FEDERAL COURT OF AUSTRALIA

Stalyce Holdings (Aust) Pty Ltd v Cetec Pty Ltd [2002] FCA 278

PRACTICE AND PROCEDURE – application for removal to the State Supreme Court – interests of justice – whether trial should be by jury – whether consumer protection claims are substantive

DEFAMATION – whether the statements pleaded convey the imputations alleged – incompetence of manufacturer – whether formulation of imputations defective

Trade Practices Act 1974 (Cth) ss 52, 65A, 80 and 86A

Courts Legislation Amendment (Civil Juries) Act 2001 (NSW)

Supreme Court Act 1970 (NSW) s 85

Federal Court of Australia Act 1976 (Cth) ss 39 and 40

Insurance Commissioner v Australian Associated Motor Insurers Ltd (No 2) (1982) 49 ALR 714 cited

Mansell v Cumming (1989) 86 ALR 637 distinguished

Construction Industry Long Service Leave Board v Odco Pty Ltd (No 2) (1988) ATPR 40-887 discussed

Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 referred to

Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 followed

Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472 referred to

Cinevest Ltd v Yirandi Productions Ltd [2001] NSWCA 68 discussed

Gatley On Libel and Slander, 9th ed. (1998)

STALYCE HOLDINGS (AUST) PTY LTD v

CETEC PTY LTD, CHANNEL SEVEN SYDNEY PTY LTD, CHANNEL SEVEN MELBOURNE PTY LTD, CHANNEL SEVEN BRISBANE PTY LTD, CHANNEL SEVEN ADELAIDE PTY LTD, CHANNEL SEVEN PERTH PTY LTD

N179 OF 2001

TAMBERLIN J

SYDNEY

19 MARCH 2002

THE COURT ORDERS THAT:

1.                  The Notice of Motion is dismissed.

2.                  The applicants pay the costs of the respondent.

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

REASONS FOR JUDGMENT

1                     This proceeding was commenced by application filed on 27 February 2001 under ss 52 and 80 of the Trade Practices Act 1974 (Cth) (“the TPA”) and in defamation.

2                     The matter for determination at this point is a Notice of Motion by the Second to Sixth respondents (“Channel Seven”) which seeks the following orders:

“1.       The proceedings be transferred to the Supreme Court of New South Wales pursuant to s86A Trade Practices Act or s5(4) Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth);

In the alternative:

 2         The question of law in the capacity of the matter complained of to convey the pleaded imputations be determined a separate question pursuant to O29, r 2 Federal Court Rules;

 3         The defamation issues of whether the pleaded imputations are conveyed of and concerning the applicant, and are defamatory, be tried by a jury in this Court pursuant to s40 of the Federal Court Act 1976 (Cth);

 …”

3                     In the Further Amended Statement of Claim (“FASC”) the applicant Stalyce Holdings (Aust) Pty Ltd (“Stalyce”) essentially claims against the first respondent Cetec Pty Ltd (“Cetec”) that Cetec prepared a report for Channel Seven containing the results of tests performed on motor vehicle radiator coolants (“the report”).  This was published to Channel Seven Melbourne, prior to 28 February 2001.  On 28 February 2001, Channel Seven Sydney broadcast a promotion for its current affairs program, Today Tonight of 1 March 2001, alluding to the impending broadcast of the report on the program.

4                     On 1 March 2001, Channel Seven Sydney broadcast a story in relation to claims concerning motor vehicle radiator coolants.  The same story was broadcast in other states.  The broadcast of the promotion for the program will be referred to as “the promotion” and the broadcast story concerning the report will be referred to as “the broadcast”.

5                     The FASC alleges that the broadcast and the promotion contained false representations, particularly concerning the levels of corrosion in car engines arising from the use of one of the Stalyce products.  It is said that the representations conveyed in the broadcast were false, inaccurate and misleading under s 52 of the TPA.  The FASC contains the same allegations as to the representations conveyed in the report by Cetec.  It is also said that Channel Seven were knowingly aware of the publications and their falsity and that Channel Seven Sydney and Channel Seven Melbourne were involved in the contravention of the TPA by Cetec under s 52 in so far as they aided and abetted the contravention by Cetec.

