FEDERAL COURT OF AUSTRALIA

Stead v Fairfax Media Publications Pty Ltd [2021] FCA 15

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be adjourned to 9am on 3 February 2021 for the making of final orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

LEE J:

A    INTRODUCTION AND OVERVIEW

1    Mr Joe Aston, together with a colleague, writes a column entitled “Rear Window” for The Australian Financial Review (AFR) published by Fairfax Media Publications Pty Ltd (Fairfax).

2    It is common ground Mr Aston is a talented and oftentimes highly entertaining wordsmith. He is no respecter of persons. He gave evidence he has a “blank canvass” to “target and address” hypocrisy, cant, farce and misfeasance in the corporate and political world. From the perspective of readers who inhabit those worlds, Mr Aston’s work, with its characteristic acerbity, is no doubt often amusing; but one suspects the mirth of some readers might be mixed with a vague sense of disquiet that their behaviour might someday become the subject of his mocking focus. It was perhaps for this reason that Mr Aston blithely (but self-revealingly) gave evidence that he was “not a very popular” columnist.

3    But a writer targeting and addressing the perceived folly or sins of others walks a fine line. It is a line which reflects the tension between two important rights which the law of defamation seeks to balance: the right to freedom of expression and the right to reputation. Consistently with protecting the right to expression, which is fundamental to the exchange of ideas, is that liberty is given to express ideas provocatively. As Sir Fredrick Jordan observed in Gardiner v John Fairfax & Sons Pty Ltd (1942) 42 SR (NSW) 171 (at 174), “a critic is entitled to dip his pen in gall for the purpose of legitimate criticism; and no one need be mealy-mouthed in denouncing what he regards as twaddle, daub or discord”. But the counterbalance is that for a writer’s opinion to attract protection it must, in truth, be an opinion, be related to a matter of public interest, and be properly based – these requirements mean a freedom to express one’s views, however foolish or malignant, does not become a licence to defame without lawful excuse. In essence this case is about whether this line the law draws was crossed.

4    In 2018 and 2019, Mr Aston directed his focus to Blue Sky Alternative Investments Limited (Blue Sky), a listed asset manager, of which Dr Elaine Stead was a director and the Head of Venture Capital. For reasons I will explain, given the focus of his column, it is unsurprising that Blue Sky came into his ken.

5    Dr Stead asserts that she was singled out from the others associated with Blue Sky and that in doing so, not only did Mr Aston cross the line the law draws, but that he pole vaulted it. As a consequence, she brings this proceeding in relation to five publications reproduced in the schedules to these reasons, being:

(1)    a column entitled “Fairfax dead, feminist self-interest lives” published in the AFR newspaper on 4 February 2019 (First Article);

(2)    a column entitled “Clementine Ford, Elaine Stead ensure self-interest lives” published on the AFR website from 3 February 2019 (First Internet Matter);

(3)    a column entitled “Fox in Steven Marshall’s burning henhouse” published in the AFR newspaper on 29 October 2019 (Second Article);

(4)    a column entitled “Fox in Steven Marshall’s burning henhouse” published on the AFR website from 28 October 2019 (Second Internet Matter); and

(5)    a Twitter post published by Mr Aston on 28 October 2019 (Third Matter).

6    Dr Stead alleges that the matters conveyed various imputations detailed below, each of which she alleges is defamatory. Issue has been joined by Fairfax and Mr Aston denying that the pleaded (or substantively similar) meanings were conveyed. Further, Fairfax and Mr Aston relied upon, and only relied upon, the defence of honest opinion pursuant to s 31 of the Defamation Act 2005 (NSW) (Act), being the opinion of Fairfax’s employee, Mr Aston.

7    For the reasons that follow, Dr Stead has established that some of the imputations pleaded (or imputations substantially similar to them) have been conveyed, and that they are defamatory. The pleaded defence of honest opinion has not been made out by Fairfax or Mr Aston and, as a consequence, Dr Stead is entitled to relief.

8    In explaining these conclusions, the balance of these reasons will be divided into the following headings:     

    Part B:        The Imputations Conveyed and the Defamation

    Part C:        The Evidence of Dr Stead and Mr Aston Generally

    Part D:        Honest Opinion

    Part E:        Relief

    Part F:        Conclusion and Orders.

B    THE IMPUTATIONS CONVEYED AND THE DEFAMATION

B.1    The Pleaded Imputations and the Separate Determination

9    Dr Stead pleaded the following defamatory imputations:

(1)    as to the First Article and the First Internet Matter (First Matter), that:

(a)    the applicant is a cretinously stupid person (First Alleged Imputation);

(b)    the applicant wilfully destroyed the capital of business ventures with which she was associated causing enormous losses to unitholders (Second Alleged Imputation);

(c)    alternatively to (b), the applicant recklessly destroyed the capital of business ventures with which she was associated causing enormous losses to unitholders (Third Alleged Imputation);

(d)    the applicant is a venture capitalist, who made stupid investments in two worthless companies, Shoes of Prey and Vinomofo, which had no business and no prospects of success (Fourth Alleged Imputation);

(2)    as to the Second Article and the Second Internet Matter (Second Matter), that:

(a)    the applicant deliberately destroyed the capital of business ventures with which she was associated causing enormous losses to investors (Fifth Alleged Imputation);

(b)    the applicant, a venture capitalist, wantonly lost millions of dollars entrusted to her by unsuspecting investors by channelling their funds into a string of hopeless investments (Sixth Alleged Imputation);

(c)    the applicant is an untrustworthy venture capitalist who fails to deliver on her promises to shareholders and investors (Seventh Alleged Imputation); and

(3)    as to the Third Matter, that the applicant is not competent to hold the position of VC fund manager for South Australia because she deliberately and shamelessly lost other people’s money (Eighth Alleged Imputation).

10    There was no issue Dr Stead was identified in the publications and despite initially adopting a different approach, by the time of the filing of their opening submissions, Fairfax and Mr Aston did not contest that the pleaded imputations are defamatory of Dr Stead, allowing the Court to move directly to considering the issue of meaning.

11    The parties agreed that it would be expedient to determine the issue of meaning at the conclusion of Dr Stead’s case. This course was embraced as it would mean, consistently with the overarching purpose of civil litigation in this Court, that any defence case and any final submissions were directed only to the meanings actually conveyed, and not to irrelevancies.

12    Accordingly, on 4 December 2020, an order was made by consent and pursuant to s 37P(2) of the Federal Court of Australia Act 1976 (Cth), that the issues joined by paragraphs 5, 8 and 10 of the statement of claim and the second further amended defence be determined separately and before any other issue in the proceeding. It may be obvious, but it is worth stressing, that the task upon which the Court was engaged in deciding this separate question was not the legal issue as to whether the matters were reasonably capable of bearing the defamatory meaning or meanings alleged, but rather the final determination of whether the publications did in fact convey the meanings for which Dr Stead contends.

13    Argument took place immediately, and on the following hearing day, prior to the opening of the defence case, I determined the separate question. To avoid any bifurcation of the proceeding but preserve the rights of the parties, I made orders granting leave to appeal (to the extent it is necessary), and extending time to allow any separate question appeal to be filed contemporaneously with any appeal from the orders made at the conclusion of this proceeding. Set out in the balance of this section are my reasons for my determination of meaning.

B.2    The Relevant Law

14    The three matters were pored over repeatedly during the hearing, but it is erroneous to approach the question of meaning by scrutinising the publications with the intensity of deconstructing a haiku. The principles to apply were not in dispute, and I explained them in Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 (at [19]–[20]) as follows:

The relevant principles … are summarised, with respect helpfully and comprehensively, by White J in Hockey v Fairfax Media Publications Pty Limited [2015] FCA 652; (2015) 237 FCR 33 at 49-51 [63]-[73]. More recently, as the High Court (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) relevantly explained in Trkulja v Google LLC [2018] HCA 25; (2018) 92 ALJR 619 at 627 [31]-[32]:

The test for whether a published matter is capable of being defamatory is what ordinary reasonable people would understand by the matter complained of. In making that assessment, it is necessary to bear in mind that ordinary men and women have different temperaments and outlooks, degrees of education and life experience. As Lord Reid observed in Lewis v Daily Telegraph Ltd, “[s]ome are unusually suspicious and some are unusually naïve”. So also are some unusually well educated and sophisticated while others are deprived of the benefits of those advantages. The exercise is, therefore, one of attempting to envisage a mean or midpoint of temperaments and abilities and on that basis to decide the most damaging meaning that ordinary reasonable people at the midpoint could put on the impugned words or images considering the publication as a whole.

… it is often a matter of first impression. The ordinary reasonable person is not a lawyer who examines the impugned publication over-zealously but someone who views the publication casually and is prone to a degree of loose thinking. He or she may be taken to “read between the lines in the light of his general knowledge and experience of worldly affairs”, but such a person also draws implications much more freely than a lawyer, especially derogatory implications, and takes into account emphasis given by conspicuous headlines or captions. Hence, as Kirby J observed in Chakravarti v Advertiser Newspapers Ltd, “[w]here words have been used which are imprecise, ambiguous or loose, a very wide latitude will be ascribed to the ordinary person to draw imputations adverse to the subject”.

(Citations and footnotes omitted)

Hence my task, as the tribunal of fact, is addressing the question as to whether the ordinary reasonable viewer would have understood the matters complained of in the defamatory sense pleaded: Favell v Queensland Newspapers Pty Ltd [2005] HCA 52; (2005) 79 ALJR 1716 at 1720 [11], 1721 [17]. Meaning is to be determined objectively, by reference to the hypothetical construct of the ordinary reasonable viewer, who is taken to glean the ordinary meaning conveyed … It necessarily follows that the meaning the respondents intended to convey is irrelevant, as is any evidence as to how the publication was actually understood: Wagner v Harbour Radio Pty Ltd [2018] QSC 201 at [33] (Flanagan J).

15    It is worth summarising some further principles relevant to meaning because during argument, there was extensive debate as to reformulations and whether they differed in substance to the pleaded imputations. There was also debate as to the distinct question as to whether it was possible for Dr Stead to depart from the pleading. To ensure there was no misunderstanding as to how these issues were to be resolved, I prepared (and the parties eventually agreed) a summary of the relevant principles, largely but not exclusively drawn from Australian Broadcasting Corporation v Chau Chak Wing [2019] FCAFC 125; (2019) 271 FCR 632. It was as follows:

(1)    procedural fairness requires that a respondent is entitled to know what defamatory imputations are relied upon by an applicant, thus requiring the imputations to be pleaded specifically: see Federal Court Rules 2001 (Cth) (FCR) 16.02, 16.08 and 16.41;

(2)    an applicant may allege that a published matter conveys distinct defamatory imputations, and may allege imputations in the alternative: see FCR 16.06;

(3)    it is open to an applicant to choose the imputations relied upon, which will generally confine the questions of meaning and will determine the metes and bounds of the contest at trial;

(4)    these boundaries extend to meanings that are not substantively different in that they are comprehended in, or are a shade or nuance of, the pleaded meaning;

(5)    if a variant imputation is proposed to be relied upon, whether, and to what extent, a departure from the pleaded meanings is permitted is to be resolved by considerations of fairness and practical justice;

(6)    if a respondent is, or might reasonably be thought to be, prejudiced, embarrassed or unfairly disadvantaged by the proposed departure to a variant meaning, the applicant will be held to the meaning pleaded;

(7)    in considering the question of prejudice or fairness as between the parties, it is relevant to bear in mind that when an applicant makes a forensic choice to plead a more serious or “higher” meaning than others that are available, a consequence of this forensic choice is to render more difficult the task of a respondent in proving the imputation is substantially true (it necessarily follows that allowing a less serious meaning to be relied upon by an applicant at trial could, depending upon the circumstances, visit an unfairness upon a respondent);

(8)    the Court at trial is required to determine the meaning which the matter conveyed to an audience or readership composed of ordinary decent persons, being reasonable people of ordinary intelligence, experience and education who bring to the question their general knowledge and experience of worldly affairs;

(9)    given that meaning is to be determined objectively, the audience is taken to have a uniform view of meaning and although different people might in fact have understood the meanings conveyed in different ways, the Court must arrive at a single objective meaning; and

(10)    in considering the defences that may have been run, the statutory defence of truth under s 25 of the Act requires the respondent to prove that the imputations carried are substantially true and hence a respondent is limited to justifying a meaning upon which the applicant might have succeeded.

16    With all these principles in mind, it is appropriate to deal with each pleaded imputation in turn.

B.3    Were the Imputations Conveyed?

First Alleged Imputation

17    Although formally put in issue, at trial there was no contest that the First Alleged Imputation was conveyed in a substantially similar form (but removing the tautology). It became common ground that the imputation that Dr Stead is a cretin was conveyed.

Second Alleged Imputation

18    The imputation that “Dr Stead wilfully destroyed the capital of business ventures with which she was associated causing enormous losses to unitholders” was said to arise from the phrase “a prodigious destroyer of capital” in [4] (emphasis added), and the sentence commencing “[t]he losses accrued in FY18” in [6], and what was said to be the overall tone of the First Matter. In addition, in the First Internet Matter, this meaning is said to be further advanced by the by-line “a tax loss specialist” in [8].

19    This contention is unpersuasive. The hypothetical referee would not understand the First Matter to convey that Dr Stead wilfully, that is, deliberately, destroyed capital causing enormous losses to unitholders. As set out above, a meaning that the ordinary reasonable reader would understand from the First Matter is that Dr Stead is a cretin. The ordinary reasonable reader would also understand Mr Aston to be saying that she had made silly or maladroit decisions, such as investing in the companies known as Shoes of Prey and Vinomofo (at [6]). The impression conveyed is one of stupidity and want of care and skill, and this is inconsistent with the notion that she was engaging in the wilful destruction of property. Although the focus is always on what was conveyed to the ordinary reasonable reader, it is noteworthy that in her final submissions (at [232]) Dr Stead agreed that destroying capital, causing enormous losses to investors, amounted to an allegation of “criminal conduct”. Although the correctness of that characterisation would depend upon the circumstances, it points to the seriousness of an assertion in the terms of the Second Alleged Imputation, which I do not consider was conveyed.

Third Alleged Imputation

20    Necessarily, given it eschews deliberate conduct, the imputation that Dr Stead “recklessly destroyed the capital of business ventures with which she was associated causing enormous losses to unitholders”, is a true alternative to the Second Alleged Imputation. Dr Stead asserts that it arises from the same content. The primary submission of Fairfax and Mr Aston is that given the notion that Dr Stead made silly or pointless decisions is conveyed, this impression is contrary to the suggestion that her conduct is reckless. This submission should be rejected. Given the ordinary meaning of the relevant adverb is the action of taking steps “[w]ithout regard to consequences or risk, rashly, imprudently” (Oxford English Dictionary, 3rd ed, 2009 (OED)), this captures accurately what was conveyed to the ordinary reasonable reader. Having said this, recklessness is a somewhat nebulous concept: it can mean subjective recklessness (being conduct engaged in without any regard to the consequences of the conduct); but it can also describe objective recklessness, a concept which might otherwise be described as rash or imprudent conduct. Dr Stead submitted that the meaning pleaded was directed to the latter of these conceptions, and accepted that to avoid any ambiguity, the word “rashly” better captured what was conveyed.

