)the conduct of the publisher in publishing that matter is reasonable in the circumstances,

 

            there is a defence of qualified privilege for that publication."

Sub-section 9 (1) of the NSW Act provides, inter alia, that where a person publishes an article by means of which or by means of any part of which, and its publication, the publisher makes an imputation defamatory of another person, that article is a "matter" and the imputation is made by means of the publication of that matter.

"Code" defences of qualified protection in Queensland and Tasmania

The "code" defences of qualified protection in Queensland and Tasmania on which ACA relies are found in s 377 of the Criminal Code Act 1899 (Qld) (by Act 37 of 1995, s 459, Sch 3, that provision has subsequently become s 16 of the Defamation Act 1889 (Qld)) and s 16 of the Defamation Act 1957 (Tas).  They are in substantially the same terms.  ACA relies, in particular, on sub-ss 377 (3), (5) and (8) of the Queensland Code and their Tasmanian counterparts, paras 16 (1) (c), (e) and (h) of the Tasmanian Act.  As under the NSW Act, reciprocity of duty or interest of the parties to the communication is not required.  It suffices to set out paras 16 (1) (c), (e) and (h) and sub-s 16 (2) of the Tasmanian provision:

     "16(1)It is a lawful excuse for the publication of defamatory matter if the publication is made in good faith -

 

            (a)...;   (b  ...;

 

            (c)for the protection of the interests of the person who makes the publication, or of some other person, or for the public good;

 

            (d)...;

 

            (e)for the purpose of giving information to the person to whom it is made with respect to a subject as to which that person has, or is reasonably believed by
the person who makes the publication to have, such an interest in knowing the truth as to make the last-mentioned person's conduct in making the publication reasonable in the circumstances;

 

            (f)...;   (g)  ...;

 

            (h)in the course, or for the purposes, of the discussion of a subject of public interest the public discussion of which is for the public benefit.

 

        (2)For the purposes of this section, a publication shall be deemed to be 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)the manner and extent of the publication does not exceed what is reasonably sufficient for the occasion; and

 

            (c)the person by whom the publication is made -

 

                (i)    is not actuated by ill-will to the person defamed, or by any other improper motive; and

 

                (ii)   does not believe the defamatory matter to be untrue."

Paragraph 377 (8) of the Queensland Code is similar to para 16 (1) (h) of the Tasmanian Act but adds: "and if, so far as the defamatory matter consists of comment, the comment is fair."  The matters which would be relevant to a plaintiff's reply of "malice" at common law are relevant to the element of "good faith" to be established by a defendant under the codes.  The "reasonableness" of the publisher's conduct in publishing is referred to in para 16 (1) (e).

General legal nature of the various "comment" defences

Common law defence of "fair comment on a matter of public interest"

The common law defence of "fair comment on a matter of public interest" is available in Victoria, South Australia, the Australian Capital Territory and the Northern Territory (s 6A of the Defamation Act 1938 (NT) provides also that fair comment is privileged if it is published in respect of any of the specific matters referred to in that section).  A recent definition of what qualifies at common law as fair comment on a matter of public interest is as follows:

     " ... criticism on matters on matters of public interest, in the form of comment upon true or privileged statements of fact, such comment being made honestly by a person who did not believe the statements to be untrue and was not otherwise actuated by malice." (Balkin and Davis, Law of Torts, 2nd ed, 1996, 549)

Again,

     "At common law the defendant must demonstrate that:

 

     (a)    the words in question are an expression of opinion as opposed to a statement of fact;

 

     (b)    the opinion has been expressed on a matter of public interest;

 

     (c)    the comment was fair, which requires the opinion to be expressed on a matter of fact (or on privileged material such as the judgment of a court or the proceedings of parliament) and to be expressed honestly." (Tobin and Sexton, Australian Defamation Law and Practice, Butterworths, 1991, para [13,010], pp 8551-2)

The common law defence is defeated by malice, the onus of proving which lies on the plaintiff.

Defence of comment under Div 7 (ss 29-35) of Part III of NSW Act

The NSW Act abolished the common law defence (para 29 (1) (b) of the NSW Act) but made available, by Division 7 (ss 29-35) of Part III of the Act, a defence of comment in the nature of an expression of an honestly held opinion relating to, relevantly, facts truly stated on a matter of public interest.  Sections 30-33 of the NSW Act are as follows:

     "30(1)For the purposes of this section, but subject to subsection (2), `proper material for comment' means material which, if this Division had not been enacted, would, by reason that it consists of statements of fact, or by reason that it is a protected report within the meaning of section 24, or for some other reason, be material on which comment might be based for the purposes of the defence or exclusion of liability in cases of fair comment on a matter of public interest.

 

        (2)A statement of fact which is a matter of substantial truth is proper material for comment for the purposes of this section, whether or not the statement relates to a matter of public interest.

 

        (3)The defences under this Division are available as to any comment if, but only if -

 

            (a)the comment is based on proper material for comment; or

 

            (b)the material on which the comment is based is to some extent proper material for comment and the comment represents an opinion which might reasonably be based on that material to the extent to which it is proper material for comment.

        (4)There is no special rule governing the nature of the material which may be the basis of comment imputing a dishonourable motive or governing the degree of foundation or justification which comment imputing a dishonourable motive must have in the material on which the comment is based.

 

      31    The defences under this Division are not available to any comment unless the comment relates to a matter of public interest.

 

      32(1)Subject to sections 30 and 31, it is a defence as to comment that the comment is the comment of the defendant.

 

        (2)A defence under subsection (1) as to any comment is defeated if, but only if, it is shown that, at the time when the comment was made, the comment did not represent the opinion of the defendant.

 

      33(1)Subject to sections 30 and 31, it is a defence as to comment that the comment is the comment of a servant or agent of the defendant.

 

        (2)A defence under subsection (1) as to any comment is defeated if, but only if, it is shown that, at the time when the comment was made, any person whose comment it is, being a servant or agent of the defendant, did not have the opinion represented by the comment."

The defence is not defeated by a defendant's malice.

Other statutory "comment" defences

Statutory "fair comment" defences, similar in most respects, are available in Queensland, Tasmania and Western Australia.  They are found in the Criminal Code Act 1899 (Qld), s 375 (by Act 37 of 1995 s 459, Sch 3, that provision has subsequently become s 14 of the Defamation Act 1899 (Qld)), s 14 of the Defamation Act 1957 (Tas), and s 355 in the Schedule to the Criminal Code Act 1913 (WA).  (Sub-section 14 (2) of the
Tasmanian Act has no counterpart in Queensland's s 375 or Western Australia's s 355.)