6                     In addition, proceedings are brought in defamation against Channel Seven.  There are also claims for joint liability in defamation between the respondents.  Additionally, there are claims for injurious falsehood.  Stalyce seeks declarations and damages, interest and costs.

Removal

7                     The application is made pursuant to s 86A of the TPA on the ground that it is in the interests of justice that the proceedings be dealt with by the Supreme Court of New South Wales (“the Supreme Court”). 

8                     It is said that the s 52 claims are limited in their nature as regards Channel Seven and that in substance, the claims under the Act are relatively minor in nature when compared with the substantial claims made in defamation and injurious falsehood, which are essentially matters of state jurisdiction. 

9                     Channel Seven say that they rely on s 65A of the TPA on the basis that they are prescribed information providers (with the possible exception of the promotion) and that the claims under s 52 of the TPA may fail on this basis.  It is said that the s 52 claim against Cetec concerns a report given to Channel Seven and was not published to consumers or the public generally.  The defamation claims, it is argued, are not simply collateral to a significant cause of action in this Court’s original jurisdiction.  They are the substance and focus of the present proceedings against the respondents.

10                  The application by Channel Seven is opposed by the applicant.

11                  The issues in this application are somewhat intertwined in that one of the principal reasons for seeking a transfer, in the interests of justice, is said to be that the applicants are entitled to a jury in the Supreme Court and that this is the classic manner in which defamation cases are tried.  However, since 18 January 2002, when the Courts Legislation Amendment (Civil Juries) Act 2001 (NSW) commenced, the new s 85 of the Supreme Court Act 1970 (NSW), provides that proceedings in any Division of the Supreme Court are to be tried without a jury unless the Court orders otherwise.  Such an order may be made in respect of an application by a party, granted that the Court is satisfied that the interests of justice require a trial by jury in the proceedings.  There is no automatic entitlement to a jury in the Supreme Court in any civil proceedings, including defamation.  I do accept for the purpose of the present application that if the matter were transferred to the Supreme Court there is reasonable likelihood that the defamation aspect of the proceeding would be heard by a jury.  However, the presence of a jury in itself results in some inconvenience in so far as the Trade Practices aspect of the matter may have to be heard distinctly from the defamation aspect.  The normal practice in the Federal Court is that unless the Court otherwise orders, the trial shall be by a Judge without a jury and that the Court may, in which the ends of justice render it expedient to do so, direct trial with a jury: see ss 39 and 40 of the Federal Court of Australia Act 1976 (Cth).   The authorities indicate that before a court exercises the discretion conferred by s 40, some substantial reason must be shown for a departure from the normal method or mode of trial: see Insurance Commissioner v Australian Associated Motor Insurers Ltd (No 2) (1982) 49 ALR 714 at 716.

12                  It is said by Channel Seven that the Supreme Court has a special list for defamation and facilities to cater for a jury trial in the form of suitable accommodation.  I do not think the latter point carries any great weight, but nevertheless, it is a factor that must be taken into account.  Further, it is said that because there are broadcasts in several states with different defamation laws, it is more appropriate for a Supreme Court of a State to deal with a complex of defamation defences. 

13                  Reference is also made to several decisions said to support the motion for transfer. Counsel for Channel Seven referred to the decision in Mansell v Cumming (1989) 86 ALR 637.  In that case Northrop J ordered the transfer of defamation proceedings from the Federal Court to the Supreme Court of Tasmania, event though they had been combined with s 52 proceedings.  However, that case is clearly distinguishable because there was no substance in the s 52 claim in that the s 65A prescribed information provision afforded protection against the claim made under the TPA and no other TPA claim was made in the proceedings.  The only remaining claims were purely in defamation.  His Honour considered that there was some foundation for the view in that case that s 52 was pleaded simply to invoke jurisdiction in the Federal Court.  That is not the position in the present case where substantive claims and issues are raised as to the TPA in relation to all respondents.