21    The more substantive submission of Fairfax and Mr Aston was that the pleader had simply missed the mark. It was submitted that the ordinary reasonable reader would understand that the capital that is destroyed ([4]) is that of the VC unitholders ([6]), that is, the investors’ money, rather than the capital of the businesses with which Dr Stead is associated or with which she invests. The contention in the First Matter is that Dr Stead’s investments had caused the loss of investors’ money. It says nothing whatsoever, it was submitted, of Dr Stead’s management or involvement in any business invested in, or whether or not her conduct led to the loss of the capital of those businesses.

22    At first glance it might be thought that there is something in the difference between the focus on the destruction of the capital of the business ventures with which Dr Stead was associated and the destruction of the value of unitholders’ investments. For this reason, argument as to the Third Alleged Imputation transformed into debate as to whether an imputation with certain textual differences was substantively different in that it was comprehended in, or amounts to a shade or nuance of, the pleaded meaning.

23    When Dr Stead is introduced at [4], she is described as a “prodigious destroyer of capital”. The capital to which reference is being made is not specified. It is a somewhat loose expression to use in the context. In the abstract, a reader would most likely understand the term “capital” to mean the cash that comes into a business or conceptualise it as working capital, being an excess of current assets over current liabilities in a business. But colloquially, and leaving aside any accounting niceties, to an ordinary reasonable reader, the concept could no doubt also be conceived as the amount invested in a fund from which an investor sought to obtain a return.

24    We are not dealing with the abstract. It is trite that the matter must be read as a whole, and the imputations pleaded are to be construed in the context of the entire matter. When one attends to this task, the meaning conveyed to the hypothetical construct emerges tolerably clearly. After the reference to capital in [4] and the reference to Dr Stead’s Instagram posts in [5], reference is then made at [6] to the losses accrued by the “VC unitholders”. The whole thrust of the matter is the proffering of a “begging bowl” ([4]) by someone who has rashly destroyed the wealth of others, being the unitholders ([6]), and the ridicule conveyed as a consequence ([7]).

25    The ordinary reasonable reader does not engage in over-elaborate analysis and given the mocking tone, notwithstanding the AFR is a serious publication, it is less likely that the ordinary reasonable reader would read the First Matter with a high degree of analytical care.

26    The sting of rash destruction of capital causing enormous losses to unitholders was conveyed. The issue was whether allowing Dr Stead to rely on the recast imputation that “Elaine Stead rashly destroyed capital causing enormous losses to unitholders” is either: (a) sufficiently similar to be comprehended within the original pleaded meaning; or (b) a departure from the pleaded meaning, which nonetheless should be permitted when regard is had to considerations of fairness and practical justice.

27    When one has regard to the whole context of the article, the meaning that Dr Stead rashly destroyed capital causing enormous losses to unitholders is not substantively different in that it is comprehended within the terms of the pleaded meaning. As was explained by Mahoney ACJ in Crampton v Nugawela (1996) 41 NSWLR 176 (at 183), an applicant should not fail if the error is not pleading with complete accuracy the imputation that is in the published material. This is a case where the pleader, in attempting to respond to an ambiguous publication, has attempted to translate the imputation from the published material to the pleading (although it might have been done with more precision).

28    But even if I was wrong in this view, it would not matter. In contrast to the position in relation to the Second Matter to which I will come, if it is the case that the imputation that Dr Stead rashly destroyed capital causing enormous losses to unitholders is not comprehended within the original pleaded meaning, the supposed relevant unfairness articulated by Fairfax and Mr Aston had a high degree of unreality about it. It was not contended, nor could it be, that the cross-examination of Dr Stead would have been conducted differently in any specified way. Nor would I accept that any earlier recasting would have caused other or further enquiries to be made prior to trial. This is a case where a statutory truth defence was initially pleaded to this and other imputations. Over a score of subpoenas were issued and a vast array of material was inspected.

29    Fairfax and Mr Aston incorporated extensive particulars to justification (no less than 194 of them) of the imputation that there was a reckless destruction. Any fair reading of those particulars demonstrates that Fairfax and Mr Aston were prepared to run a truth defence which went beyond, but incorporated, losses to investors; moreover, and perhaps more relevantly, in the honest opinion defence maintained to the matter which was said to convey the Third Alleged Imputation, the particulars were, in part, directed to the role of Dr Stead in the management and deployment of funds of investors and her “overall responsibility” for exiting those investments realising gains or losses (particular 6), and particularisation was given of the losses in various funds by investors (see, eg, particulars 18, 30, 43, 44, 47).

30    Any notion that Fairfax and Mr Aston were labouring under the view that the capital of investors in the funds was somehow irrelevant to the issues to be determined must be rejected.

31    I find an imputation not substantially different to the imputation pleaded was conveyed in the terms identified. But in the event I am wrong to characterise the imputation in that way, no relevant unfairness or unjustness is occasioned to Fairfax and Mr Aston in allowing it to be relied upon.

Fourth Alleged Imputation

32    Finally, as to the First Matter, the imputation that Dr Stead “is a venture capitalist, who made stupid investments in two worthless companies, Shoes of Prey and Vinomofo, which had no business and no prospects of success” is said to be conveyed from the reference to “feminist cretin” in [4], the sentence commencing “[t]he losses accrued” in [6], and the overall tone of the First Matter in belittling Dr Stead. In the First Internet Matter, this meaning also is advanced by the by-line “a tax loss specialist” in [8].

33    Although conceding that the word “peanut” supports the notion “worthless” in the imputation, Fairfax and Mr Aston submit that nothing in the First Matter is addressed to whether the two companies had a business or prospects of success at the time of the investment.

34    This submission is without merit. A stupid investment in a worthless business would plainly be understood by the ordinary reader to be an investment that was misconceived at the time the decision was made by Dr Stead and others to invest. Although the businesses are identified as “start-ups” and are labelled as devoid of worth (that is, “peanut”), the notion they had “no business” might be thought to be subtly different to “no business of any worth”. The imputation conveyed to the ordinary reasonable reader was that “Elaine Stead is a venture capitalist, who made stupid investments in two worthless companies, Shoes of Prey and Vinomofo, which had no prospects of success”. This is not substantively different to what is pleaded.

Fifth Alleged Imputation

35    Turning to the Second Matter, it is said that the imputation was conveyed that Dr Stead “deliberately destroyed the capital of business ventures with which she was associated causing enormous losses to investors”.

36    Dr Stead submitted that this imputation arises from the entire Second Matter, including: the heading “Fox in Steven Marshall’s burning henhouse” in [2]; the phrase “venture capital pyromaniac” in [6]; the statement in [7] that Dr Stead “raised $9.1 million … to feed into Fox’s furnace”; the whole of [8], especially the statement “Stead set fire to other people’s money”; the answer “no” to the question “whether I did the right thing” in [9]; the suggestion that it was “scandalous” to allow Dr Stead to remain involved with the South Australian Venture Capital Fund (SAVCF) in [10]; the last sentence in [12], being “[i]n her case, it’s nothing Ventured, nothing lost”; and the overall tone of the Second Matter.

37    In a reprise of the arguments made in relation to the Second Alleged Imputation, Fairfax and Mr Aston contended the Second Matter would not convey that Dr Stead deliberately destroyed capital. The idea that a venture capitalist would deliberately destroy capital was said to be absurd, requiring such a meaning to be spelt out in plain terms and the pleaded meaning attributes a state of mind to Dr Stead that would simply not be understood by the ordinary reasonable reader. Considered as a whole, it was said that it does not reasonably convey that the loss of money was deliberate, as opposed to a result of bad decisions (see [9]). The use of the term “pyromaniac” does not, they submitted, convey an intention to destroy or cause damage.

38    As noted above, consideration must be given to tone and context. The tone was one of criticism but laden with an attempt to convey such criticism in what was intended to be a “clever” way. The criticism of Dr Stead was trenchant, but read as a whole it does not convey that she was engaged in a process of the deliberate destruction of the money of others. This can be seen in part by [7] which compares her actions to other venture capitalists that are described as “shrewder”; that is, better able to identify when the point had been reached that good money should not be thrown after bad. Similarly, in [9], the ordinary reasonable reader would discern that the article was conveying that although Dr Stead was an “arguably” good person who did the wrong thing, she did not take care of shareholders and investors, did not return capital in the way in which Blue Sky had targeted and failed to make good decisions. What was conveyed was that Dr Stead was behaving rashly or stupidly, not that she was intent on the seriously wrongful conduct of deliberately destroying money.

39    In addition to the necessity to consider context generally, specific reference should be made to two matters. The first is that in reaching my conclusion, the heading “Fox in Steven Marshall’s burning henhouse”, caused me some pause. The reference to a “fox” must be understood by a reader to refer to Dr Stead rather than Ms Jodie Fox, the other woman referred to in the article, because Ms Fox had nothing to do with the SAVCF or any activity or responsibility of the Premier of South Australia (as is made plain in [10]–[12]). The use of the descriptor “fox” is oft used to connote a cunning or sly person. Taking the word in isolation (used metaphorically to refer to a person), it does suggest some element of deceit or slyness. Read in context, however, such a reading would be strained. Reasonable people of ordinary intelligence, experience and education reading the whole article would not attach such significance into a play on words which, as the reader would understand, has its origin in the name of the other principal target of the article, Ms Fox.

40    The second is the danger in also reading too much into the term “pyromaniac”, or setting fire to money, or the notion of feeding cash into a furnace. A pyromaniac is, obviously enough, someone suffering from pyromania which, as would be known to the ordinary reasonable reader, is a type of mental disorder characterised by the impulse to set fire to things. Although the actions of a pyromaniac are intentional, pyromania is well understood as being a pathological or compulsive disorder. In this sense, the ordinary reasonable reader would distinguish it from arson, which is also an intentional act but well understood as being motivated by some non-pathological desire or purpose, such as material gain or revenge. Fire was used by the author as an extended metaphor (hence the references to setting fire to other people’s money or feeding cash into the furnace of Shoes of Prey), which references would all be understood as a fancy.

41    The Fifth Alleged Imputation was not conveyed.

Sixth Alleged Imputation

42    This imputation, that Dr Stead, “a venture capitalist, wantonly lost millions of dollars entrusted to her by unsuspecting investors by channelling their funds into a string of hopeless investments” was the subject of extended debate, much of it focussed on the word “wantonly”.

43    Notably, in relation to the Second Matter, a cognate of the Third Alleged Imputation, which had made reference to Dr Stead acting “recklessly”, was avoided by the pleader.

44    The OED relevantly defines wanton as being: “without regard for right or consequences; in a way that betrays delight in wrongdoing or mischief, wilfully; recklessly; gratuitously”.

45    The Macquarie Dictionary Online relevantly defines wanton as:

adjective 1. done, shown, used, etc., maliciously or unjustifiably: *my father, appalled by the wanton destruction of the bird life he loved, brought in a bill for its protection – MARY DURACK, 1959.

2. deliberate and uncalled for: why ruin your career in this wanton way?

3. reckless or disregardful of right, justice, humanity, etc., as persons.

4. lawless or unbridled with respect to sexual behaviour; loose, lascivious, or lewd.

5. extravagantly luxurious or self-indulgent, as a person, way of life, etc.

…

– noun 9. a wanton or lascivious person, especially a woman.

– verb (i) 10. to act, grow, etc., in a wanton manner.

– verb (t) 11. to squander (away), as in pleasure.

[Middle English wantowen, literally, undisciplined, from wan- not + Old English togen disciplined]

–wantonly, adverb

–wantonness, noun

46    It was put by Dr Stead that wanton meant nothing more than reckless. Given the pleader’s apparently deliberate forensic decision not to use this latter adjective (as has been done in relation to the Second Alleged Imputation), understandably, oral argument revolved around the questions as to whether: (a) an imputation expressed in terms of objective recklessness did not differ in substance to the pleaded meaning; and (b) if it did so, whether it was a variant imputation that could be relied upon.

47    Why the word wantonly was used was never really explained save that it was said (at T449.3–5) “that wantonness carries with it a notion that it’s extensive or out of control which is carried by the references in the article to the burning and the pyromaniac”. But this was an incomplete answer because Dr Stead was explicit that the notion of investments being excessive or out of control could accurately be characterised as being reckless. Of course, the pleading of a meaning is, in the first instance, a matter for the applicant and the adequacy of that pleading cannot be determined by reference to other forensic choices that could have been made. But the consequence, as counsel for Dr Stead, Ms Chrysanthou SC, rightly accepted (at T452.1–2), was that “the term wantonness could give rise to some ambiguity”.

48    This ambiguity created challenges. Of course, in previous times in New South Wales it was not uncommon for the “form” of imputations to be attacked on the basis they were “ambiguous” or lacked sufficient certainty (cf Drummoyne Municipal Council v Australian Broadcasting Corporation (1990) 21 NSWLR 135 (at 137–8 per Gleeson CJ)). But given the real issue as to any alleged form deficiency is always whether there is likely to be confusion either at the pleading stage or at the trial, no strike out application relying on “ambiguity” was made (an entirely understandable and appropriate course since all issues were to be determined in this case by a judge). In any event, despite this admitted ambiguity, one must do the best one can while recognising that the meaning of the imputation must be seen in the entire context of the publication.

49    Without losing sight of the overall task, it is useful to consider initially whether the meaning that Dr Stead “wantonly lost millions of dollars entrusted to her by unsuspecting investors by channelling their funds into a string of hopeless investments” is substantively different to a meaning Senior Counsel for Dr Stead embraced as the pleader’s “intention”: that Dr Stead “recklessly (in the sense of rashly) lost millions of dollars entrusted to her by unsuspecting investors by channelling their funds into a string of hopeless investments”.

50    Despite Dr Stead’s submissions to the contrary, I think these meanings are quite different. Used in context and accompanied by the notion of “channelling”, the concept of Dr Stead operating wantonly is a meaning which conveys some form or aspect of deliberate conduct, not “mere” rashness or stupidity. As I have explained above, I do not consider that the Second Matter, taken as whole, conveys this former charge to the ordinary reader.

51    But this is not the end of the question as to whether a revised version of this imputation inserting a word which conveys objective recklessness or a want of due care can be relied upon. As explained above, whether and to what extent a departure from the pleaded meaning is permitted is to be resolved by considerations of fairness and practical justice.

52    In this regard, as noted above, it is relevant to bear in mind that when an applicant makes a forensic choice to plead a more serious or “higher” meaning than others that are available, a consequence of this forensic choice is to render more difficult the task of a respondent in proving the imputation is substantially true. It is fair to assume that rather than pleading an alternative of recklessness, the pleader chose the word wanton advisedly – and the consequence of this choice of the pleader was that it would (or at least may) be more difficult for truth to be proved in relation to this imputation. Obviously enough, the statutory defence of justification under s 25 of the Act would have required Fairfax and Mr Aston to prove that the imputations carried are substantially true.