ACA's defence of qualified privilege at common law

Did ACA have an interest or a legal, social or moral, duty to communicate the content of the article to those to whom it was published?   Did the latter have a corresponding interest or duty to receive it?

I accept ACA's submission that it:

     "... is a body expressly devoted to investigating matters related to the interests and protection of consumers, and to making available the information gained as a result of its investigations to consumers ..." (ACA's written submissions, para 1.9)

The annual reports of ACA for the years 1991-92 and 1992-93 were in evidence.  They describe ACA's objectives which are consonant with the submission.  The earlier report states that ACA "aims to give consumers access to unbiased information and guidance about goods and services" (p 1) and the later one states that "The Association exists to assist and empower consumers" (p 1).  There are many references in both reports to concerns of consumer safety, information and education.  It is not amiss in this regard, to refer to the applicants' own allegations made in sub-paras 3 (b) and 4 of their second further amended statement of claim:

     "3.  The Respondent is and was at all material
times:

 

         (a)  ......................................; and

 

         (b)  a corporation providing certain consumer goods and/or services including the investigation of activities of manufacturers, wholesalers, retailers and the providers of goods and services, the giving of advice to consumers and advice on consumer protection generally and the publication of `Choice' Magazine for public reception by consumers throughout the Commonwealth of Australia ...

 

      4.  The Respondent has at all material times held itself out and continues to hold itself out, inter alia, by the Respondent's business as possessing and/or purporting to possess special skill and competence in relation to the investigation of the activities of manufacturers, wholesalers, retailers and the providers of goods and services, the giving of advice to consumers and the giving of advice on consumer protection generally."

(In answer to sub-para 3 (b), ACA admitted only that it provides to consumers information and guidance about goods and services, and ACA did not admit the allegations in para 4.)

In several answers to questions in cross-examination, Mr Cerexhe asserted that ACA had sufficient information to make it sensible to an obligation to give a public warning of the risk and to tell its members in particular (see T 404.10-.11; 406.26-.32; 410.18-.23; 417.15-.27; 418.29-.36). 

ACA had been presented by Mr Musster with what appeared to Messrs Shales and Cerexhe, on reasonable grounds, to be genuine internal documentation of Bowin.  ACA had carried out a substantial investigation in an attempt to gain an understanding of whether any, and if so how many, dangerous heaters remained in consumers' homes.  It had alerted the Bureau to the problem by letter dated 20 March 1992.  The Bureau had taken no action.  Mr Wunsch of the Bureau said that one reason why ACA's allegations were not given priority was that officers of the Bureau understood that ACA and AGA were investigating the problem (T 255.31-256.13).  Of course, ACA also knew that AGA and AGL had not taken steps to warn consumers.

That there were as a matter of objective fact, still dangerous MS12 heaters in use at the time of publication constituting a danger to be warned against, cannot be doubted.  There was, of course, the letter dated 26 June 1992 from Mrs W Bentley of Western Australia (received by Mr Joyce on 8 July 1992) about her heater which had been manufactured on 6 April 1988.  But there was a considerable body of further evidence too.

(a)  I have referred previously to the random survey conducted by AGL in July 1992 of MS12s which had been sold by it.  That survey revealed as follows:

         "Sold by AGL in 1987:

 

              Number sold             = 306

              Number surveyed         = 34 (11%)

              Hoses found faulty      = nil (0%)

 

         Sold by AGL in 1988:

 

              Number sold             = 360

              Number surveyed         = 40 (11%)

              Hoses found faulty      = 12 (30%)

 

         Sold by AGL in 1989:

 

              Number sold             = 234

              Number surveyed         = 26 (11%)

              Hoses found faulty      = 5 (19%)

 

         Sold by AGL in 1990:

 

              Number sold             = ?

              Number surveyed         = 12 (from a base                              of 20)

              Hoses found faulty      = nil"

     If one were to extrapolate from the numbers surveyed to the totals sold in 1988 and 1989, it appears that 108 of the 360 MS12s sold in 1988 and 44 of the 234 MS12s sold in 1989 (a total of 152 out of 594 heaters) might be expected to have been found faulty in July 1992, when AGL conducted its survey.

     The random survey also showed that of the 17 faulty MS12 hoses referred to above, 14 had been manufactured in 1987 and three in 1988.

(b)  At a meeting with AGL on 24 July 1992, Mr Joyce expressed the view that 225 heaters were suspect.

(c)  On the hearing, Mr Joyce estimated the number of potentially suspect heaters to be "less than 100", an expression suggestive nonetheless of a sizeable number.

(d)  While it is true that not all of the numerous inquiries of Bowin made by consumers following publication of the
article or references to it in other media can be equated with the existence of a hose problem, many can be.

(e)  Witnesses called by ACA (Gallagher, Victory, Scott and Hope), who had not been the subject of service call reports in Bowin's records, gave evidence of having experienced problems with the hoses connected to their MS12 heaters.  The evidence of Margaret Jane Scott is particularly pertinent, since the incidents in question occurred virtually contemporaneously with publication.  In summary, her evidence was that in about June 1992, for no apparent reason and while the heater was not in use, the hose popped out of the back of the heater; she had the heater repaired by a plumber who reported that he could not identify the cause of the disconnection; and that about a month later (about July 1992), while the heater was in use, the hose again came apart from the back of the heater and escaping gas was ignited giving a flame between 6 inches and a foot long coming from the end of the hose.

In sum, ACA was correct in its assumption that there were in use in consumer's homes a substantial number of heaters which posed a fire danger; knew that no-one else had taken steps to warn owners of suspect heaters or was proposing to do so; knew that the identity and addresses of the owners of MS12 heaters were unknown so that the only effective means of communicating with them was by means of a general and widely publicised warning; knew that it had the means available of giving such a warning through its magazine "Choice"; and knew that its raison d' etre included the protection of consumers against the risk of injury from dangerous products. 

In my opinion, the considerations to which I have referred show that ACA had moral and social duties to alert the owners of MS12 heaters manufactured before August 1989 of the defect and of its potential to cause fire, and thus injury to the person and damage to property by means of its "Choice" magazine. 