14                  Channel Seven also referred to the decision of Jenkinson J in Construction Industry Long Service Leave Board v Odco Pty Ltd (No 2) (1988) ATPR 40-887.  In that case his Honour transferred the matter to the Supreme Court of Victoria.  In so doing, his Honour considered that the factual nexus between consumer protection and the substance of the proceeding was “tenuous”.  His Honour contrasted the case before him with one in which the conduct was likely to mislead consumers of a service.  His Honour referred, in this respect, to the decision of Northrop J in Insurance Commissioner, in which Northrop J considered that the alleged conduct in broadcasting comparative television advertisements raised real and substantial questions of consumer protection.  The case before Jenkinson J was considered by his Honour to be primarily concerned with alleged impropriety concerning a governmental agency and directors of a trading corporation.  In the present case, there are substantial TPa claims, as indicated earlier, against the respondents and live and important issues to be resolved.  The claims in the present case under the TPA are not colourable or on their face insubstantial or made in an attempt purely to establish federal jurisdiction as against any of the respondents.  Important questions arise as to the application of s 65A in relation to the broadcast and the promotion and as to whether Cetec can claim protection under the provisions of the Act as an information provider in relation to its comparative report prepared at the request of Channel Seven.

15                  So far as a jury is concerned, I recognise the force of considerations which favour a jury hearing in some cases as expounded in Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 at 166 ff.  However, on questions of identification, I am not persuaded that the questions raised in this case have any particular features which mandate determination by a jury.  This is not a case where general community contemporary values are involved, as may be the case in proceedings where moral, ethical or general social values are involved.  This is a case where assessments have to be made as to what representations were in fact conveyed by the statements and conduct in question concerning Stalyce and its coolants.  There is no reason in principle why a Judge cannot decide such questions in a satisfactory manner.  The determination of whether alleged imputations are conveyed by statements or conduct is a process which can be determined by a Judge alone.  The case has a strong commercial element to it and is by no means dissimilar to cases heard on almost a daily basis in the Court concerning Trade Practices litigation under Part V of the TPA.

16                  As intimated above, there are also some practical considerations involved with having a Trade Practices case heard together with a jury hearing the defamation claims.  In the interests of expedition, efficiency and clarity, it is desirable to hear all evidence on other groups of issues together without a jury, rather than endeavouring to separate out elements to be determined by the jury and those not for determination by the jury, but by the Judge sitting alone.

17                  In this case I am not satisfied that the matters should, within the interests of justice, be transferred to the Supreme Court.  No “special reason” has been shown as to why the matter should not proceed in this Court without a jury as is the normal position in the Federal Court.

Imputations

18                  Channel Seven contends that some of the statements and conduct pleaded cannot as a matter of law convey the imputations alleged and that the formulation of the imputations is defective. Counsel for Channel Seven addressed the Court on this question and the submissions were supported by counsel for Cetec.

19                  Essentially, the substance of the submission can be illustrated by reference to allegations in cl 24(a) and (b) of the FASC which read as follows:

“(a)     Stalyce is an unreliable manufacturer in that it manufactures coolants which when used in the ordinary way caused severe damages [sic] to users’ engines;

 (b)      Stalyce is an incompetent manufacturer in that coolants manufactured by it caused severe damage to users’ engines;”

20                  It is said, correctly in my view, that the sting in the allegations lie in the expressions “unreliable manufacturer” and “incompetent manufacturer”.  It is submitted that it does not follow from allegations of manufacture and consequent damage that the manufacturer is unreliable or incompetent. Moreover, the difficulty is illustrated by Channel Seven when it submits that it cannot plead to the generalised assertions of “unreliability” and “incompetence” because to meet such a broad imputation, it may be necessary to cover many other issues that go to general unreliability and incompetence. 