53    Let us assume for a moment that I had found the “deliberateness imputations” and the Sixth Alleged Imputation had been conveyed and further assume that Fairfax and Mr Aston had run a justification defence and had proved, inter alia, that Dr Stead had negligently or rashly lost millions of dollars, but failed relevantly to prove that she had lost the money of investors deliberately. In that scenario one can see Senior Counsel for Dr Stead, with her customary skill and vigour, submitting that they had fallen short of the mark, including as to this imputation, because wantonly means more than mere negligence or rashness. For forensic reasons the pleader made a choice (and an understandable choice), but the result was to pitch the imputation too highly. In this regard, in response to a question directed by me, Senior Counsel for Dr Stead fairly conceded (at T466–7) that Fairfax and Mr Aston “may have” taken a different approach to whether or not they maintained the originally pleaded justification defence in respect of a variant of the Sixth Alleged Imputation being “the applicant, a venture capitalist, rashly or negligently lost millions of dollars entrusted to her by unsuspecting investors by channelling their funds into a string of hopeless investments”.

54    The pleaded Sixth Alleged Imputation was not only not conveyed, but considerations of fairness prevent reliance by Dr Stead upon the recast meaning proposed during argument.

Seventh Alleged Imputation

55    The notion of Dr Stead being untrustworthy and failing to deliver upon her promises is clearly conveyed by [7] and [9]. Mr Aston, after all, made plain that the answer to the question of whether Dr Stead “did the right thing” (which, given the context of the additional questions, must go beyond simply taking care of investors and delivering returns) was “no”. Although I have already explained that the heading, which refers to Dr Stead as a “fox”, was a play on words and does not go far enough contextually to impute deceit, it does reinforce a notion that Dr Stead is someone in whom one could not repose confidence. It would be clear to the ordinary reasonable reader that Dr Stead is described as somebody who acts in a way which is not “classy” and is somebody who did not do the right thing, did not take care of shareholders and investors, was not able to return capital in the way that had been hoped and did not make good decisions. It follows that the ordinary reasonable reader would have understood the matter in the way pleaded.

56    I do not consider there is any tension in accepting this imputation was conveyed with my rejection of the Fifth and Sixth Alleged Imputations (which connoted some form of behaviour which went further than objective recklessness or rashness). It must be borne in mind that one is required to consider the response of a non-legally trained audience of readers who were receiving the information in an impressionistic way and, at least in some respects, are prone to a degree of loose thinking.

57    I am satisfied that the imputation that Dr Stead is an untrustworthy venture capitalist who fails to deliver on her promises to shareholders and investors was conveyed.

Eighth Alleged Imputation

58    It is now necessary to turn to the Third Matter and the pleaded imputation is that “Dr Stead is not competent to hold the position of VC fund manager for South Australia because she deliberately and shamelessly lost other people’s money”.

59    The Third Matter has an important difference to the other publications. It is a tweet devoid of any context other than contained in the tweet is the “teaser” link to the Second Internet Matter. The tweet asserts in terms that Dr Stead has “an unenviable record setting fire to other people’s money”. Dr Stead’s submission was that it is difficult to see how the ordinary reasonable reader would not take this assertion as meaning anything other than that Dr Stead deliberately or wantonly destroyed the money. Further, unlike the Second Matter, there is no emollient reference to the fact that Dr Stead might arguably be a good person; nor is there reference to the fact that other venture capitalists did make similar investment decisions initially, but were sufficiently shrewd to have adopted another course when further information became available. Further, immediately juxtaposed to this assertion is the notion that the Premier of South Australia is insisting on imposing Dr Stead on South Australia’s “new VC fund manager”. This is followed by an expletive, the precise terms of which will be conveyed to the ordinary reasonable reader, demonstrating incredulity at the course adopted by the Premier. In this sense the tweet is a crude reduction of similar assertions made in the Second Matter.

60    The position of Fairfax and Mr Aston was that there is nothing in the tweet which suggests that the loss of money was the intended result of Dr Stead’s investments.

61    It is necessary to put out of mind the content of the Second Matter for the purpose of seeking to ascertain the meaning conveyed by the tweet. Considered solely on its own account, on balance, I do not believe it conveys the meaning that Dr Stead deliberately and shamelessly lost other people’s money. The sting of the tweet is obvious and the message is conveyed provocatively. The difficulty is that deliberately and shamelessly losing the money of others is conduct that would be considered by an ordinary reasonable reader as wicked, and not merely irresponsible or stupid conduct. The audience or readership of the tweet, composed of ordinary decent persons, of unexceptional intelligence, experience and education, would consider the tweet as conveying the notion that the Premier was making an inexplicable decision worthy of criticism by insisting on the continuing involvement with the SAVCF of someone said to be incompetent. The Eighth Alleged Imputation is pitched too highly, and given it is the only pleaded meaning of the publication, Dr Stead must fail in this aspect of her case.

B.4    Conclusions as to Meaning

62    It follows from the above, that on 7 December 2020, orders were made recording findings that the following imputations were conveyed:

(1)    as to the First Matter, that:

(a)    Elaine Stead is a cretin (Imputation 1A);

(b)    Elaine Stead rashly destroyed capital causing enormous losses to unitholders (Imputation 1B);

(c)    Elaine Stead is a venture capitalist, who made stupid investments in two worthless companies, Shoes of Prey and Vinomofo, which had no prospects of success (Imputation 1C);

(2)    as to the Second Matter, that Elaine Stead is an untrustworthy venture capitalist who fails to deliver on her promises to shareholders and investors (Imputation 2).

63    Having found these imputations were conveyed in relation to Dr Stead and they were defamatory, it is necessary to examine the only defence that was pressed: the statutory defence of honest opinion. But before doing so in detail, it is convenient to deal with some aspects of the evidence.

C    THE EVIDENCE OF DR STEAD AND MR ASTON GENERALLY

64    It will be necessary below to make specific findings when it comes to considering the defence and the question of damages. But it is well to commence by making some general findings about the credit and aspects of the evidence of the main protagonists, Dr Stead and Mr Aston; and also explain how it is necessary to deal with one aspect of the evidence.

C.1    Dr Stead

65    Dr Stead presented as a witness of the truth. Save for two aspects of her evidence which I will deal with below, I generally found her evidence to be impressive. She was responsive and presented as someone doing her best to give honest answers. Dr Stead obviously (and unsurprisingly) felt the weight of this litigation heavily and her testimony as to her subjective hurt was compelling. I will return to those specific aspects of her evidence when I deal with damages.

66    It is worth commencing by mentioning two (to an extent connected) aspects of Dr Stead’s personal and business life that received a good deal of attention during the course of the evidence. The first was that Dr Stead had been, well prior to 2019, an enthusiastic and, at least in some respects, indiscriminate user of social media. This had caused some disquiet within Blue Sky and some criticism in the AFR. For example, in a Rear Window article written by Mr Aston on 28 May 2018 (“For Blue Sky, plausibility remains illusive”), the following appeared:

Blue Sky’s VC boss Elaine Stead remains the worst (remaining) enemy of the company’s negligible plausibility …

To Future Fund chief executive David Neal’s comments last week that he wanted to put more capital into “global grade” Australian VC managers, Stead tweeted (to the headline, not the words in the article itself, naturally) that “no there’s not” any shortage of local VC capital. Gold, given Neal’s next line, that “it’s not in our interests or the interests of the taxpayer I don’t think for us to be investing in organisations that don’t meet that grade”.

Better still, though, were her thought bubbles on Sunday. “Lowest of lows today,” she admitted at 3:19pm.

“OMFG I just heard the best news but it’s a secret!” she tweeted at 6:54pm, turning on a dime, like a parody of a tween at a slumber party.

The only reassuring part of this unhinged drivel is just how late Blue Sky brings its VC chief into VC deals. Could there yet be financial redemption across the caravan parks of the Sunshine State?

Oh, and then she tweeted: “Yep, pretty sure I’ve lost my passport.”

(Emphasis in original).

67    Devoid of any context (a topic to which I will return), the sending of these tweets does seem unusual conduct for a public company director in the midst of an existential crisis for the company on whose board she sat. Perhaps unsurprisingly, the next day, a shareholder and Ord Minnett investment advisor communicated with Blue Sky’s then interim Chief Executive Officer, Mr Kim Morison in the following terms:

Someone kindly should perhaps take Dr Elaine Stead’s mobile off her to stop tweeting… see below… is this for real?

If this is real…this only damages Blue Sky credibility further… if not, take Mr Aston to court.

Cheers

68    Mr Morison showed Dr Stead this communication (which had been copied to others within both Ord Minnett and Blue Sky) and reprimanded her. Mr Morison then communicated with the shareholder:

Appreciate your concerns. Yes, we’ve done what we need to do. Elaine no longer has a twitter account.

Regards

Kim

69    The disciplining of Dr Stead arising from her tweeting was perceived by her to have been conducted by Mr Morison in “heated” terms and amounted to mistreatment. Indeed, she considered it sufficiently serious to cause her to engage solicitors to provide her with advice. Notwithstanding this, although she gave evidence she considered it was “fair enough” for Blue Sky management to have asked her to stop tweeting, she also said that prior to the meeting with Mr Morison, she believed the media would leave her tweeting alone and not report on it. This was surprising evidence, given that a few weeks earlier, on 7 May 2018, the following insulting comments had been published in a Rear Window article written by Mr Aston entitled “Blue Sky meltdown continues, untruths now official”:

Poor Elaine Stead, Blue Sky’s own Brick Tamlin, sure doesn’t sound happy. “So angry”, she tweeted on Sunday evening, before adding, an hour later, “today sucked dogs (sic) balls.” How fitting that on March 24 she tweeted that “your reputation and integrity is all you have.” Lord knows what she’ll do next – maybe go back and finish primary school?

(Emphasis in original).

70    That Dr Stead apparently held the view there was likely to be a lack of media interest in her tweeting was doubly peculiar given the issue had been previously raised with her by Mr Morison. This can be seen by her reference to a previous discussion in a draft email complaint she composed in relation to her upbraiding (the final version of which was not in evidence). The email records:

Although you did ask me to stay off Twitter until media interest dies down, I assumed that was in relation to Blue Sky related matters. The tweets you raised were personal tweets which were not related to Blue Sky and not inappropriate or unprofessional. I had also assumed the media focus had died down. When I resumed tweeting, it wasn’t to go against your request, it was because I believed it was safe and that the tweets were innocuous and of a personal nature … I had reasonably thought these tweets were not news worthy as they were not work related … However I understand that in the current environment, every piece of information can be twisted negatively by those with an agenda so I have deactivated my account as you have requested.

71    Although I do not go so far as rejecting Dr Stead’s evidence that prior to the meeting with Mr Morison she believed the general media would leave her tweeting alone and not report on it, given the contemporaneous intense media scrutiny of Blue Sky (arising from matters explained below) and her important role within Blue Sky as a public company director, it was, at best, a naïve view for Dr Stead to hold.

72    Before moving on, it is worth tarrying to observe a few matters including the distinction that Dr Stead drew in her complaint between “personal” and “professional” tweets. The supposed division raises interesting questions. What actually is personal in this context? To those of an age and cast of mind who have not embraced social media, the demarcation between what is private and public may be quite different to those more attuned to the contemporary zeitgeist. Speaking generally, to those accustomed to restricting one’s private musings to family and a circle of close friends, the inclination and apparent readiness of social media users to “share” their feelings and their views on everything from fascism to fish fingers seems decidedly odd. For some on social media, emoting or the recounting the mundane often seems to co-exist with commentary on issues of public significance or discussion of professional matters of moment. But to be too quick to stigmatise a tweet as banal is to fail to recognise that often seems the point of the exercise. Those forming the community of social media users, or a sub-set of them, might have quite a different conception from others as to what is noteworthy or inappropriate, silly, or even risible. Mr Aston was emphatic in denouncing what he perceived to be Dr Stead’s asinine posts, but anyone wishing to glance though the evidence of his tweets on foot massages or milkshakes might rationally form the view that they were without redeeming social importance.

73    Three points worth noting emerge from this: first, the context of a post on social media is important (which, as a habitué, Mr Aston would readily understand); secondly, it is unrealistic to assume that a mundane post by a newsworthy figure would necessarily stay within a community of social media users (something which Dr Stead should have understood); and thirdly, connected to the last point, given the nature of social media, characterising any post as being “private”, if made by a person who has a role of public interest, is problematical.

74    The notion of context is important when one considers the second aspect of Dr Stead’s evidence to which significant attention was directed: her connexion to, and communication with, her peers.

75    Dr Stead describes herself as a “Venture Capitalist”. She and her colleagues repeatedly referred in their evidence to being part of an “ecosystem”. This was not a reference to an ecosystem in the conventional sense, but rather, a buzzword used to describe the “open environment” where professionals with similar and different skills work collaboratively to assist one another in “raising new companies”. Dr Stead was evidently an enthusiastic participant in the “ecosystem”: she explained she was “a subscriber to the concept of ‘give first’” and that she “believe[s] wholeheartedly in being that person for others in our ecosystem”; she did this by “volunteering my time and expertise to mentoring entrepreneurs and start-ups”. Reciprocally, the evidence suggests her fellow participants within the “ecosystem” were a source of support to her. Part of this support and community, according to a fellow enthusiast and friend, Ms Monica Bradley (an investment advisor and company director), involved interactions on Twitter. Ms Bradley explained “all of us in the ecosystem, Australia wide, follow each other on Twitter”. When asked why, she responded:

I think it’s the nature of the Twitter technology, is the following kind of constitutes people of interest or what we would have called in the old days, communities of practice. So numbers of us follow each other, and that way then we share observations, learnings, information. But you know, I have – and everyone has very different interest groups. The ecosystem is one of mine, but I also have, you know, other people I follow on equality, or women’s rights or the Eurocarbon community. So I follow a variety of people, but ecosystem communicates a lot via Twitter, and direct messages on Twitter.

76    Like many other communities of like-minded individuals, it is apparent from the evidence that those within the “ecosystem” communicated in a singular way that was apparently understood and appreciated by those within this so-called “community of practice”. A good example has an especial relevance to this case, being a flyer from the Queensland Office of the Chief Entrepreneur’s so-called “Adventurer-in-Residence”, who entreated those “active in the Queensland entrepreneurial ecosystem” who wished to “improve their physical resilience and mental stamina” to travel to Mongolia to:

… summit a challenging local Khentii Mountain and learn about nomadic life - with interviews and hands-on experience with local families, along with progressing through introspective strategy and leadership workshops, all facilitated by The Nomadic School of Business team.

We will focus our immersion around the concepts of clarity, purpose and agility. Taking inspiration from our surroundings and the nomadic families we meet, the team will be guided through reflection on their own territory and season, the purpose of their team and organisation, and the qualities of agility needed to be truly responsive to your environment. We aim to help attendees see the world and themselves in a completely different way. We will also be meeting local entrepreneurs and Australians and other businessmen and women based in Ulaanbaatar.

77    To an outsider to the “ecosystem” and its interactions on social media, the public expression of private ruminations and the sometimes cloying expressions of support and mutual regard might seem easy to mock; but, as explained above, when considering the content and tone of Dr Stead’s social media posts, it is necessary to bear in mind the context of the communications: they are thoughts primarily shared with persons likely to have a similar “mind-set”.