It is useful in the present context to inquire whether, if ACA had not published when it did, and there had been a serious (even fatal) accident in the winter of 1992, it would have been readily accepted that ACA had been under no duty to publish, notwithstanding the information with which it was by then burdened.  I think that this would not have been readily accepted.

Is the defence of qualified privilege at common law available to an organisation such as ACA in respect of a publication such as "Choice" magazine"?  I have previously recorded the nature and extent of the publication of the July 1992 issue of the magazine.  It was mailed to the magazine's 140,403 subscribers.  In addition, there were approximately 150 persons and bodies on the "free" list of which approximately 50 were individuals.  The persons and bodies on the "free" list included a number of consumer organisations in Australia and overseas, government departments, hospitals and other health related organisations, libraries, technical and other expert advisers, representatives of the media and universities.  Jane MacKenzie, the editor of the magazine, acknowledged in cross-examination that libraries stocked the magazine and they and representatives of the media took it with a view to its becoming available generally to the public.

It has been said that generally the public media do not have the benefit of the defence of qualified privilege at common law; cf Morosi v Mirror Newspapers Ltd [1977] 2 NSWLR 749 (CA) at 777-8, 787, 788, 790-792; Nationwide News Pty Ltd v Wiese (1990) 4 WAR 263 (FC) at 267 (Wallace J with whom Pidgeon J agreed); Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211 ("Stephens") at 261 ff.  But such statements must be understood in the context in which they were made.  They were referable to publications in the public media on matters of general public interest.  They did not contemplate publications which, although widely available, are on their face, directed to a particular interest.  But more importantly, they do not contemplate publications of warnings against a danger of injury or death (cf Blackshaw v Lord [1984] 1 QB1 (CA) at 27 (Stephenson LJ)).  The passages referred to allow for exceptional cases.  Thus, in Stephens, McHugh J said this (references to authorities and citations are omitted):

     "Only in exceptional cases does a person have an interest or duty to publish defamatory matter to the world at large.  Both in Australia and elsewhere, common law courts have repeatedly held that a person has no legitimate interest or duty to publish defamatory matter to the general public if no more is established than that the subject matter of the publication is one in which the public is interested.  In Howe & McColough v Lees, Higgins J said that the word ‘interest’ was not used in any technical sense.  However, his Honour said that the person must not be ‘interested in it as a matter of gossip or curiosity, but as a matter of substance apart from its mere quality as news’.  In the same case, O'Connor J said that the interest must be ‘of so tangible a nature that for the common convenience and welfare of society it is expedient to protect it.’" (at 261)

In  my opinion, the circumstances of the present case are "exceptional"; more is established here than that the subject matter of the article is something in which the public is interested as a matter of "gossip" or "curiosity" or "as news"; and the public's interest is "of so tangible a nature that for the common convenience and welfare of society it is expedient to protect it."

McHugh J referred to certain exceptional cases and said this:

     "Accordingly, it is now appropriate for the common law to declare that it is for ‘the common convenience and welfare’ of Australian society that the existing categories of qualified privilege be extended to protect communications made to the general public by persons with special knowledge concerning the exercise of public functions or powers or the performance of their duties by public representatives or officials invested with those functions and powers.  The scientist who discovers that lack of governmental action is threatening the environment, the ‘whistleblower’ who observes the bureaucratic or ministerial ‘cover up’, and the investigative journalist who finds that grants of public money have been distributed contrary to the public interest are examples of persons who have special knowledge of matters affecting the exercise of public functions or powers or the performance of duties by public representatives or officials.  If such persons, acting honestly, inform the general public of what they know about such matters, their publication will be made on an occasion of qualified privilege.  The defence of qualified privilege will be available even if the information is subsequently proved to be incorrect.  Thus, the occasion will still be privileged even if the ‘whistleblower’ mistakenly but honestly publishes information which defames another person or the scientist or journalist honestly overlooks some fact which undermines the thesis of his or her claim.  The publication of erroneous information may be evidence of malice in some cases.  But by itself an error in the published information will not destroy the occasion of privilege." (at 265)

The passage quoted is directed to "reporters" who are privy to special information about the activities of those who occupy official public positions, but it applies with all the more force to an organisation such as ACA, which exists to safeguard the interests of consumers and to information which suggests that a consumer product poses a danger to the health and safety of an unidentifiable cross-section of the public which is using it.

In my view, because the use of gas heaters is so widespread and undiscriminating, members of the public generally had an interest in being warned of the defect and of the fire danger present in the use of the heaters.  That interest was personal and private to each member of the public, although shared by all.  The warning could be given effectively only by notification to the general public.  In such a case the rationale underlying the qualified privilege defence is satisfied: cf Brown v Croome (1817) 2 Stark 297 at 301 (171 ER 652 at 653); Allbutt v The General Council of Medical Education and Registration (1889) 23 QBD 400; Adam v Ward [1917] AC 309; Loveday v Sun Newspapers Ltd (1938) 59 CLR 503; Dunford Publicity Studios Ltd v News Media Ownership Ltd [1971] NZLR 961; Stephens, supra, at 261-270 (McHugh J). 

The qualified privilege defence succeeded in a case in the Supreme Court of British Columbia, the facts of which bore some similarity to those of the present case.  In Camporese v Parton (1983) 150 DLR (3d) 208, the plaintiff had imported canning lids from Taiwan.  The defendant, a newspaper columnist, wrote an article under the headline, "Importer Pushes Canning Lids That Could Spell Death".  The gist of the article was that the plaintiff was trying to sell a large stock of the imported lids although he knew that they were defective.  The article asserted that in addition to causing food spoilage, the defective lids could cause death because of the formation of a deadly toxin.  Wallace J found that the article defamed the plaintiff; that while the lids were defective, it was highly unlikely that their use would lead to the formation of a deadly toxin; that the defendant's research into this possibility was inadequate; and that the defendant honestly believed the opinions and facts set forth in her article.  It was held that she was protected by the defence of qualified privilege at common law since a matter of possible deadly food contamination was of vital concern to the general public of British Columbia and, in the circumstances, the defendant had a duty to communicate the matter to the public.