21                  By way of contrast, reference is made to the allegation in cl 23A(b) which reads:

“Stalyce manufactured coolant for car engines which it knew was so defective that it destroyed car engines;”

22                  It is said that this allegation imputes a blameworthy attribute to the conduct of Stalyce and the sting of the allegation is that “it knew” that the coolant was so defective that it destroyed car engines.  In Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 at 138, Gleeson CJ stated:

“As I have indicated, the question is ordinarily one to be resolved by considerations of practical justice and the circumstances of a particular case, rather than considerations of the possibility of linguistic refinement.  I agree with the test formulated by Hunt J in Whelan v John Fairfax & Sons Ltd (1988) 12 NSWLR 148 at 155 where his Honour said:

‘… The issue which has to be decided in the particular case is whether there is likely to be confusion either at the pleading stage or at the trial in relation to the meaning for which the plaintiff contends.”

23                  Counsel for Channel Seven also referred to the remarks of Asprey JA in Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472 at 476 to the effect that the pleadings in libel are more important than in any other class of action brought at common law.

24                  Uninstructed by authority I would not accept that there is any uncertainty as to what is meant by the imputations complained of.  There is no general allegation of unreliability or competence.  There is only a specific allegation of incompetence or unreliability in one specific respect, namely the manufacture of coolants that are said to cause damage to motor engines.  The words “in that” negate any suggestion of general incompetence or unreliability.  If the only basis alleged for incompetence or unreliability is proven by showing that in fact the coolant did not have such an effect, then the imputation alleged has not been made out.  However, the matter is not free from authority.

25                  There is no doubt that to impute incompetence to a person can be defamatory although the statements in question do not impute any fault or defect of a personal character.  Moreover, statements can be defamatory if they impute lack of qualifications or capability or efficiency in the conduct of trade or business or professional activity: see Gatley On Libel and Slander, 9th ed. (1998) par 2.27.  An imputation of incompetence in the conduct of a company’s business could be a libel on the company.

26                  In Cinevest Ltd v Yirandi Productions Ltd [2001] NSWCA 68, Spigeleman CJ (with whom Meagher and Handley JJA agreed) considered a jury finding in relation to an alleged imputation that:

“(d)     That it [Cinevest Ltd] was incompetent in that it failed to return money to the investors in any of the fifteen films it had produced.”

27                  The jury found that the imputation was not defamatory and this was reversed on appeal.

28                  In [44]-[46], the Chief Justice stated:

“… Rather, the natural and ordinary meaning of that word [incompetence] was satisfied by reason of particular conduct.  The ‘act’ or ‘condition’ attributed to the plaintiff … was that of incompetence by the conduct specified.

The defamatory sting is in the word ‘incompetent’.  It may well be that a failure to return money to the investors over the course of making fifteen films would not necessarily indicate anything adverse about the producer of those films.  Film making is a notoriously difficult business particularly in Australia.  Many films serve promotional or educational purposes with no objective of return of funds.  Even, in the case of a film made for ‘investors’, a failure to return money to investors may not be a manifestation of ‘incompetence’ at all.

It would have been perfectly appropriate for the jury to find that an imputation of ‘incompetence’ was not in fact conveyed, by reason of the fact that the conduct specified in the pleaded imputation did not constitute ‘incompetence’.”

29                  These observations support a conclusion that the allegation of incompetent manufacturer is restricted by the conduct specified in the pleaded imputation and that if that conduct is established then it cannot be otherwise said that Stalyce is incompetent.

30                  To use the language of Gleeson CJ in Drummoyne Municipal Council, where a general allegation is defined by reference to a particular respect, then considerations of practical justice as opposed to linguistic refinement lead to a conclusion that the substance of the allegation is not generalised incompetence but only incompetence based on the particular specified matter.  The additional words in the imputation after the charge of “incompetence” refer to the manifestation of an “act” or “condition” of Stalyce.

CONCLUSION

31                  For the above reasons I consider that the interests of justice do not require that this proceeding be removed to the Supreme Court.  The matter is not one in which any special reason has been shown for a hearing of the proceeding, or any part of it, by a jury.  I am not persuaded that there is any defect of the type alleged in the submissions with respect to the imputations conveyed.  Accordingly, the Notice of Motion is dismissed.  The costs should follow the outcome.  The applicants on the Motion should pay the costs of the respondent to the Motion.

Associate:

Dated:              19 March 2002