78    From before her reprimand, Dr Stead had a “private” Twitter account. Mr Aston was aware of this from April 2018 when he received a message (“Elaine has gone private on Twitter! Say it ain’t so!!”: Ex 1, p 2990). But, as noted above, the label “private” is apt to mislead: the posts were still available to be viewed by her many “followers” (numbering about 5,000). Unlike Twitter, Dr Stead’s Instagram account had never been available to the general public; she gave thought to whom she “accepted” on Instagram and indeed Mr Aston’s request to follow her was rejected in April 2018. But it could hardly be said that the 500 to 600 followers she had on this medium amounted to a circle of intimacy.

79    As noted above, when the extent of her social media cohort is borne in mind, notwithstanding Dr Stead was directing her communications to the “ecosystem”, it must have been apparent by at least mid-May 2018, that her social media comments may, given the public interest in the travails of Blue Sky, be decontextualised and be the subject of critical media interest and comment. Indeed, as the extract from her complaint to Mr Morison belatedly recognised, in an environment where Blue Sky was the subject of focus, “every piece of information can be twisted negatively by those with an agenda”.

80    The reason why Dr Stead’s comments were likely to be of public interest leads me to an aspect of her evidence which did cause me concern, that is, the evidence relating to her activity as a director of Blue Sky. To explain why, it is necessary to go into a little detail.

81    Dr Stead originally joined Blue Sky as the Head of Venture Capital. Blue Sky was a listed alternative asset manager (ASX: BLA) operating as a holding company for fund managers that invested in four alternative asset classes: private equity and venture capital, real estate, hedge funds and agriculture and resources. Between September 2016 and April 2018, Dr Stead was a director of Blue Sky (although she continued as a senior executive until her employment ended on 30 September 2019). Regrettably, in the submissions of both parties there was a repeated tendency to elide distinctions between: (a) Blue Sky the listed entity; (b) Blue Sky Venture Capital, which was not a legal entity, and which was described in the Agreed Background Facts (ABF) as a “division of Blue Sky”, of which Dr Stead was “Investment Director” (defined as “BSVC”: ABF at [7]; Ex 2, p 383); (c) the entity BSVC Pty Ltd, in respect of which Dr Stead was apparently appointed an executive director in July 2013 (ABF at [9]); and (d) the entity Blue Sky Private Equity Pty Ltd (BSPE). BSPE was a wholly owned subsidiary of Blue Sky and operated as an investment manager.

82    The listed entity Blue Sky was, at one time, perceived by many participants in equity markets to be a spectacular success. By the first half of FY2014, revenue had reached $8.15 million with the company projecting more than $500 million in assets under management (AUM) by the end of that financial year. The details of further growth do not need recounting; it suffices to note that a succession of further capital raisings took place to fuel an ambitious and expansive investment strategy. 

83    By contemporary accounts, many seemed to think the strategy had worked. In June 2017, an article was published written by Mr Anthony Boyd, of the AFR’s “Chanticleer” column. The column is prominent; indeed it self identifies as “Australia’s pre-eminent business column”. Among other things, the article (“Blue Sky Alternatives CEO Rob Stand fights back”) reported:

There is no better example of the surge in interest in alternative assets than Blue Sky Alternatives, a Brisbane manager which has shot the lights out for the past five years. This week it revealed that its total funds under management had hit $3 billion, which is up about $1 billion from a year ago. It lifted its funds under management by about $1 billion in the previous year.

Blue Sky has about $1 billion in private equity, $1 billion in real estate and about $1 billion in water and agriculture. It has a small amount in hedge funds.

Blue Sky is well on the way to meeting its target of having $10 billion in funds under management and being the home-grown version of Wall Street alternative asset giants Blackstone and KKR.

Any company with the words Blue Sky in its name will have its fair share of sceptics …

There is no suggestion that Blue Sky Alternatives has any [‘speccy’] features in its operations. First, it is not involved in mining. Second, its accounts are audited by respected firms and, third, its board includes respected Queensland business people.

But it has had its fair share of sceptics. In October and November last year, the short interest in the stock was equal to about 3.5 per cent of the issued capital.

Also, over the years Blue Sky has come under attack from bloggers and analysts claiming it is too reliant on asset revaluations and that its investment vehicles carry too much debt.

Chanticleer believes there is an element of the tall poppy syndrome wrapped up in the negativity towards Blue Sky. Many of the rumours have been proven to be wrong.

Chief executive Rob Shand is happy to deal with all the criticisms head-on. His arguments are quite persuasive, as shown by the fact that the level of institutional investment in Blue Sky’s range of funds has jumped from zero five years ago to 37 per cent in 2016.

In response to the claim that returns are driven by unrealistic valuations of assets, Shand says that 28 of the 31 asset realisations made by Blue Sky since 2006 have been at valuations higher than book value. He says this shows an inherent conservatism in the accounting for the value of assets.

In response to claims that valuations are too easily pumped up, Shand says each asset must go through four separate sets of eyes. It starts with KPMG as valuer, then EY as auditor, then the board of the fund and then the board of the head stock, Blue Sky Alternatives.

…

(Emphasis added).

84    There are a number of reasons why this article was significant. First (and perhaps explaining why there was some short interest in Blue Sky shares) was that aspects of the business of Blue Sky were opaque; it had apparently not provided, by way of periodic or continuous disclosure, either a breakdown between gross AUM and fee earning AUM, nor a breakdown as between various asset classes. Secondly, as a consequence, the communication of an aspect of this information (that Blue Sky “has about $1 billion in [the] private equity” asset class) in a prominent article, was arguably information of some moment. Thirdly, given its apparent source and publication in the AFR, it was information likely to come to the attention of investors or potential investors. Fourthly, it was information which might arguably be thought to be of significance to those investing, including in the VC funds (leaving aside anything else, it may matter to a potential investor in a venture capital fund to understand the quantum of total private equity assets under management, as compared to say, the real estate assets or agriculture and resources assets – even though they all may be generating upstream fee income).

85    Dr Stead gave evidence she was not happy about the article because “it was incorrect”; indeed, she believed it was an inaccurate estimate of AUM for any of the business units. The following evidence was then given:

MR DAWSON: It would be a bit of a worry, wouldn’t it, Dr Stead, if the financial world reading the [AFR] thought that that was the official company position when it wasn’t?---Yes.

Didn’t you think it was important to correct it if the company disagreed with it?---It was difficult to correct if we can’t actually say the number for each of the assets under management.

HIS HONOUR: Why couldn’t you say the number?---We had never disclosed the individual assets under management for each of our business units individually. We had only ever talked about it in its totality.

But that was a commercial decision - - -?---Yes.

- - - that was made?---Yes.

So up until the time … the information that the company had concerning the amount it had in private equity was information that was not generally available to the market?---Yes.

…

Did it concern you that given that in June [2017] it was – it had been conveyed inaccurately that Blue Sky had about 1 billion in private equity, that it may be appropriate for the communication to be made to the market to make it clear that the true position concerning the assets held in private equity were lower?---So the question was did it concern us, and the answer is yes.

Yes?---And there was much discussion about what to do, if anything.

Yes?---The consensus from the board in the end was to maintain our position, which was to not disclose assets under management by asset class, and because he hadn’t said anything materially different to what we had disclosed in totality of about three billion under management the decision was made to just let it go.

…

MR DAWSON: If Mr Shand was responsible for the breakdown in that Financial Review article I showed you, namely one billion in private equity, et cetera, if he had told the Australian Financial Review that it follows from what you’re saying that Mr Shand would have been misrepresenting the position, doesn’t it?---Yes.

And did you take up with Mr Shand as a director of Blue Sky the fact that this was inaccurate and information going into the public domain that was wrong? ---Yes.

Right. And your evidence is that there was a discussion at board level, was there, to let it lie?---Yes.

86    A curious aspect of this case is that although the business and ultimate demise of Blue Sky was the subject of voluminous evidence, according to the parties (as recorded in a document filed in advance of the trial), the limited factual findings that need to be made as to the underlying business of Blue Sky (and its failure) are related to the substantial truth of aspects of the alleged proper material relied upon by Mr Aston.

87    Consistently with this, in support of a submission that Fairfax and Mr Aston had failed to prove that Dr Stead had a “poor track record”, the following was said on behalf of Dr Stead:

The issue of why Blue Sky collapsed is not relevant to the facts in issue in this proceeding but … the March-April 2018 short-seller attack and related media coverage, including by Mr Aston and the AFR, affected the fundamentals of Blue Sky shortly thereafter.

88    The “attack” to which Dr Stead was referring was a report on Blue Sky by Glaucus Research Group California LLC (Glaucus), an activist short seller based in the United States, published on 28 March 2018 (Glaucus Report). The Glaucus Report was damning as to a range of matters, including the lack of transparency of Blue Sky. Dr Stead left the board shortly thereafter, but it was common ground that this was about redressing a deficiency of non-executive directors and had nothing to do with: (a) the publication of the Glaucus Report; (b) Blue Sky’s attempted rebuttal of it; nor (c) any disagreement she had with the Board as to inaccurate AUM information being in the public domain.

89    Just as it is beyond the scope of this case to make findings as to why Blue Sky collapsed or the accuracy of the Glaucus Report, given the way the case is pleaded, it is also beyond my role to make findings as to the legal or moral appropriateness of Dr Stead and the other directors letting misleading information as to the extent of fee earning AUM, and the breakdown of AUM as between various asset classes, to be left unaddressed – notwithstanding people were investing in funds managed by Blue Sky and were buying the listed entity’s shares.

90    During the course of the trial, at times, it seemed to be suggested that the failure of Blue Sky could be simply put down to the publication of the Glaucus Report and the consequent loss of investor confidence fuelled by the media (although, as noted above, Dr Stead’s evidence was somewhat more nuanced on close examination). In her evidence in chief, Dr Stead was highly critical of Glaucus in noting:

By publishing what I believe to be biased opinions in [the Glaucus Report] that are not based on facts, Glaucus’ aim was to panic Blue Sky investors and destroy their confidence in the company with a view to driving its share price down and exploiting the fall in the share price to make a significant profit. By doing so, it significantly improved its odds of being able to sell Blue Sky shares at a high price and buy at a low price …

I also believe Glaucus relies on the media to achieve its aim.

91    But when addressing why Blue Sky failed, in an article she wrote published on the website SmartCompany on 31 October 2019 (“The mainstream media sneers at success and revels in failure – and it feeds a culture of mediocrity”), to which she was taken in cross-examination, Dr Stead gave a somewhat more comprehensive response than simply blaming short sellers. She identified three main reasons for the debacle being:

[o]ur growth rate prior to the attack, combined with an activist short seller attack which was false, misleading and deceptive, and the board’s mistakes in the wake of the attack. I wear part responsibility for at least one of these reasons.

92    Dr Stead did not resile from this statement in cross-examination, and confirmed that the reason for which she wore “part responsibility” was the company’s growth rate. But to the extent it is relevant to credit, even this somewhat more complete account seems likely to miss the mark. Dr Stead accepted that Blue Sky’s shares traded efficiently. The so-called “efficient market hypothesis” in its “pure” (or even “semi-strong”) form has its persuasive critics, and no doubt distortions from fair market value can be caused by short sellers for a period (such as “short and distort” participants), but in the present case, Blue Sky ultimately responded to the Glaucus Report by placing further information into the market. Even assuming the Glaucus Report was inaccurate in material respects, ultimately one would expect investors acting rationally to have placed a fair value on Blue Sky shares based on the present value of projected future cash flows. The apparent problem for Blue Sky was that when additional information was revealed, the value placed by the market on the stock was very different than the heady days before, and immediately after, the “Chanticleer” column.

93    At this point it is convenient to identify and dismiss a submission made by Dr Stead connected to the activities of short sellers. It was suggested that it was somehow “improper” for Mr Aston to rely on information provided to him by anyone with a short position in Blue Sky. Speaking generally, market participants with long positions can be as biased as those holding short positions. Their perspective is different, but each perspective may be valid, provided one appreciates the respective partialities. It is unnecessary to go into the details, but it has been compellingly argued by financial economists that constraints on short selling can slow the dissemination of information into the market which, by impeding timely price responses to new information, undermines market efficiency. Leaving aside short term distortions, if the share price is seen as an equilibrium or fair value arrived at by all market participants, to exclude short sellers can systematically reduce the amount of information which should be reflected in the fair value share price. To submit, as Dr Stead did, that Mr Aston could not rely on any source or information to the degree he did, simply because it came or originated from a short seller is, with respect, jejune and I reject the notion that a journalist like Mr Aston was somehow obliged to ignore their views of the company or its officers in an a priori fashion.

94    The final matter to which preliminary comment should be made relates to the context of Dr Stead’s social media posts and, in particular, the context of one Instagram post that followed on from the efforts of the Chief Entrepreneur’s “Adventurer-in-Residence” to have members of Queensland entrepreneurial ecosystem gain “clarity” and “agility” by undergoing “immersion” in Mongolian nomadic life.

95    I referred earlier to the support Dr Stead perceived she received from those within her “community of practice”. Following the release of the Glaucus Report, which was discussed widely in the “ecosystem”, she attended a function and thereafter posted to Instagram a photo of herself with Ms Bradley, in which post she observed that Ms Bradley was a support to her, and explained:

When the chips were down, I was overwhelmed with love support and community. This woman is one of the awesome peeps [scil. people] in the Queensland ecosystem who has been a staunch sister.

96    She then went on to say that:

Along with many other sisters and brothers, many of whom I had the joy to see again tonight. You all know who you are. Thank you.

Now, given I’m currently broke, how am I going to crowd source $5k to go on the venture mission to Mongolia?

(Emphasis added).    

97    As to the emphasised paragraph of her post, it was said by Fairfax and Mr Aston that Dr Stead did not give any direct evidence that this part of the post was a joke, despite having opportunities to do so. Moreover, the comments on the post in evidence do not appear to indicate that that was how it was understood by the two followers who responded to it (in fact they take issue with the fact that she referred to herself as “broke”) (Ex 1, p 3893). It followed, it was contended, the Court ought to be slow to conclude the emphasised remark was a joke.

98    But to the extent subjective intentions are actually relevant, it was made plain on behalf of Dr Stead throughout the case that this aspect of the post was not to be taken literally. This was put to Mr Aston (no doubt on instructions), and was asserted to be patent from any fair reading. I have little doubt, given the context of the post, that by her last paragraph Dr Stead was attempting to be light-hearted and was speaking in a jocular way to persons she considered colleagues and fellow enthusiasts of such “bonding” sessions. This was someone primarily conversing with “peeps” she considered her “brothers” and “sisters” in an emotional way. The joke might be perceived by some as being self-indulgent or injudicious (given that investors in Blue Sky and the funds she had managed had suffered financially), and two people may have taken issue with any assertion she was broke, but any want of tact did not mean this aspect of the post was not an attempt at levity. It follows, contrary to the complexion Mr Aston put on the post, I do not accept that Dr Stead’s post was an exercise in panhandling by a cadger trying to procure a free trip to East Asia.