The plaintiff had invited the defendant to test the lids which he was selling but the defendant viewed this invitation as a "stalling technique" which she understood was commonly used by persons in the plaintiff's position.  The defendant was under a newspaper deadline for the filing of her story and she considered that the public's interest in receiving the information immediately outweighed the plaintiff's interest in her withholding it until further checks could be made.  She thought that further testing would take some weeks, and it was already close to the end of the canning season.  As well, she was aware of many consumers who had lost hundreds of dollars of food as a result of using the defective lids.  She had received recent advice, but only in the nature of a short impromptu comment made by a home economist in the course of a telephone conversation, that there was a threat to health.  It was because of this that the judge held that the reporting was careless and reckless, and that the home economist's passing comment over the telephone had called for an immediate in-depth investigation.  But, as noted above, the defence succeeded because his Honour found that the defendant accepted the home economist's comment as accurate and believed it was true when she wrote the article and caused it to be published.

The investigations carried out by ACA in the present case were far more extensive, detailed and thorough.  Mr Shales and Mr Cerexhe believed the third imputation to be true.

In my view, ACA published the matter complained of on an occasion of qualified privilege.

This conclusion requires me to consider the applicants' reply to the effect that ACA's malice prevents the defence of qualified privilege from succeeding.  The leading authority on malice is the House of Lords decision in Horrocks v Lowe [1975] AC 135.  Lord Diplock and Viscount Dilhorne delivered independent speeches and Lords Wilberforce, Hodson and Kilbrandon expressed agreement with Lord Diplock.  While the learned authors of Gatley on Libel and Slander (8th ed, 1981) acknowledge that there can be no substitute for consulting the speech of Lord Diplock, they offer the following convenient summary:

     "(1)Improper motives

 

          (a)  There is some special reason of public policy for giving immunity in all cases of qualified privilege.  If the maker of a statement uses the occasion for some other reason he loses the protection of the privilege.

 

          (b)  The defendant is entitled to be protected unless some dominant and improper motive on his part is proved.

 

          (c)  (i)    The usual motive relied on is that of injuring the plaintiff, but there may be others.

 

                (ii)   Knowledge that a statement will injure the plaintiff does not destroy the privilege if the defendant was using the occasion
for its proper purpose.

 

      (2)Absence of honest belief

          (a)  If it can be proved that the defendant did not believe that what he published was true, that is generally conclusive evidence of express malice.  The burden of proof, at least where conduct extraneous to the privileged occasion is not relied on, is not a light one.

 

          (b)  If the defendant publishes untrue matter, without considering or caring whether it be true or not, he is treated as if he knew it to be false, but carelessness, impulsiveness or irrationality in arriving at a belief is not to be equated with indifference to truth.

 

          (c)  There are exceptional cases where a person may be under a duty to pass on defamatory reports made by another which he does not believe to be true: he is not then malicious.

 

      (3)Positive belief

 

          (a)  Positive belief in the truth of what is published will usually protect the defendant unless he can be proved to have misused the occasion.  Judges and juries should be slow to draw the inference that he has misused the occasion, and the defendant's desire to use the occasion for its proper purpose must be shown to have played no significant part in his motives if malice is to be found.

 

          (b)  Where the defendant believes in the truth of what he has published and conduct extraneous to the privileged occasion is not relied on, the plaintiff can only succeed if he shows that the publication contains irrelevant matter, and that it can be inferred that the defendant did not believe it to be true or realised that it was irrelevant, and brought it in for some improper motive.  Judges and juries should be slow to draw this inference, too." (para 773 - references to footnotes omitted)

In their Amended Reply, the applicants give the following particulars of express malice:

     "A  The Respondent had an improper motive being an intent to injure the Applicants evidence[d] by:

 

         (i)    The large and widespread publication of the matter complained of;

 

         (ii)   The sensational manner of presentation of the matter complained of;

 

         (iii)  The sensational manner of the promotion of the matter complained of and the setting out and phrasing of the matter complained of;

 

         (iv)   The allegations of recklessness, irresponsibility, carelessness and dishonesty against the Applicants in the matter complained of which the Respondent knew or ought to have known would seriously injure the Applicants;

 

         (v)    Its failure to apologise;

 

         (vi)   The intrinsic malice of the matter complained of in its structure which seeks to emphasis[e] the alleged wrongdoings of the Applicants the subject of the imputations;

 

         (vii)   Its mala fide pleading of paragraphs 14, 15, 16 and 17 of the Defence [the qualified privilege/qualified protection and comment defences] having regard to the seriousness of the allegations made against the Applicants in the matter complained of;

 

         (viii)Its deliberate, selective and/or recklessness [sic] misquotations and/or distortion of information obtained by the Respondent from the Applicants and otherwise prior to the publication of the matter complained of;

 

         (ix)   Its negligence in publishing the matter complained of by failing to take any or reasonable care to ensure that the matter complained of did not contain false imputations against the Applicants; and

 

         (x)    The matters pleaded and particularised in paragraphs 14 and 15 of the amended Statement of Claim.

 

     B.  The Respondent published the matter complained of and the imputations contained therein having no honest belief in the truth thereof and/or with reckless indifference to the truth thereof in that:

 

         (i)    The Respondent gave the Applicants no or no reasonable opportunity to explain or refute the imputations made against them in the matter complained of; and

 

         (ii)   The Respondent made no or no reasonable inquiries as to the truth of the matter complained of."

The applicants' written submissions on malice include the following:

 

     "3.  The publication, in so far as it affected the Applicants, was brought about by a pre-judgment of them by the Respondent upon irrational and unfair conclusion.  The evidence demonstrated a perverse resistance on the part of Cerexhe and Shales to accept explanations from persons well qualified to give them which were inconsistent with the angle they had chosen to pursue.

 

      4.  The evidence makes plain that the Respondent had no information whatsoever that warranted the publication of any of the imputations, particularly allegations of the kind conveyed as to the nature of the conduct of each Applicant.  It is demonstrated that the Respondent was recklessly indifferent to the truth or falsity of those allegations.  It is open on the evidence to conclude that, prior to publication, the Respondent never paused to consider the gravity of the allegations to be conveyed or whether there was any factual basis for them."