C.2    Mr Aston

99    Mr Aston was an intelligent, self-possessed witness who sparred effectively with his cross-examiner.

100    Without objection, and without any limitation on its use, a 50-minute video went into evidence (Ex D) recording Mr Aston (together with two other journalists) being interviewed and taking questions at the Melbourne Press Club. It was both instructive and revealing. It provided a candid account of how Mr Aston regards his role, how he perceives his “inside Baseball” readership (at 30:20), and his modus operandi generally, including how he sometimes will (at 18:07):

… bite off a really big story and pursue it for months and months and stay on it and I think it’s important to do that, to own something and to pursue it to its ungainly end.

101    It is also evident that Mr Aston is conscious of the power of his position. In answer to a question posed by the interviewer (at 26:35) to identify someone the interviewees most enjoyed “tweaking, attacking or having fun with, just for the sheer and utter sport”, Mr Aston explained (at 29:22) he had “a lot of fun” with Mr Eddie McGuire, a prominent Melbourne identity. After telling a story, which he repeated in the witness box, about being “shirtfronted” by the Collingwood Football Club President in a corporate tent on Derby Day, he remarked that this was an “unwise decision” of Mr McGuire because “I’m the one with the column inches” (at 30:06).

102    Mr Aston also described how he perceived that Mr McGuire, by his actions, served him up a “slow full toss every time” (at 31:33). He later made another point about “how do you manage someone when they’re coming after you” (at 42:59), explaining that there are people “I went after” who confronted him but, by way of contrast, there are other persons who have reacted well and have since become sources or professional friends (at 43:39). He then explained (at 43:46):

… there are many slow deaths that have occurred on the page because people, through pride, or arrogance or wrongheadedness or whatever have chosen the former rather than the latter.

103    When cross-examined about this last comment, he dismissed its present relevance because Dr Stead never rang up and abused or confronted him. But the comment does seem to me to be material. Dr Stead did not act as some others had done, those “hail-fellow-well-met” types Mr Aston apparently considered good sports and who offered to take him out to lunch and tell a few yarns. When it was put to Mr Aston that his intention in relation to Dr Stead was to make her reputation suffer a “slow death”, and that she continued to defend her conduct at Blue Sky, he responded (T574.32–8):

Well, she continued to claim that Blue Sky collapsed through no wrongdoing of its own or through no fault of its own.

… I think her refusal to accept reality of what happened caused me … great surprise and it was … certainly a big part of what made me wonder what was going on in her head.

104    For reasons I will explain further below, Dr Stead was a target Mr Aston determined to “go after” because he perceived she was not taking responsibility for her alleged failures at Blue Sky and because of her insouciance, as he saw it, to the losses suffered by investors. The consequence of Dr Stead being targeted was that she did suffer a type of “slow death” as a consequence.

105    The interview (which took place between the primary judgment and the determination of the appeal in Bauer Media Pty Ltd v Wilson (No 2) [2018] VSCA 154; (2018) 56 VR 674) also demonstrates that Mr Aston has an apparent interest in the law of defamation: for example he noted his wish for a successful appeal in Bauer Media (at 24:32). Further, in describing a notable example when he and his employer were confident they had a “really good case” in resisting potential defamation proceedings, Mr Aston proffered (at 42:31) that this was subject to the following caution:

… as much as any media organisation has a good case anymore when it comes to the courts who seem to roll out the red carpet for any vexatious plaintiff/applicant.

106    Be that as it may, despite any appreciation of the relevance of questions posed to him gleaned from this familiarity with the law of defamation and his (at least at some stage) apparent cynicism about the judicial process, it is to his credit none of this seemed to cause Mr Aston to fashion his evidence to suit the perceived forensic exigencies of his case. On the contrary, he was generally candid and impressive in giving spontaneous answers. Having made that general observation, in addition to those aspects touched upon above by reference to Ex D, there are three aspects of his evidence that do require close examination and comment.

107    First, on the second day of his evidence, in rejecting any meaningful distinction between (a) a cretin; and (b) a person doing stupid things and thereby appearing cretinous, Mr Aston justified his position by invoking a well-known line of dialogue from a popular film, being “stupid is as stupid does”.

108    I do not accept this evidence. Mr Aston is not to be confused with Forrest Gump. Although the distinction between actuality and appearance may have been lost on a fictional character of subnormal acuity, to anyone with a degree of sophistication, the difference is manifest. When the words cretin, moron, imbecile or idiot were used in their obsolete medical sense, there was a hierarchy of meaning and each conveyed something somewhat different: see, eg, Huey E B, Backward and Feeble-Minded Children: Clinical Studies in the Psychology of Defectives, with a Syllabus for the Clinical Examination and Testing of Children (Warwick and York, Inc., 1912). These subtleties have now been largely lost as these words have become general terms of abuse, but it is fair to say that to describe someone as a cretin, in an unqualified way, conveys the notion of someone who is at one end of the continuum of human intelligence, being a person who is brainless or very stupid indeed. This is quite different to someone being silly or, at times, professionally incompetent – even Homer nods, let alone persons of average intelligence who, for a variety of reasons, do foolish things.

109    The use of the expression “cretin” to describe Dr Stead was, as Mr Aston conceded, a very offensive thing to say. In his affidavit evidence, Mr Aston deposed as follows:

I referred to the applicant as a “cretin” because I was struck by the idiocy of a public company director and senior businessperson tweeting the contents of last night’s dreams or how her coffee tasted. The banality and incessance of her social media utterances made her appear cretinous. So did her posting about needing to crowdfund a trip to Mongolia when she had until recently been earning an executive salary, and had lost investors’ money whilst earning that salary. Her continuous social media posting was also why I said “she will not be silenced”.

(Emphasis added).

110    This evidence, no doubt prepared with the assistance of his solicitors, was unsurprising. Dr Stead is a highly-educated, articulate woman of not insignificant professional accomplishments. To assert on oath she was a cretin, rather than simply doing silly things that made her appear cretinous, might have been thought to be a bridge too far. This evidence in chief was also consistent with the sensible instructions given to his solicitors not to run a justification defence to the imputation that Dr Stead was cretinously stupid – notwithstanding truth was pleaded with regard to every other imputation.

111    In his oral evidence, however, Mr Aston was far from abashed. He expressed himself in different ways at different times. On the one hand he said he did not consider Dr Stead to be an “academically stupid person” and that she was “very well qualified in that regard”; he further said her investments and perceived self-delusion and social ineptitude amounted to “almost a form of stupidity or of cretinousness”. But on the other hand, he said that Dr Stead not only appeared very stupid, but actually was very stupid. The evidence has elements of inconsistency, but having observed Mr Aston closely in the witness box, I think it can be reconciled. The true position is closer to that given in chief. Mr Aston had a genuine belief at the time of publication that Dr Stead was vapid, self-deluded, platitudinous, and a very poor venture capitalist; but I do not consider he honestly held the belief she was a cretin, in the sense of being brainless or grossly stupid.

112    Secondly, another aspect of his evidence that evolved was in relation to Dr Stead’s involvement (between 2008 and 2011) as an Investment Manager with CM Capital Investments Pty Ltd, an Australian venture capital firm that later went into liquidation. In the Second Matter, Mr Aston had said, at [8], “[h]er previous employer, CM Capital Investments, was liquidated in 2014”. By way of explanation for this apparent irrelevancy being included in the article, Mr Aston deposed that he was:

… aware that [Dr Stead’s] previous employer, CM Capital Investments, had been a $250 million venture fund, but had also failed and had been liquidated in 2014. I did not believe that this failure was entirely or even mostly the applicant’s fault, but as an investment manager at the firm I considered that it reflected poorly on her track record, and the failure seemed to mirror the outcome at Blue Sky.

113    But by the time of giving evidence in cross-examination, Mr Aston expressly denied he intended to attribute blame to Dr Stead for the liquidation, and that he had “just said that she had worked there and that it had been liquidated. I didn’t try to suggest that, you know, she had managed investments well or badly because I didn’t know”: at T536.17–19. But this is precisely what he was implying. It seemed to me that the reason for this change was because Mr Aston, being astute, recognised the wholly insecure foundation of any extrapolation being made as suggested by his affidavit. Unlike the candour which characterised most of his evidence, this aspect of his testimony was unpersuasive.

114    Thirdly, Mr Aston was cross-examined at some length about his reaction to the Instagram post extracted above which was the catalyst for the First Matter. I have already explained why I consider that unlike Ms Clementine Ford, the other person Mr Aston described as a “feminist cretin”, Dr Stead was not asking for money. Mr Aston’s evidence was that allusion to the solicitation of funds was a device or conjunction that “links together two quite similar pieces of conduct by two feminists” (at T516.22). Slightly earlier (at T513, T515) the following evidence was given:

HIS HONOUR: So, does that mean that your view at the time was that was actually a serious solicitation for raising that money, is that the way you understood it at the time?---Well, it wasn’t, you know – sorry, your Honour, I would say it wasn’t equivalent to actually, you know, posting a link to a GoFundMe page where she was – had set it up, ready to raise money, but I did – I didn’t consider it a joke as in “I’m not seriously – I don’t seriously want someone to pay for me to go to Mongolia”.

Well, it’s – it’s one of two things, isn’t it. I mean, correct me if I’m wrong, if I misapprehended your evidence, it’s either said flippantly or jokingly, or, as you say in the first article, it’s a solicitation for funds. Is there a middle ground that I’m missing?---Well I didn’t – well, I didn’t think that it was a joke. I didn’t think it was – I didn’t think it was a joke.

Does that mean you thought it was a – the point I’m trying to get at is did you seriously think it was a solicitation of funds? Given – given that you’ve excluded the possibility it was a joke, I’m just seeking to clarify, does that mean that you seriously thought at the time that it was a solicitation of funds?---Yes.

…

HIS HONOUR: You’ve given evidence to the fact that you didn’t think it was a joke, but you thought it was a genuine solicitation of funds. I was just asking for your assistance having formed that view at the time how that, as it were, impacted upon your decision making processes that this was something that was risible or absurd - - -?---Yes. Well, to answer that, that’s to me what made it newsworthy, newsworthy or comment worthy, that so much - - -

Because it’s so risible that someone in her position would be making a genuine solicitation - - -?---Correct.

- - - of funds. I see?---And – and – and in light of the – the extent of – of the failures, of many of her – the investments she was steward over.

115    I confess to being somewhat vexed as to whether I should accept this evidence. On the one hand, an ordinary and contextual reading of the post is strongly to the contrary, but on the other, Mr Aston was quite forceful in his evidence as to his belief. For reasons I will explain, it ultimately does not matter, but on balance, it is more likely than not that Mr Aston did not genuinely hold the subjective belief that Dr Stead was actually acting as a mendicant. Upon close consideration of his evidence on this topic (including his manner of giving it), I am satisfied that the post was simply viewed by Mr Aston as being relevant to a “big story” he was pursuing “for months and months”, and that it was a topic ripe for mockery and provided a plausible link to Ms Ford’s behaviour. Put another way, to adapt Mr Aston’s cricketing metaphor in Ex D, without forming the view that she was actually begging, Dr Stead (by posting the way she did), served him up a half-volley he thought he could attack.

C.3    A Further Aspect of the Evidence

116    Dr Stead gave evidence that she regarded the First Matter to be misogynistic with the titles being “entirely misogynistic”, the Second Matter to be “unashamedly misogynistic” and the Third Matter to have “misogynistic undertones”. Senior Counsel for Dr Stead opened consistently with this evidence. After I sought clarification as to whether she was using the term in a way corresponding with its etymology, Ms Chrysanthou submitted, in terms, that the First Matter “conveys a hatred of women”. When Senior Counsel for Fairfax and Mr Aston, Mr Dawson SC, opened their case he said:

Now, Ms Chrysanthou has been pleased to say, and Dr Stead has echoed this in her evidence, that Mr Aston’s criticism of Dr Stead was an act of misogyny. That, we say, is an allegation which is as absurd as it is offensive. Mr Aston didn’t write what he did … about Dr Stead because she is a woman. He was motivated to write about her in both articles as a result of something she herself had said on social media.

… And Mr Aston in his reporting on Blue Sky, as your Honour will have seen in the court book materials, was just as tough, if not tougher, on male executives at Blue Sky. His criticism was, one might say, very much an exercise in equal opportunity.

117    It is clear from Ex D that Mr Aston has targeted plenty of men. More specifically, although Dr Stead’s activities were a particular focus (a matter to which I will return), Mr Aston was pursing the “big story” of Blue Sky and it is demonstrably true to say that was highly critical of others. For example, Mr Aston co-wrote an article on 1 May 2019 (“Oaktree pulls the trigger on Blue Sky, surprising none”), in which he referred to what he perceived to be Australian Securities and Investments Commission inaction in relation to “Blue Sky’s apparent breaches of its continuous disclosure obligations” and asked the question:

Why is former CEO Rob Shand enjoying life on his sprawling estate (with 14x6-metre swimming pool, fully-lit north-south tennis court and purpose-built 60x20-metre dressage arena)? He told the market Blue Sky had $1 billion of real estate, $1 billion of private equity and $1 billion of water and agriculture assets under management. It never did. He lied.

(Emphasis in original).

118    Although he was cross-examined at some length about the use of the word “feminist cretin” in the First Matter, despite the opening, it was not put to Mr Aston directly that he was a misogynist or what he wrote was, in fact, misogynistic. As I will later explain, it is clear that Mr Aston did target Dr Stead for particular criticism and this allegation was properly put to him. These forensic choices by Senior Counsel for Dr Stead are understandable given that Ms Chrysanthou explained in final address (at T715) that any relevance of misogyny is as to Dr Stead’s subjective belief that she felt Mr Aston had made a misogynistic attack on her, and that I do not “have to decide whether it was in fact”. Accordingly, although this subjective reaction is relevant to hurt to feelings, it is unnecessary, on the way Dr Stead finally put the case, for any finding to be made as to whether Mr Aston was motivated by misogyny (an allegation, through his Senior Counsel, he strongly resisted), or whether the publications objectively could be characterised as misogynistic.

D    HONEST OPINION

D.1    Introduction

119    Fairfax and Mr Aston eschewed reliance on the common law defence of fair comment and relied exclusively on s 31 of the Act, which provides that it is a defence to the publication of defamatory matter if the respondent proves that:

(1)    the matter was an expression of opinion of the respondent (s 31(1)(a)) or of an employee or agent of the respondent (s 31(2)(a)), rather than a statement of fact; and

(2)    the opinion related to a matter of public interest (ss 31(1)(b), 31(2)(b)); and

(3)    the opinion is based on proper material (ss 31(1)(c), 31(2)(c)).

120    An opinion is based on proper material if it is based on material that (relevantly) is substantially true: s 31(5) of the Act. However, even if a respondent is not able to establish that all of the material upon which the opinion is based is proper material, a respondent may still succeed in the defence. Sub-section 31(6) of the Act provides that an opinion does not cease to be based on proper material only because some of the material on which it is based is not proper material if the opinion might reasonably be based on such of the material as is proper.

121    It is useful to make three preliminary points relating to the relevant statutory provisions. First, both parties agreed (and the joint position was put to me) that an aspect of the decision of the High Court in Channel Seven Adelaide v Manock [2007] HCA 60; (2007) 232 CLR 245 (an appeal from South Australia, then a common law state) could, in effect, be read as being directly applicable to the statutory defence. This aspect being: the approach to what can constitute “proper material”.

122    Sub-section 31(5) of the Act is in the following terms:

(5)     For the purposes of this section, an opinion is based on proper material if it is based on material that–

(a)     is substantially true, or

(b)     was published on an occasion of absolute or qualified privilege (whether under this Act or at general law), or

(c)     was published on an occasion that attracted the protection of a defence under this section or section 28 or 29.

123    In this case, Fairfax and Mr Aston put to one side (b) and (c), and hence the sole basis of the proper material was said to be that it was “substantially true”. Section 4 of the Act provides that “substantially true” means true in substance or not materially different from the truth.

124    Notwithstanding these very broad statutory definitions, the agreed position as to proper material was relevantly said to be, as in the common law defence, a series of true facts which are contained or referred to in the publication or alternatively are notorious (although no notorious facts were said to be relevant in the present case). Moreover, this is the way the defence was pleaded. If one was searching for a textual foundation for this approach it might be thought it is consistent with the statutory requirement that the opinion be based on the proper material. Further, it might be thought consistent contextually with the need for the facts to be identified in such a way as to allow a reader to come to their own opinion on the facts identified. In any event, it unnecessary to say anything further as to any possible differences as to proper material as between the common law and statutory defences. Moreover, the point will be academic when the Defamation Amendment Act 2020 (NSW) (Amendment Act) commences. The amendment to s 31 introduced by this legislation will make plain that the proper material is to be: (a) set out in specific or general terms in the published matter, or (b) notorious, or (c) accessible from a reference, link or other access point included in the matter (for example, a hyperlink on a webpage), or (d) otherwise apparent from the context in which the matter is published.

125    The second preliminary point is to note that the common law defence provides for an objective assessment as to whether the opinion is reasonably based on the specified material (Sims v Wran [1984] 1 NSWLR 317 (at 325 per Hunt J); Manock (at 290–1 [90]–[91] per Gummow, Hayne and Heydon JJ)), and it has been suggested that there must be a sufficient rational connexion between the opinion and the facts in order to sustain the conclusion that the opinion was “based on” those facts: see Carolan v Fairfax Media Publications Pty Ltd (No 6) [2016] NSWSC 1091 (at [119] per McCallum J); Feldman v Polaris Media Pty Ltd as trustee of The Polaris Media Trust trading as The Australian Jewish News (No 2) [2018] NSWSC 1035; (2018) Aust Torts Reports ¶82-395 (at 66,585 [49]–[50] per McCallum J). There is no reference to reasonableness in s 31(5), however, as noted above, a respondent can make out the defence even if not all the facts are true but the opinion is reasonably based on those facts which are true: s 31(6).

126    The third point is that the common law defence has long been regarded as relatively difficult to establish unless an author of defamatory material was conscious of the need to ensure the facts upon which the opinion was based were apparent to the reader, and was careful to respect the distinction between what is an opinion and what is a statement of fact. Given the way the statute has been interpreted (as reflected in the common ground presented to me), it is perhaps unsurprising that the statute has not greatly increased the rate of success of respondents.

127    With these matters in mind, it is convenient to consider the applicability of the defence to the publication of the defamatory matters by reference to the three elements requiring proof: (a) whether the matters were expressions of opinion; and, if so, whether (b) the opinions related to a matter of public interest; and (c) were based on proper material.

D.2    Opinion or Fact: the Nature of the Inquiry

Relevant Approach

128    There is no definition in the Act as to what constitutes an opinion and it was common ground that the approach to distinguishing between an expression of opinion and a statement of fact is a question of characterisation which turns on whether the ordinary, reasonable reader would understand that a statement of fact was being made, or that an opinion was being offered: see Manock (at 264 [36] per Gummow, Hayne and Heydon JJ, with whom Gleeson CJ agreed). An opinion is something which can be characterised as a conclusion, a judgment or observation of some kind: see, eg, John Fairfax Publications Pty Ltd v O’Shane [2005] NSWCA 164; (2005) Aust Torts Reports ¶81-789 (at 67,455 [25] per Giles JA, quoting Gatley on Libel and Slander (at [12.6]) (Wildy & Sons Ltd, 10th ed, 2004).

129    At the extremes the task is easy, but like many processes of characterisation, it can be difficult at the margins.

130    It is also important to bear in mind that the statutory defence requires that it is the matter that was an expression of opinion, not the imputation or imputations conveyed – in contrast to the defences contained in s 25 (justification) and s 26 (contextual truth). Although the significance of the defamatory matter lies in its meaning, the pleaded meanings, although relevant, cannot be determinative of the necessarily contextual characterisation inquiry as to whether a statement is opinion. Put another way, although the pleaded meaning is not to be the sole focus, given that the critical question is whether the defamatory sense of the matter was conveyed as an expression of opinion rather than an assertion of fact, it is necessary that the inquiry is conducted, as McCallum J said in Feldman (at 66,584 [43]) “through the lens of the defamatory meaning held to have been conveyed”.

131    It seems to me that if one is faithful to the text of the Act, the correct approach can be stated quite simply: to determine whether the matter would have been understood by the ordinary reasonable reader to be an expression of opinion rather than a statement of fact; and although this contextual inquiry necessarily requires consideration of the meanings found to be conveyed, it is not constrained or dictated by their terms so as to transform the inquiry into a consideration as to how each imputation would be understood.

The First Matter

132    Mr Aston co-writes an opinion column, although it is an opinion column that includes gossip and business related tittle-tattle. I accept that the ordinary reasonable reader would understand that Mr Aston’s opinion, as a columnist, was being offered, not the least because of the nature of the language used. Taken as a whole, this language was consistent with Mr Aston’s evaluative judgments of current events in the financial and business world, and the people involved in those events. It is unsurprising that Mr Aston’s column appears in the “Opinion” section of the online newspaper.

133    Further, I accept the submission that taken as whole, the language of the First Matter is such that it is conveyed to the ordinary reasonable reader as a statement of Mr Aston’s opinion rather than as a statement of fact. The language used is colourful, sarcastic and exaggerated, and would be understood in this way. The tone is set by the sarcastic headline, and this continues throughout the article with phrases such as “feminist cretin”, “a prodigious destroyer of capital”, “Riveting”, “No kidding”, “fatuous investments in peanut start-ups” and “The mind boggles”.

134    Dr Stead places some emphasis on the words: “[w]e’re not qualified to give financial advice, but at least we’ve drawn you all the dots” on the basis that the ordinary reasonable reader would understand he was presenting the facts about Dr Stead and refraining from expressing an opinion. I disagree. This comment seems to convey that Mr Aston is saying it is up to the reader to come to the same view as him if they so choose.

135    Contrary to Dr Stead’s submissions, I accept the submission made by Fairfax and Mr Aston that the ordinary reasonable reader would understand the expression of opinion being offered by Mr Aston in the First Matter, viewed through the prism of the defamatory meaning conveyed, to be that Mr Aston considered Dr Stead to be self-interested and a cretin in the context of that Instagram post that: (a) followed a history of banal social media posts; (b) referred to crowdfunding a trip to Mongolia, which trip Mr Aston considered was ridiculous; and (c) was worthy of criticism in circumstances where Dr Stead had earned a significant salary and had been involved in investments which resulted in enormous losses to unit holders in FY2018, including losses incurred as a result of making stupid investments in two companies Shoes of Prey and Vinomofo, which were not worthy of investment.

The Second Matter

136    For similar reasons, the ordinary reasonable reader would understand that Mr Aston’s opinion was being offered by the Second Matter.

137    I do not accept that Mr Aston presents all of the material that gives rise to the sting of the allegations as incontrovertible fact – the language he uses is again sarcastic, colourful and exaggerated and not indicative of recounting a series of facts.

138    Again, I accept the submission of Fairfax and Mr Aston that the hypothetical referee would take the metaphorical references to Dr Stead burning investors’ cash as representing Mr Aston’s opinion as to the quality of the investment and the fact that their money has been wasted. Similarly, the use of rhetorical questions such as “Class act?”, and “With taxpayers’ funds, what big idea will Stead co-invest in next? A prototype DVD rewinder? Or perhaps motorised ice-cream cones?” gives the impression that an expression of opinion was being proffered.

139    The catalyst for the article was Dr Stead’s tweet describing Ms Jodie Fox as a “class act” and the relevant opinion being conveyed is that Dr Stead was not worthy of trust because Blue Sky: (a) did not return upfront fees to investors for unearned management fees in relation to Shoes of Prey, despite a promise that they would be returned; and (b) did not return capital to investors in the way Dr Stead hoped and promised including capital invested in Shoes of Prey, THR1VE, HeyLets and Vinomofo.

140    Another opinion conveyed related to Dr Stead’s suitability to manage the SAVCF (although no pleaded meaning to that effect was advanced). Although not relevant to the defence, the expression of this view, which comes across as a strongly held opinion of the author, is consistent with the characterisation of the Second Matter as opinion.

D.3    Public Interest

Relevant Approach

141    Public interest is also not defined in the Act and the parties accepted that it is not a concept susceptible to comprehensive definition, and may constitute an infinite variety of matters: John Fairfax Publications Pty Ltd v Hitchcock [2007] NSWCA 364; (2007) 70 NSWLR 484 (at 487 [8] per Ipp JA). Given there is no bright line, it amounts to an evaluative assessment; but in making the assessment there are, at least, some guideposts. In Bellino v Australian Broadcasting Corporation (1996) 185 CLR 183, Dawson, McHugh and Gummow JJ suggested (at 221) that the question was whether the claimant was engaged in conduct which “inherently, expressly or inferentially, invites public criticism or discussion”. But Brennan CJ and Gaudron J considered that this formulation was too narrow (at 193, 240–2) and referred to the statement by Lord Denning MR in London Artists Ltd v Littler [1969] 2 QB 375 (at 391) that the concept of the public interest should not be confined within narrow limits, and that anything which is “such as to affect people at large, so that they may be legitimately interested in, or concerned at, what is going on” is a matter of public interest.

Application

142    Dr Stead accepted that this element of the defence was established for the Second Matter. In these circumstances it might be thought curious that public interest is in dispute in relation to the First Matter.

143    The argument went along the following lines: (a) the labelling of a person who has no public profile as a feminist other than being “a woman who works in venture capital” as a “feminist cretin” who “will not be silenced” is “patently not related to the public interest”; (b) Dr Stead’s Instagram account has always been “private” and she was particular as to her following; (c) Mr Aston’s other quote was from an innocuous and “private” Twitter post that did not relate to the public interest; and (d) the fact that part of a person’s life may be in the public arena does not make every aspect of their life a legitimate subject matter for comment, and there “is no rational public interest” in reference to the proposed funding of the nomadic adventure, even if Mr Aston believed Dr Stead was unrepentant about her involvement in Blue Sky.

144    For reasons I have already explained in part, this argument does not withstand scrutiny. Although at the time of publication Dr Stead was no longer a public company director, her conduct in that role (together with her colleagues) was a matter of legitimate public interest. Additionally, she remained the Head of Venture Capital at Blue Sky. Both the listed entity and the VC funds had attracted substantial sums of money from the investing public. Blue Sky and its performance were matters of real public interest and once that is appreciated, Dr Stead’s behaviour and statements on social media in the midst of the collapse of Blue Sky and thereafter were of public interest.

145    In particular, the fact that the then current Head of Venture Capital at Blue Sky, and an ex-director, was (seriously or otherwise) declaring herself “broke” in the period after the Glaucus Report and the dramatic share decline, and the events of 2018, at a time when Blue Sky was “sunk or almost sunk” (at T527.31), was of public interest. Members of the public, including those who had lost significant sums, would regard it as of public interest that Dr Stead would jape about being in a dire financial situation and the need for the public to assist her to go on an outing with members the ecosystem. If it was not an attempt at humour (contrary to my view), the public interest is even more evident.

146    I have dealt above with the inaptness of placing significance on the fact that Dr Stead’s Instagram account was “private”. At the time of trial Dr Stead had 595 followers on her Instagram account (at T298.27) and it is safe to infer that at the relevant time she had roughly the same number of followers. It do not accept that a publication to almost 600 people, including people in the business community, is relevantly private, particularly given that those who follow her on Instagram were not precluded from sharing what she posted on the platform and there was no reason to think that they would not do so. Dr Stead’s emotional “shout out” to her “brothers” and “sisters” in the ecosystem was not a private communication.

147    To constrain the concept of the public interest as suggested by Dr Stead is contrary to principle; the public had every reason to be legitimately interested in, or concerned at, what was going on at Blue Sky and the reaction of its directors and senior employees to those goings on. This element of the defence has been established.

D.4    Proper Material

Overview

148    The parties agree that in this case, for material to be proper, it must be a series of true facts, which are contained or referred to in the publication. Hence it was common ground that in order to succeed in their defence, Fairfax and Mr Aston must, subject to s 31(6), prove that the relevant facts upon which the opinions expressed by Mr Aston in the matters were based are true in substance. Despite this, there was a fundamental difference in approach to the identification of those facts.

149    By the time of final submissions, Fairfax and Mr Aston had identified the relevant facts they asserted are contained, or referred to, in each matter; Dr Stead, for her part, complained that the facts identified by Fairfax and Mr Aston did not, in important respects, reflect the publications, and were wrongly pitched at a low or impermissibly general level, so as to ease the task of proof.

150    As the trier of fact, it is necessary for me to identify the material upon which the opinions are purported to be based (regardless of what Fairfax and Mr Aston have asserted to be the basis) and thereafter decide whether that material is proper material: see Feldman (at 66,585 [47]–[48] per McCallum J). After this process of identification, I will then explain why I have concluded that on the evidence adduced, Fairfax and Mr Aston have not discharged their burden of proving that much of the material contained, or referred to, in the matters is substantially true.

151    In this latter regard, it is worth making a few preliminary points.

152    First, Dr Stead was not Blue Sky and was not responsible for all of the activities of the company generally (except in her role as a director); nor was she solely responsible for individual decisions to deploy venture capital funds. Further, despite the collapse of Blue Sky, it is necessary to recall that Blue Sky was much more than BSVC – a point I made a number of times during the course of the hearing. It was only part of a much broader enterprise.