The applicants rely upon the submissions which they make as to the unreasonableness of ACA's conduct (see below), and say that ACA's desire to injure them may be inferred from matters which they identify in summary, as follows:

(a)  ACA's suppression of, and failure to publish, information to hand which established or suggested an absence of potential danger, including the facts that decisions as to product recall were a matter of judgment requiring consideration of a range of factors and that ACA knew nothing of the basis upon which the decision against recall had been made;

(b)  the selective process according to which material most damaging to the applicants was published and material capable of qualifying or nullifying the defamatory effect of the article was omitted;

(c)  the fact that Messrs Cerexhe and Shales formed the view, apparently without any rational basis, that Mr Joyce's word should not be accepted;

(d)  the untrue statement that ACA had called upon the Bureau to investigate the matter;

(e)  the statement concerning the Australian Design Award contained in the postscript to the article;

(f)  Mr Sirmai's participation in, and publication of, injurious matters about the applicants in the programmes and articles referred to in sub-para 15 (a) of the second further amended statement of claim mentioned earlier;

(g)  the early entrenched bias against the applicants and concomitant readiness to publish false and damaging matter concerning them.

The applicants point to various matters in evidence which they submit demonstrate the "early entrenched bias" last referred to.  They point, for example, to the successive drafts of the article and observe, for example, that on the last page of the third draft, there had occurred the following paragraph:

     "One interpretation is this course of inaction [by Bowin] was chosen because the company placed a higher value on its reputation and profits than on the safety of its customers."

No doubt, the views held by officers of ACA during the "development" of the article may be relevant to their, and ACA's, motive in publishing it in its final form.  However, the abandonment of a passage such as that quoted does not compel a finding that the view expressed in it continued to be held or had ever been held initially.  Perhaps it was abandoned because, upon reflection, those concerned considered that it had not expressed their state of mind at the time when it was written.  Perhaps it was abandoned because evidence subsequently to hand convinced those concerned that their view expressed in the passage could no longer be sustained.  At
least, the deletion of the passage demonstrates some taking of care to ensure that a particularly damaging paragraph did not remain in the article; - a course of conduct which tells against a finding of recklessness or of an intention to injure on the part of those involved in the writing of the article. 

The matters particularised by the applicants in sub-paras A (i), (ii), (iii), (iv) and (vi) above go to the extent of publication and the manner of presentation and the content of the article.  The fact that the article was addressing a potential fire danger in consumers' homes signified that it was bound to be somewhat alarming.  In fact, however, the article contains several acknowledgments of lack of knowledge on the part of the writer.  Even if it were possible to write an article warning of the danger without its conveying the third imputation, that fact would not have signified that the writing of it in the form which it in fact took was motivated by express malice.  The authorities have warned against inferring malice from no more than the manner and extent of publication, including the language used: cf Adam v Ward [1917] AC 309 at 330, 339; Calwell v Ipec Australia Limited (1975) 135 CLR 321 at 332-3.

It is important to consider what any article consistent with the occasion of qualified privilege would have said.  Any article sounding the necessary warning would have had to identify Bowin's MS12 as a potential fire hazard.  It would have had to address the question of the number and identity of the particular heaters which were "suspect".  It would have had to refer to the period of manufacture of them and to acknowledge that it was impossible to know how many or which ones of those manufactured during that period were unsafe.  It would have been unfair if no account had been given of Bowin's and Mr Joyce's conduct and response.  But once these matters are accepted, it is clear that the third imputation, or one very much like it, would be conveyed.

For the foregoing reasons I do not infer express malice from the matters particularised in paras A (i), (ii), (iii), (iv) or (vi).  Lest it should be thought that I have overlooked them, I record that I do not infer it from the matters referred to in paras (a) to (g) above, to the extent that those matters may not be encompassed in the particulars.

Nor do I infer malice from ACA's failure to apologise (see sub-para A (v) of the Amended Reply).  In Horrocks v Lowe [1975] AC 135, Lord Diplock said:

     "A refusal to apologise is at best but tenuous evidence of malice, for it is consistent with a continuing belief in the truth of what one has said." (at 152)

I find that Messrs Shales and Cerexhe did believe the content of the third imputation.  Moreover, in the present case, as in Toyne v Everingham (1993) 114 FLR 299, there is no evidence that the applicants ever sought an apology.

In relation to sub-para A (vii), I do not infer that the pleading of paras 14, 15, 16 and 17 of the defence was a pleading in bad faith.  Sub-paragraph A (viii) was not elaborated upon in submissions.  In my view, the evidence does not establish any deliberate, selective and/or reckless misquoting and/or distortion by ACA of information obtained by it from the applicants.  In relation to sub-para A (ix), a failure by ACA to take reasonable care to ensure that the matter complained of did not contain a false imputation about the applicants does not itself and without more constitute evidence of malice.  Finally, in relation to sub-para A (x), the matters pleaded and particularised in paras 14 and 15 of the second further amended statement of claim, namely the incurring of expenditure by Bowin and distress and embarrassment, are incapable of amounting to malice or improper motive on ACA's part.

In relation to para B of the particulars of malice, I do not accept that ACA published the third imputation without having an honest belief in its truth and/or with reckless indifference as to its truth.  On the contrary, I accept that Messrs Shales and Cerexhe, the only relevant officers of ACA for the present purpose, believed in its truth.  Mr Joyce chose not to reply to Mr Shales' letter dated 21 April 1992 notwithstanding Mr Shales' follow-up telephone inquiry on 15 May 1992.  He was not prevented from doing so by the reason which he gave to Mr Shales, namely, because of "matters that [were] before the police."  It was not suggested on the hearing that Mr Joyce could not have replied for that reason.  Nor do I accept that ACA gave the applicants no, or no reasonable, opportunity to explain or refute the third imputation.  Nor do I accept that ACA made no or no reasonable inquiries as to the truth of the third imputation.

It follows from what I have said above and what I say below that the applicants have failed to establish malice and that the defence of qualified privilege at common law succeeds.

ACA's defence of qualified privilege under sub-s 22 (1) of the NSW Act

The NSW Act does not exclude the common law defence of qualified privilege.  Accordingly, I am not required to decide whether the defence provided by s 22 of the NSW Act is established.  However, I choose to do so because the only substantial issue under s 22 which I have not resolved is the reasonableness of ACA's conduct in publishing, and, as noted earlier, the applicants rely on what they submit is the unreasonableness of ACA's conduct in this respect as evidence in support of their reply of malice to the common law defence.