153    Secondly, there is obvious substance in the submission of Fairfax and Mr Aston that it must be accepted, as Dr Stead recognised, that it is fair to judge a venture capitalist by whether they are able to provide a return to investors (T241.1–6), and that it is not good to return, on a consistent basis, less than what was forecast. It is also correct to submit that notwithstanding that Dr Stead gave evidence of the “rule of thumb” that for every 10 investments, seven will fail, two will break even and one will reap a significant return for investors (third affidavit of Dr Stead at [7]), this “rule”, applying to venture capitalists generally, was apparently inconsistent with the particular investment strategy or risk profile that Dr Stead represented that BSVC embraced. For example, in September 2017, Dr Stead gave an interview to “Startup Grind” during which she stated:

So the target for our fund is around 30% [internal rate of return (IRR)], so what that means for the uninitiated is we want to see a 30% return on our money year on year compounding, for the period of the fund. So the typical kind of power law in venture is, particularly if you invest in early stage, is you’ll invest in sort of 10 to 20 companies, one of those will be a 1 – you know a 100 times return. The rest of them are either going to be a failure or kind of deliver moderate returns. And it’s that one kind of out-performer which really gets you those, you know, 30% or more returns for the fund. In our case, because we do invest slightly later stage, and the majority of our companies are already in the market, it’s a different risk profile. And so we don’t expect that same volatility of returns. So we’re not expecting most of them to fail and one to kind of save the fund. We’re actually expecting all of them to be successful.

(Emphasis added).

154    But this is not a misleading and deceptive conduct case. I do not need to determine whether there was any reasonable basis for forecasts or contemporaneous representations made by Dr Stead. My focus is to identify the material referred to by Mr Aston and work out whether the series of facts, which are contained, or referred to in the publication are substantially true – not a broader, roving inquiry.

155    Thirdly, and connected to the last point, although there is some force in the submissions of Fairfax and Mr Aston that out of the approximately $80 million raised by funds associated with Dr Stead, the capital invested in three businesses was lost completely and, it appears, none of the funds performed in such a way that the valuation (as at 30 June 2019) would likely result in a return of capital to investors, let alone targeted IRR. The difficulty is that the facts which adequately underpin these propositions are not contained, or referred to, in the matters. Be it fair or unfair, it was possible for an opinion piece to be written that was critical of the performance of Dr Stead at Blue Sky, but to do so, it was necessary for the material upon which those opinions were based to be identified properly.

156    Fourthly, returning to the material that was specified, as Sir Owen Dixon emphasised in a number of cases, when the law requires proof of any fact, the tribunal of fact “must feel an actual persuasion of its occurrence or existence before it can be found” (Briginshaw v Briginshaw (1938) 60 CLR 336 (at 361)). His Honour explained that a party bearing the onus will not succeed unless the whole of the evidence establishes a “reasonable satisfaction” on the preponderance of probabilities such as to sustain the relevant issue (Axon v Axon (1937) 59 CLR 395 (at 403, 407)); and the “facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied” (Jones v Dunkel (1959) 101 CLR 298 (at 305)). 

157    I now turn to the reasons why I do not feel such an actual persuasion or reasonable satisfaction in relation to the substantial truth of much of the relevant material.

The First Matter

158    Some facts readily identifiable in the First Matter can be accepted immediately as being either true or substantially true: Dr Stead was the Head of Venture Capital at Blue Sky; she made social media posts, including those with the words indicated in the article; Blue Sky paid Dr Stead substantial remuneration in FY2018; and that a venture mission to Mongolia had been planned and had been characterised as a trip to “live alongside the nomadic herders and eagle hunters” and “learn more about the importance of flexibility, resilience and purpose”. Other facts, which are not immediately apparent to be relevant to the defamatory meanings or opinion expressed, such as that Dr Stead quit the Blue Sky board in April 2018, are also clearly true.

159    But it was then said by Fairfax and Mr Aston that the “key factual issue in dispute is as to the losses to unitholders as a result of investments” with the three investments that were identified and pressed in final submissions being Shoes of Prey, Vinomofo and the VC 2012 Fund.

160    But this submission mischaracterises the ambit of the dispute at the outset by incorrectly identifying the material upon which the opinion purports to be based. The First Matter asserted that Dr Stead is a “prodigious destroyer of capital”. I have already explained what the First Matter conveyed in its defamatory meaning, and it is qualitatively different from the content of the relevant aspect of the proper material Fairfax and Mr Aston pleaded, being that Dr Stead is someone “with a poor track record”. The fact of a “poor track record” is not sufficiently contained in, or referred to, within the First Matter. Put another way, the pleaded allegations as to Dr Stead’s track record as a venture capitalist and the performance of some of the funds she managed does not rationally support an allegation that Dr Stead invested recklessly, stupidly and with a want of care and skill such as to cause untold losses to unitholders. It is evident that Mr Aston did not base his publication on the lower level factual contention pleaded.

161    It seems to me quite plain that the First Matter states as facts a number of matters in addition to those identified at [158] above. One (the identification of which was, or at least became, largely uncontroversial) was:

(1)    Unitholders in investments presided over by Blue Sky suffered untold losses in FY2018 (in [6]);

162    Three others, not identified by Fairfax and Mr Aston in the terms below, were:

(2)    Dr Stead had solicited funds on social media to fund a trip to Mongolia (in [4], [5], [7]);

(3)    Shoes of Prey was a worthless start-up with no prospects of success (in [6]); and

(4)    Vinomofo was a worthless start-up with no prospects of success (in [6]).

163    As I explain below, on the evidence I have been taken to, these four facts identifiable in the First Matter have not been proved to be substantially true to the requisite standard.

Unitholders suffered untold losses in FY2018

164    Senior Counsel for Fairfax and Mr Aston eventually accepted, correctly in my view, that the focus must be on losses suffered in FY2018, that is, between 1 July 2017 and 30 June 2018 (T739.25). It was also accepted that the losses must be “significant” (although to be substantially true, given the use of the adjective “untold”, the losses must be, at least, very significant).

165    But two issues raised by Dr Stead need to be dispatched before one comes to the evidence. The first was the misconceived notion that the focus of the inquiry meant that no document, other than one created during FY2018, could be admissible to prove the substantial truth of this fact. This cannot be right. The most obvious example would be a financial report for the year ended FY2018, which may be highly probative but would not, of course, be produced during the year.

166    The second related to the meaning of “loss”. Dr Stead submitted that the First Matter (at [6]) referred to the “losses accrued in FY18”. A loss accrued, it was said, was loss that had been “realised” or was somehow “fixed”. Here I consider that Dr Stead is slipping into casuistry. A loss, particularly used in the sense it was used in the First Matter, would ordinarily be regarded as a diminution in the estimated value of the investment at a particular point in time. The use of the term “accrued” does not change the sense or substance of the material stated. Most would understand an accrual to be an adjustment that must be made before an entity’s true financial position at a balance date is identified or financial statements are issued. I reject the submission that what Dr Stead called the “unrealised and continuing nature” of most of the investments Dr Stead was involved with at the time of publication to date means “it is not possible (with the exception of Shoes of Prey or HeyLets) to identify that a loss had been made or was likely”.

167    It is then necessary to turn to how Fairfax and Mr Aston sought to prove the substantial truth of this fact. They did so by focussing on:

(1)    investments made in Shoes of Prey through: (a) the bespoke Blue Sky Shoes of Prey Private Equity Fund (SoP Fund) which raised $9.738 million, with $8 million to be invested in Shoes of Prey and the balance to be used for fees; and (b) the Blue Sky VC 2014 ESCVLP Fund LP (VC2014 Fund) with the investment recorded in the 2016 financial statements for VC2014 at about $1.6 million (Ex 2, p 244);

(2)    investments made in Vinomofo through a $20 million investment by the Blue Sky Private Equity Vinomofo Fund (Vinomofo Fund) and a $5 million investment by the VC2014 Fund; and

(3)    the investments made by the VC 2012 ESVCLP Fund LP (VC2012 Fund) of:

(a)    about $1.1 million in September 2013 in Conventus Orthopaedics Inc., (Conventus), a medical device company;

(b)    about $1.5 million (together with the Blue Sky Private Equity Paws for Life Fund totalling about $4 million) in November 2013 in Pet Circle, a subscription e-commerce company specialising in the sale of pet food, medicine and accessories;

(c)    about $1 million in November 2013 in HatchTech Pty Ltd (HatchTech), a specialty pharmaceutical company seeking to develop United States Food and Drug Administration-approved lice treatment;

(d)    an investment, together with M H Carnegie, in Serene Medical Pty Ltd (Serene), an “anti-aging” cosmetic device company offering an alternative to Botox; and

(e)    about $850,000 in July 2014 in HeyLets Inc (HeyLets), a social networking application focussed on “sharing and discovering experiences”.

168    No doubt a number of these investments turned out, for a variety of reasons, to have been unsuccessful at various times (the investment in HeyLets, for example, was written-off by the first half of June 2017); it may also be the case that some of the investments were inconsistent with the representations made as to the nature of investments that would be made or the likely return – but these points are not directly relevant to, let alone determinative of, the question of the truth as to whether unitholders suffered untold losses in FY2018.

169    The submissions made were at a very high level of generality, directed to the distinct notion as to whether Dr Stead had a “good track record”. When pressed for specifics as to the substantial truth of the proposition that unitholders suffered untold losses in FY2018, Fairfax and Mr Aston pointed to revaluations of units which occurred when there was a material change in the value of the underlying assets held by the relevant fund. By reference to that material, it appears that in FY2018:

(1)    In relation to Shoes of Prey, it did appear there was a significant “loss” for unitholders in the SoP Fund (in the way I have characterised that concept) during FY2018 – on 13 August 2018 (Ex 2, p 586) the holding value of the SoP Fund was revised to $0.1293 (all prices are per unit), which was down from $1.00 the previous quarter (Ex 2, p 562); this revaluation represented an approximate 87% loss to investors in that fund (to the extent relevant, by the time of publication of the First Matter, approximately $10 million of investors’ funds had been lost); although in relation to the VC2014 Fund, any unitholder loss was much more modest – as at 30 June 2017 the unit price was valued at $0.9912 (Ex 2, p 270), while by the end of FY2018, the value was $0.86 (Ex 2, p 309);

(2)    In relation to Vinomofo, unitholders do appear to have suffered some losses during FY2018, in that Blue Sky’s quarterly reports estimated the unit price of the Vinomofo Fund as at 30 June 2018 as $0.88 (Ex 2, p 776) down from $1.00 (Ex 2, p 763) at 30 June 2017 (to the extent relevant, by the time of publication of the First Matter, the value represented an estimated loss of about 13%); I have already set out the position above in relation to unitholders in the VC2014 Fund;

(3)    In relation to the VC2012 Fund, it might be fair to describe any “loss” as very marginal – as at 30 June 2017 the unit price for the fund was $0.8588 (Ex 2, p 130) while at 30 June 2018 the unit price was $0.8307 (Ex 2, p 148) (although, to the extent it matters, by the time of publication of the First Matter, the value appears to have rebounded to $1.26 comprising $0.3978 in distributions and $0.8641 in unrealised assets: Ex 2, p 154).

170    There were clearly losses in FY18 – including one very significant failure, but some losses are to be expected in venture capital funds and, taken as a whole, they are far from being accurately characterised (on the evidence adduced and relied upon) as being untold. The evidence to which I was taken falls substantially short of proving the substantial truth of the proposition that unitholders suffered untold losses in FY2018, even without having regard to the fact that I have been given no clear picture as to the performance of all BSVC funds and investments in that year, whether these or other funds made distributions before or during FY2018 (except to the extent I can glean it from the voluminous business records provided to me without any elaboration), or any material which demonstrated comparable performance during FY2018 (to the extent any comparative analysis bears upon the issue as to whether a loss can be described as an untold one, as a matter of substantial truth).

Dr Stead had solicited funds on social media to fund a trip to Mongolia

171    As I have already explained (at [94]–[98]), Dr Stead did not, as a matter of substantial fact, engage in a solicitation of funds.

Shoes of Prey was a worthless start-up with no prospects of success

172    It is worth commencing by briefly sketching the history of Shoes of Prey and the involvement of Blue Sky.

173    Shoes of Prey was initially an online vendor of “customised” shoes for ladies. As noted above, various investments were made in the business by BSVC funds. Indeed, in November 2015 Blue Sky led a US$13 million financing of Shoes of Prey: Ex 2, p 209. Apparently by this time, Shoes of Prey’s growth strategy was to seek distribution agreements with retailers in the United States and other major markets and its forecasts assumed execution of these “partnerships” to allow for “offline” sales.

174    It did not go swimmingly. By the middle of 2016, Blue Sky provided a relatively negative update to investors in the VC2014 Fund and also to investors in the SoP Fund. The last of these updates indicated that “Shoes of Prey has had a challenging quarter” and that “the Blue Sky Venture Capital team has increasingly less conviction in management's capability to deliver upon the forecast agreed at the time of the Fund’s investment”. A few months later, as a result of the unprofitability of the “offline” channels (which, it will be recalled, were important for its forecast growth), Shoes of Prey had decided to pivot back to focus on online sales.

175    By December 2017 this had again changed. Blue Sky updated investors in respect of a key strategic priority, being a focus on the so-called “Cinderella” customer, that is, customers that have a non-standard width or length shoe requirement: Ex 2, p 551.

176    But there was no handsome Prince at the end of this story.

177    In early 2018, Blue Sky led a financing round to bridge the company to completing financing or a sale: Ex 2, pp 553, 562. Dr Stead sought and obtained approval from the BSVC Investment Committee to participate in this bridging round, by lending the company up to US$750,000: Ex 2, 554. In her request for approval, Dr Stead described the participation in the bridge financing round as “defensive, to protect the valuable rights of the existing VC2014 and SOP Fund investors”.

178    Then in April 2018, Dr Stead sought approval from the Investment Committee to fund the shortfall during the earlier bridge round. Dr Stead noted that other investors comprising Khosla, Blackbird, Southern Cross Venture Partners and IFM elected not to participate in the earlier bridging round: Ex 2, pp 568–9. They went ahead but the die was cast and by August 2018 Shoes of Prey ceased trading: Ex 2, p 587A.

179    It can now be seen that Shoes of Prey was a lamentable failure and the decision to invest in, and provide continued to support to, Shoes of Prey was a mistake. But an ex post assessment is a flawed way of approaching the question as to whether it is substantially true that Shoes of Prey was a worthless start-up with no prospects of success. This necessarily involves an ex ante analysis.

180    Mr Aston appropriately conceded the prospect of hindsight bias in his evidence. In the light of that evidence, the way Fairfax and Mr Aston finally put this part of the case can be seen from an extract from final oral submissions (T790–1):

HIS HONOUR: … one of the reasons why I thought [Mr Aston] gave careful evidence was he did draw a distinction between the fact that decisions which may not be able to be criticised as rash or careless or imprudent at a particular time because of particular information can become careless and rash when someone persists in the investment at a later time when further information comes to light. And I think what he’s doing there is, well, he wasn’t following [Shoes of Prey] in 2015. He doesn’t know. He was starting to write about it then and he thought, when he looked at it, it was a ridiculous idea.

MR [DAWSON]: That’s carefully investigated and deployed. And he makes that very clear in – in 35 to 38 where my friend says:

So you disagree with the investment. But what –

He said in the previous line it was a blindingly stupid idea. And my friend says:

So you disagree with the investment. But what I’m putting to you is that you never believed that the decision by my client to invest in October 2015 arose by any carelessness on the part of my client.

His answer is:

Not carelessness, but – but it was a really stupid decision.