The terms of sub-s 22 (1) of the NSW Act were noted earlier.   The persons to whom the matter complained of was published clearly had "an interest or apparent interest in having information on some subject" within the meaning of para 22 (1) (a) of the NSW Act.  The subject was, relevantly, the potential fire danger posed by an unknown number of MS12 heaters which had been manufactured by Bowin before August 1989 and were in consumers' homes.  It has not been in dispute that for the purposes of para 22 (1) (b), the matter complained of was published by ACA to the recipients "in the course of giving to [them] information on that subject".  The remaining issue as to the availability to ACA of the defence of qualified privilege under s 22 of the NSW Act is whether ACA's conduct in publishing the matter complained of was "reasonable in the circumstances" (cf para 22 (1) (c)).  This issue was the subject of lengthy submissions.

In Austin v Mirror Newspapers Ltd (1985) 3 NSWLR 354 ("Austin (PC)") Lord Griffiths, delivering the judgment of the Privy Council, said this:

     "In considering whether the conduct of the publisher is reasonable the court must consider all the circumstances leading up to and surrounding the publication.  These circumstances will vary infinitely from case to case and it would be impossible and most unwise to attempt any comprehensive definition of what they may be." (at 360B)

Nonetheless, guidance can be found in observations made in particular cases.  Some which I have found to bear upon the present case are as follows:

1.        "The conduct must have been reasonable in the circumstances to publish each imputation found to have been in fact conveyed by the matter complained of.  The more serious the imputation conveyed, the greater the obligation upon the defendant to ensure that his conduct in relation to it was reasonable." (Morgan v John Fairfax & Sons Ltd [No 2] (1991) 23
NSWLR 374 (CA) ("Morgan") at 387E (Hunt AJA, with whom Samuels JA agreed).

     Similarly,

          "The harder hitting the comment the greater should be the care to establish the truth of the facts upon which it is based." (Austin (PC) at 364C)

2.   It is relevant that the information which the recipient had an interest or apparent interest in having, could easily have been conveyed without the defamatory imputation which in fact arose: Chappell v TCN Channel 9 Pty Ltd (1988) 14 NSWLR 153 (Hunt J) at 171 C,D.

3.   If the publisher intended to convey an imputation which was in fact conveyed, generally he must have believed in its truth, and if he did not have that intention in relation to an imputation which was in fact conveyed, he must establish:

     (a)  at least generally, that he believed in the truth of any other imputation which he did intend to convey; and

     (b)  that his conduct was nevertheless reasonable in the circumstances in relation to each imputation which he did not intend to convey but which was in fact conveyed: Morgan at 387F,G.

4.        "The connection between the subject and the defamatory imputation remains relevant.  It may be tenuous, or it may be real and substantial.  If what was said includes comment, it is relevant to consider whether it was fair and whether it followed logically from facts known or stated.  Questions of the exercise of care before the defamatory utterance are also relevant, and questions as to whether the maker of the statement knew whether he was likely to convey a misleading impression.  These are but examples of what I conceive to be involved in the inquiry to be made by the judge in order to determine whether the defendant has satisfied him that it was reasonable of him to defame the plaintiff in the way he did." (Wright v Australian Broadcasting Commission [1977] 1 NSWLR 697 (CA) ("Wright") at 712B,C (Reynolds JA with whom Glass JA agreed)

5.   The effect of a failure or refusal by the person defamed to answer a journalist's questions will depend upon all the circumstances.  If the questions are an attempt to penetrate matters which are secret and are entitled to be kept secret, yet the journalist, upon a refusal or failure to reply, chooses to guess or infer what the answers are and to publish accordingly, if the guess produces a result which is defamatory, the journalist will publish at his risk and will be likely to find that he cannot establish the reasonableness to which para 22 (1) (c) refers: Wright at 707B,C (Moffitt P).

6.        " ... the relevant matters for consideration include the manner and extent of publication, the extent of inquiry made, the degree of care exercised and any knowledge that a misleading impression was likely to be conveyed."

     and

          "1.  The reasonableness of the publisher's conduct is to be judged in relation to his publication
of 'that matter' which means the defamatory matter.

 

           2.  It is not reasonable to publish the defamatory matter merely because it was reasonable to give information on the subject which inspires interest.

 

           3.  The occasion does not protect a defamatory imputation irrelevantly made in the course of giving information." (both passages in Austin v Mirror Newspapers Ltd [1984] 2 NSWLR 383 (CA) ("Austin (NSW/CA)") at 390E,F per Glass JA with whom Samuels and Mahoney JJA agreed)

7.        "The defendant must also establish:

 

              (a)that, before publishing the matter complained of, he exercised reasonable care to ensure that he got his conclusions right, (where appropriate) by making proper inquiries and checking on the accuracy of his sources;

 

              (b)that his conclusions (whether statements of fact or expressions of opinion) followed logically, fairly and reasonably from the information which he had obtained;

 

              (c)that the manner and extent of the publication did not exceed what was reasonably required in the circumstances; and

 

              (d)that each imputation intended to be conveyed was relevant to the subject about which he is giving information to his readers.

 

          The extent to which the inquiries referred to in par ... (a) should have been made will depend upon the circumstances of the case, in particular the nature and the source of the information which the defendant has obtained, and whether the position, standing, character and opportunities of knowledge of the informant (as perceived by the defendant himself) are such as to make his belief in the truth of that information a reasonable one: ..." (Morgan at 388B-D per Hunt AJA, with whom Samuels JA agreed)

8.   The fact that the defamatory matter is published in the course of giving information which falls within para 22 (1) (a) "may involve some evaluation of the importance of giving such information and the nexus with the defamatory matter", but "[i]n the end, ..., it is the reasonableness of the conduct in publishing the defamatory matter which determines the question under s 22 (1) (c)" (Wright (NSW/CA) at 704G-705A per Moffitt P).

I remind myself of the third imputation:

     "That the Applicants and each of them were careless and reckless in failing to take the appropriate steps to recall or remove dangerous appliances, namely gas heaters, from consumers."

As I have previously noted, Messrs Shales and Cerexhe gave evidence that they believed the third imputation to be true, and I accept that evidence.

Clearly, the width of publication and the seriousness of the third imputation demanded that ACA's staff take care in the writing of the article.

I find it convenient to address the question of the reasonableness of ACA's conduct in publishing the third imputation by reference to the particular submissions and factual issues noted below.

(1)  The applicants submit that Mr Cerexhe's purpose in
writing the article was to alert consumers to check their heaters rather than to attack the applicants, and to bring pressure to bear on the Bureau to investigate whether the circumstances warranted a product recall or product safety notice.  In ACA's letter to the Bureau which was ultimately dated 10 July 1992, Mr Cerexhe expressed the view that a "public safety issue" existed and that the Bureau should "investigate the matter so as to confirm the scale of the problem (that is, how many heaters with faulty hose connections are still in consumers' homes?)".  The applicants submit that ACA could have achieved its purposes without publishing, relevantly, the third imputation.  In this respect, the applicants cite Morgan at 389E, and Austin (PC) at 364. 

     It was Mr Cerexhe's conviction that there might well yet occur serious accidents, injury or death from fire if no notification were to be given to the owners of faulty heaters.  Ultimately, Mr Joyce was forced to concede that the risk existed.  Public notification was an appropriate course to take at the time when the article was published, and was, as events transpired, the very course which Mr Joyce shortly afterwards demanded that Gooden take.

     For the reasons which I gave earlier, it would have been difficult to write an article warning heater owners, without implicitly blaming Bowin and Mr Joyce for not having already published, or caused to be published, a similar warning.

(2)  The applicants submit that ACA, through Messrs Shales and Cerexhe, "chose not to pursue the search" for information from Mr Joyce, and by publishing when it did, deprived itself of the opportunity to explore with Mr Joyce the reasons why he had not initiated a public notification or product recall.

     In his evidence, Mr Shales said more than once that he continued to hope that Mr Joyce would provide the information which he had sought and that Mr Joyce's failure to answer ACA's written questions was "frustrating" for him.  It should not, however, be underestimated how much ACA did know by the time of publication.  Mr Cerexhe had spoken to Mr Joyce on 3 April 1992 and Mr Shales had done so on 21 April 1992, 5 May 1992 and 15 May 1992.  Moreover, Mr Joyce had written to ACA the letter dated 7 April 1992 noted earlier.

     ACA understood the following facts to be true:

     (i)     Some MS12 heaters had a faulty hose connection.

     (ii)    There had been a substantial number of instances of hoses separating from the fitting on the back of the MS12 heater (Mr Joyce conceded that by the time of publication he knew of at least 18 instances - the 28 specified in Mr Musster's memo minus 10 which Mr Joyce eliminated (T 393)).

     (iii)   Most instances had occurred in consumers' homes.

     (iv)    Some had occurred when the heater was connected to the gas supply and gas had escaped.

     (v)     In several cases, the gas had ignited causing fire (Mr Joyce admitted to being aware by September 1990 of four fires (Hancox, James, Goode and Pethybridge) and by the time of publication there had been at least a further four fires of which Mr Joyce said that he was unaware (Bruce, Males, Bradburne and Hope).

     (vi)    In at least one case, fire caused burns to a person.

     (vii)   Thousands of MS12 heaters had been manufactured and sold by Bowin (Bowin's production run records for the five year period 1984-1989 appear to disclose a total of 4,686 MS12s from serial number 0990 to serial number 5675).

     (viii)  The heaters involved in the 18 hose separation incidents down to September 1990, of which Mr Joyce knew by the time of publication of the article, had been manufactured between 1986 and 1989 (it was not true to say that they were limited to heaters manufactured in 1987 and 1988 or to "one batch").

     (ix)    No hose separation incidents or fires had been reported in respect of heaters manufactured before 1986 or after August 1989.

     (x)     The total number of MS12 heaters manufactured between 1987 and 1989 was approximately 3,400. (That figure is stated in the version of the Musster memorandum supplied by Musster to ACA. Bowin's production records appear to show that from the beginning of 1987 to 8 August 1989, it manufactured 2,920 MS12 heaters from serial number 2756 to serial number 5675, but the evidence does not disclose whether any, and if so how many, more were produced in 1989 after 8 August).

     (xi)    The number of MS12 heaters manufactured in 1986 was not disclosed in Bowin's records (in fact Ex R3 appears to disclose that the number manufactured in 1986 was 942 (from serial number 1813 to serial number 2754) with the result that the number manufactured from 1986 to 8 August 1989 was 3,862 (2,920 plus 942).  This figure of 3,862 may be compared with the article's reference to "up to 4,000" between 1986 and 1989. 

     (xii)   All of the foregoing facts were known to Bowin since they appeared in, or were able to be extracted from, Bowin's business records.

     (xiii)  In 1989 the applicants became aware of the hose separation problem and wrote to AGA about it.

     (xiv)   Mr Joyce had not informed AGA that there had been incidents in consumers' homes or that there had been any fires (in fact, he had certainly not done so in writing, and had, at best, mentioned only one instance of fire in passing over the telephone to Mr Williams).

     (xv)    The applicants made no attempt to bring the problem to the notice of persons who had bought MS12 heaters.

     (xvi)   In 1989 Bowin returned some stock of the hoses to their manufacturer, Gooden.

     (xvii)  Gooden had re-worked that stock and returned it to Bowin.

     (xviii)Subsequently, Gooden altered the design of the fitting and subsequent supplies were of fittings with the altered design.

     (xix)   Importantly, the number of MS12 heaters which had been manufactured and sold with the faulty hoses was not known.  (Although Mr Joyce testified several times that only a "small number" or "single batch" was involved, ultimately he conceded that the number was unknown.  I accept the following written submission of ACA in this respect:

                "(i)   At T.371 he [Mr Joyce] estimated that even today the total number of potentially suspect hoses was ‘less than 100’;

 

                (ii)   On 24 July 1992 (Ex. R13 and T.478) at a meeting with AGL he had expressed the view that 225 heaters were suspect;

 

                (iii)  Ultimately he admitted:

 

                       -that he did not know how many hoses were defective: T.407;

                       -that he did not know how many hoses might have been in consumers' homes with this fault: T.370;

                       -that he had never been reassured that there were not potentially hundreds of hoses in the field that would fail: T.406-7;

                       -that it was impossible for him to tell, from his records, where the suspect hoses had gone in the market and that, if the safety risk was considered serious enough, the only
way to inform the end consumer would be by public statement: T.434, 436;

                       -that there was a question mark over all 1,935 hoses supplied by Goodens: T.438;

                       -that he could not really say how many heaters might be implicated: T.102.")

     (xx)    Where a heater had a faulty fitting with the propensity for the hose to come adrift there was a serious risk of ignition of gas, fire, and serious, even fatal, injury (Mr Joyce accepted this proposition and the evidence of Mr Williams supported it.

(3)  The applicants point out that there were particular lines of inquiry which ACA had not pursued to conclusion.  It referred to the fact that ACA did not pursue to conclusion its inquiries of Gooden, notwithstanding Gooden's undertaking to provide information once the relevant employee returned from leave; the New South Wales Fire Brigade; or, of course, Bowin.  But I do not think that it was unreasonable for ACA to publish without waiting for yet further information from these sources.

(4)  ACA clearly regarded it as important that the "story" should be published by the beginning of the winter of 1992.  The applicants stress the fact that ACA was subjecting itself to a need to finalise the article at a time when Mr Joyce, unaware of any need for haste, was taking the position that he would not give a written reply to ACA's letter, and that it was sufficient for him to maintain his invitation to Mr Cerexhe to attend at Bowin's factory.

(5)  The applicants submit that if Mr Cerexhe had visited Bowin's factory, he may well have learned things which would have influenced him in his view of Mr Joyce.  This is true.  He may well have been favourably impressed by Mr Joyce as a person and by safety precautions taken in Bowin's manufacturing process.  He may well have been convinced that, in general terms, Mr Joyce was a responsible engineer who was concerned over safety issues.  But, importantly, he would not have learned (a) that there did not remain a substantial number of potentially dangerous heaters in consumers' homes; or (b) that any action had been taken to warn the owners of suspect heaters or to recall such heaters.

(6)  The applicants point out that on 18 May 1992 AGL wrote to Mr Cerexhe advising that in AGL's opinion "it would be inappropriate to undertake a recall or other action which would be an over reaction to the issue" and that the article does not refer to the view that it may not always be appropriate that there be a product recall or public warning, where there is a possibility that a defective product is being used. 

     It is true that the article does not address the question of the dividing line between the class of case in which a product recall or public warning is not called for and the class of case in which it is.  However, I do not think that this demonstrates unreasonableness of ACA in publishing the article.

By reference to all the considerations mentioned above, I think that ACA has established that it was reasonable in all the circumstances for it to have published the article in so far as it conveyed the third imputation.

ACA's "code" defences of qualified protection in Queensland and Tasmania

The terms of the relevant provisions of s 377 of the Criminal Code Act 1899 (Qld) and of s 16 of the Defamation Act 1957 (Tas) were noted earlier.  What I have already said in relation to the defence of qualified privilege at common law and the defence of statutory qualified privilege under sub-s 22 (1) of the NSW Act leads me to conclude that ACA has established the defence of qualified protection under those provisions.

In the result, Bowin and Mr Joyce have not established that ACA is liable for actionable defamation.

ACA's various comment defences

In view of the conclusion which I have arrived at above, based upon the various qualified privilege/qualified protection defences, it is not necessary for me to consider ACA's various comment defences.

Claims under the TP Act and the FT Act

ACA submits that the representations pleaded were not made by the article.  Of the five imputations which are also relied on as representations, I have already found that only imputation 3 is conveyed.  In view of the conclusion which I reach below, it is not necessary for me to find whether the sixth representation arises from the article. 

ACA further submits that the representations pleaded other than the first and second mentioned earlier, if made, were not misleading and deceptive.  Finally, ACA submits that it has a complete defence to the claims under the TP Act, founded on s 65A of that Act (and to the claims under the FT Act founded on s 60 of that Act).  Relevantly, s 65A provides as follows:

     "65A(1)Nothing in section 52, 53, 53A, 55, 55A or 59 applies to a prescribed publication of matter by a prescribed information provider, other than - [the exceptions are irrelevant] ... .

 

         (2)For the purposes of this section, a publication by a prescribed information provider is a prescribed publication if -

 

             (a)in any case - the publication was made by the prescribed information provider in the course of carrying on a business of providing information; or

 

             (b)... .

 

         (3)In this section -

 

             ‘prescribed information provider’ means a person who carries on a business of providing information and, without limiting the generality of the foregoing, includes - ... ."

Section 60 of the FT Act is in identical terms, except for the numbers of the sections referred to in sub-s (1), which are respectively 42, 44, 45, 49, 50 and 54 in sub-s 60 (1) of the FT Act.

The evidence shows that ACA "carries on a business of providing information" in relation to goods and services provided to consumers and that its "Choice" magazine is published by it in the course of carrying on that business.  It follows that s 65A of the TP Act has the effect that the pleaded causes of action based on ss 52, 55 and 55A of the TP Act cannot succeed, and s 60 of the FT Act has the same effect in relation to the pleaded causes of action based on ss 42, 49 and 50 of the FT Act.  The applicants accepted that the decision of Wilcox J in Sun Earth Homes Pty Ltd v Australian Broadcasting Corporation (1993) 45 FCR 265 precluded their succeeding at first instance level under the sections to which I have referred.

ACA did not seek to sustain the causes of action based on s 52A of the TP Act and its State counterpart, s 43 of the FT Act, which provided that a corporation or person, respectively, must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that was, in all the circumstances, unconscionable.  (Section 52A was amended by the addition of sub-s (7) and re-numbered 51AB as from 21 January 1993 by the Trade Practices Legislation Amendment Act 1992 (Act No 222 of 1992)).

Fraud and negligence

The applicants addressed no submissions to these causes of action.  I did not understand them to be pressed.  It could not have been suggested that there was the slightest evidence of fraud.  My findings in favour of ACA on the issue of reasonableness in the context of the defence of qualified privilege under s 22 of the NSW Act would have sufficed to support a rejection of the claim in negligence.

CONCLUSION

It follows that the application must be dismissed with costs.

                 I certify that this and the preceding 154 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

                 Associate:

                 Dated:                6 December 1996

Heard:           24, 26, 27, 28 April; 1, 2, 3 May; 23, 24, 25, 26, 27 October; 11 December 1995; 12, 22, 23 February 1996

Place:           Sydney

Decision:        6 December 1996

Appearances:     Mr W H Nicholas QC with Mr T A Alexis of counsel instructed by Anderson and Sjoquist appeared for the applicant.

                 Mr T K Tobin QC with Mr P W Gray of counsel instructed by Deacons Graham and James appeared for the respondent.