And my friend comes back to this idea of failure of due diligence:

But not because she failed in the due diligence she needed to undertake?

No.

And he says:

I don’t have any evidence of that so I’m not suggesting it.

So you just think it’s a stupid decision?

Yes.

And that’s the opinion to which he adhered consistently. And the concessions he made about not suggesting carelessness or misconduct were entirely consistent with holding the opinion - - -

HIS HONOUR: Yes.

MR DAWSON: - - - that was expressed in the - - -

HIS HONOUR: But I think if I read from 16 onwards, that’s a – that’s a view with the benefit of hindsight, isn’t it?

MR DAWSON: Does your Honour mean at the time the evidence was being given or the time the article was being written.

HIS HONOUR: No, well, he wasn’t following in 2015. He doesn’t know. I mean, honestly, I can think of shares which I invested in which seemed like a great idea at the time. And I stand by the decision I made, investment decision in 2006. And I realised by 2009, “Well, that was stupid.” It doesn’t mean it was stupid when I invested - - -

MR DAWSON: No.

HIS HONOUR: - - - but it was a stupid decision that I made because, with the benefit of hindsight, it was stupid.

MR DAWSON: And there’s nothing wrong with that reasoning, your Honour. That’s - - -

HIS HONOUR: Yes.

MR DAWSON: - - - normal, evaluative reasoning. And it might be affected by hindsight vice in the sense that one would say no one could hold you liable for having made the decision at the time.

181    This all makes sense but it is somewhat beside the point. I accept Mr Aston thought customised shoes sold online was a contradiction in terms and was a silly idea from the get go (and the position was made worse by an evolving business strategy that appeared to be all over the shop). That view might make intuitive sense, although I suspect that Mr Aston’s opinion as to a successful business plan for the sale of ladies’ shoes (or speculation on my part) would likely be less soundly based than major United States shoe retailers.

182    There was no direct evidence of the folly of Shoes of Prey from industry participants at the time of investment. No evidence was tendered by way of investment analysis conducted by other venture capitalists demonstrating that Shoes of Prey was perceived at the time of investment by Blue Sky (or indeed any later time of investment) to be a company of no worth. Moreover, there was no challenge to the evidence of Dr Stead, which I accept, as to the careful and structured due diligence that was undertaken: see Dr Stead’s second affidavit (at [60]–[74]). The material before the Investment Committee meeting in November 2015 prior to the initial investment, which was in evidence for all purposes, does not reflect an investment in what then was a worthless company doomed to fail: Ex 2, p 409ff. In the absence of any evidence to the contrary, it is fair to infer that this view seemed to be shared at this time by other apparently competent investors such as Greycroft, Khosla Ventures and the proposed “strategic partner”, Nordstrom.

183    When one focusses upon the time of the raising and investment by the SoP Fund and the investment by the VC2014 Fund in 2015, it has not been proved that Shoes of Prey was at that time a worthless start-up with no prospects of success. Indeed, to the extent it is relevant, I cannot even conclude on the current state of the evidence that Dr Stead’s judgment in assisting facilitating a bridging round in February 2018 (to raise money to enable a sale process to be undertaken) was a stupid one – it might now look like throwing good money after bad, but perhaps it was an attempt to pull the fat out of the fire and the “least worst” of options then available. No evidence was called from the so-called “shrewder” venture capitalists and none of their business records were tendered. No real challenge was mounted to Dr Stead in relation to the substantive merits of this decision. I do not know enough to form a definitive conclusion and, for reasons I have explained, it is beside the point.

Vinomofo was a worthless start-up with no prospects of success

184    There are again significant evidentiary difficulties in Fairfax and Mr Aston making out this aspect of the case.

185    As noted above, investment in Vinomofo was through the VC2014 Fund and a special purpose vehicle, the Vinomofo Fund. Dr Stead gave evidence that Vinomofo was an apparently profitable business and had an impressive growth trajectory when a Blue Sky fund first invested: see Dr Stead’s second affidavit (at [75]). Dr Stead was not pressed on her evidence that the Vinomofo strategy was typical of an e-commerce business where customers buy repeatedly and consistently and have a low churn. It is also evident Blue Sky undertook due diligence involving an 87 page due diligence summary before the Investment Committee approved investing in the company in about February 2016: see Dr Stead’s second affidavit (at [34]–[48], [79]–[84]); Ex 2, pp 600–86.

186    There was no evidence adduced to the contrary. Again, there was no effort to prove, by reference to contemporaneous observable data, that the business was worthless and had no prospects of success at material times. There is simply insufficient material before me to lead me to be reasonably satisfied of the substantial truth of the proposition that Vinomofo was not a viable investment when the relevant investments took place.

The Second Matter

187    As to the Second Matter, there are also a number facts stated in respect of which there cannot be serious dispute as to their accuracy or substantial accuracy: the fact that Shoes of Prey was a failed fashion start-up and investors lost $31 million invested; that Dr Stead had tweeted, referring to Ms Fox and her memoir in particular terms; that in 2015 Dr Stead had raised investors’ money to invest in Shoes of Prey via the SoP Fund, with investors charged $1.6 million in fees (including upfront fees); that Blue Sky used undrawn fund monies in a late bridge funding round; the fact that in her role at Blue Sky, Dr Stead was managing people’s money; and the fact that Dr Stead said in an interview with a start-up blog: “[t]he thing that matters, and the only thing that will matter in the end, [is] whether I did the right thing, whether we took care of our shareholders or investors, and whether we were able to return capital to them in the way we hoped … Were we good people and did we make good decisions”?

188    Other facts concerning Ms Fox and her memoir, the SAVCF and Dr Stead’s role ([10]) were also substantially true, but are irrelevant, as they were unconnected with the opinion expressed in the Second Matter (considered in its defamatory sense). Another fact implicitly stated, that Dr Stead was somehow responsible for the failure of CM Capital Investments, was not substantially true, but is accepted by both parties as being irrelevant for the same reason.

189    Taking matters slightly out of order, the other relevant material contained, or referred to, in the Second Matter is as follows.

190    In [8], it is stated as a fact that:

(1)    Dr Stead lost other people’s money (OPM) investing in many unviable enterprises including:

(a)    $11.5 million Blue Sky invested in cafeteria chain THR1VE;

(b)    an investment in social media platform HeyLets; and

(c)    $25 million invested in Vinomofo.

191    In [7], it is stated as a fact that:

(2)    out of the amount raised from investors in relation to Shoes of Prey, Blue Sky “kept for itself” $1.6 million in fees;

(3)    Blue Sky promised investors that “all annual fees paid upfront [would] be refunded” if it exited the investment before 2020;

(4)    despite this promise, investors were not given any refund of the fees; and

(5)    by the time of this bridge funding round, other venture capital firms had stopped investing in Shoes of Prey.

192    In [8], it is further asserted as a fact that:

(6)    Vinomofo is imminently likely to suffer significant financial difficulty.

193    I now turn to the substantial truth of this material.

Lost OPM Investing in Many Unviable Enterprises Material

194    As to (1) above, when it came to descend to the particulars of why it was said Dr Stead lost OPM in many unviable enterprises, Fairfax and Mr Aston focussed primarily on the three investments mentioned in the Second Matter in [8]: THR1VE, HeyLets, and the $25 million invested in Vinomofo.

195    Vinomofo can immediately be put to one side. For reasons explained above, I am not satisfied on the evidence that it was substantially true that at the time of the investment of OPM ($20 million by the Vinomofo Fund and $5 million by the VC2014 Fund), Vinomofo was unviable. Such evidence as there is, points to the contrary of this proposition. Again, if Fairfax and Mr Aston wished to prove the substantial truth of this fact on would have expected them to explain, by reference to contemporaneous material, why the unviability Vinomofo was substantially true and, in doing so, present at least some challenge to the relevant evidence of Dr Stead.

196    As to the strangely named THR1VE, it appears this was one of nine companies invested in by the VC2014 Fund following a raising of $30 million. This investment took place in December 2015 (Ex 2, p 944) and then Blue Sky set up a special purpose fund, the Blue Sky Private Equity THR1VE Growth Fund (THR1VE Fund), which raised approximately $9.9 million: Ex 2, p 944.

197    As it happened, THR1VE did not thrive.

198    By the end of FY2018, unitholders in the THR1VE Fund were being told (Ex 2, p 1013) that:

The past six months for THR1VE has been challenging, underpinned by continued difficult market conditions in THR1VE’s offline retail channels …

[D]espite pleasing progress in elements of THR1VE’s business, higher-than-expected cash burn has meant the business will likely require additional investment over the coming six months. THR1VE has decided to explore the option of bringing in a strategic investor to help accelerate THR1VE’s growth.

In December 2018, THR1VE placed its restaurant subsidiary into voluntary administration (but this was said to not affect the rest of the THR1VE business involving wholesale and home delivery ready meals): Ex 2, p 1017.

199    Dr Stead explained in her evidence in chief that the decision to enter administration “dovetailed with discussions for it to be taken over” by Sumo IP Holdings Pty Ltd (SumoSalad): see Dr Stead’s second affidavit (at [94]–[95]). It appears THR1VE retained value, but the value of units in the THR1VE Fund were written down to nil while there was uncertainty and commercial sensitivity about the value in the light of the restructure: Ex 2, p 329–30. THR1VE eventually merged with SumoSalad. The 30 June 2019 update withheld the unit price of units in the THR1VE Fund due to “ongoing sensitivities”: Ex 2, p 1019. But it is correct to characterise the update as not brimming with optimism. In particular, as Fairfax and Mr Aston point out, in the discussion in relation to unit price, it is noted that Blue Sky had provided a balance sheet loan to the THR1VE Fund to cover the shortfall of capital raised by the fund, that it was intended that this loan would be repaid prior to the realisation of the fund’s investment in THR1VE and that the loan had not been repaid: Ex 2, p 1020.

200    This is all very interesting, but does not prove the substantial truth of the relevant fact referred to, or contained in, the Second Matter. Leaving aside the fact that there was also an investment by the VC2014 Fund where OPM was put into a range of businesses and it is not established that this money has been “lost”, the real issue is whether it is substantially true that THRIVE was unviable when money was invested. Again, the evidence does not establish that proposition to the requisite standard, notwithstanding the subsequent difficulties the business may have encountered.

201    As it happens, although Dr Stead was involved in the initial THR1VE investment through the VC2014 Fund, she was not the investment director for the THR1VE Fund. But, in any event, as Dr Stead explained in her unchallenged evidence, Blue Sky undertook extensive due diligence before the Investment Committee approved the investment in THR1VE: see Dr Stead’s second affidavit (at [85]–[92]); Ex 2, pp 885–940. The evidentiary leap Fairfax and Mr Aston ask me to make (to infer the business was unviable at an earlier time by reference to subsequent events), is well illustrated by noting that the VC2014 Fund invested in THR1VE in December 2015, three years before its restaurant subsidiary went into administration: Ex 2, p 944. Although the THR1VE Fund (which Dr Stead did not manage), did raise funds from investors in 2017, a subsequent voluntary administration does not somehow establish the business was unviable at an earlier time. This is not to say that post-investment matters are irrelevant, they are relevant to the extent that they can rationally and logically bear upon unviability at an earlier time, but as the party bearing the evidentiary and persuasive onus, Fairfax and Mr Aston needed to adduce some cogent evidence to prove unviability by reference to the material available at the time of investment and challenge the evidence adduced by Dr Stead to the contrary. They have not done so.

202    The positon in relation to HeyLets is essentially the same. In final submissions, I was told that the VC2012 Fund invested about $850,000 in HeyLets in July 2014, but the investment was written off in the first half of 2017. Again, Dr Stead gave unchallenged evidence about the detailed due diligence that was performed before this investment occurred: see Dr Stead’s second affidavit (at [96]–[99]). Like all this similar unchallenged evidence of Dr Stead as to due diligence, it is not inherently incredible and I accept it. Fairfax and Mr Aston have not proved to my reasonable satisfaction that HeyLets was unviable when the investment was made. The position is a fortiori in relation to businesses in respect of which Fairfax and Mr Aston did not adduce any specific evidence or provide any analysis of viability at the time of investment.

Shoes of Prey Material

203    This aspect of the case is an example where the elision to which I referred at [81] causes real confusion in the submissions.

204    As to (2) to (5) (at [191] above), the facts all related to Shoes of Prey, being: (2) out of the amount raised from investors in relation to Shoes of Prey, Blue Sky “kept for itself” $1.6 million in fees”; (3) Blue Sky promised investors that “all annual fees paid upfront would be refunded” if it exited the investment before 2020; (4) despite this promise, investors were not given any refund of the fees; and (5) by the time of this bridge funding round, other venture capital firms had stopped investing in Shoes of Prey.

205    I consider the substantial truth of part of (4) and (5) has been proved: it is agreed that investors did not receive any refund of the fees and at the last round of the bridging finance the contemporaneous documents make plain that other venture capital firms had stopped investing. Dr Stead submitted that Greycroft remained involved and “[a]lthough other venture capital firms did not participate in that round, the reasons for their failure to do so was [sic] not because they were no longer investing in Shoes of Prey” and that Blackbird “did not have free capital” but were otherwise supportive. But the fact that other investors’ specific motivations were unproved, is irrelevant. I am dealing with substantial truth and it is clear other venture capital firms stopped investing further funds in Shoes of Prey at the relevant time. I any event, it is fairly plain that at the relevant time that without any perceived need to take a “defensive” position, the investment of further funds was an unattractive prospect.

206    As to (2), (3) and the balance of (4) (that is, the money was kept notwithstanding a promise), it is convenient to deal with this material together.

207    As explained above, in 2015, an offer was made by Blue Sky (as trustee) of units in the SoP Fund, with the capital raised to be invested in Shoes of Prey. The product disclosure statement requirements in Ch 7 of the Corporations Act 2001 (Cth) (CA) did not apply because the offer was made only to “wholesale clients” or “sophisticated investors”: see ss 761G(7) and 761GA of the CA. Accordingly, the capital raising took place pursuant to an Information Memorandum in which it was disclosed (at Ex 2, p 376) that:

[a]lso included are five years of management fees payable upfront to BSPE totalling $1,000,000 including an annual management fee of $140,000, third party fees for compliance, accounting and an annual AFSL fee … In the event Blue Sky exits the investment early, all annual fees paid upfront will be refunded.

(Emphasis added).

208    The Information Memorandum also disclosed (Ex 2, p 356) that there were “[o]ngoing annual management fees of $200,000 per annum” which included “an annual asset management fee of $140,000 per annum payable to” BSPE. Dr Stead was described as the “Investment Director” of Blue Sky Venture Capital; which, as explained above, was a non-entity division of Blue Sky.

209    There is no investment management agreement between Blue Sky (as trustee) and BSPE (as investment manager) in evidence – or at least I was not taken to one. I presume that the upfront amounts held on account of fees (after payment of the initial year) was held in trust by Blue Sky pending invoices for management fees being delivered, with those fees being charged on an annual basis. On balance, I think from the arrangements to which I was taken, I am entitled to infer that this was the case, or at least something substantially similar.

210    There is no definition of “exit” or “Blue Sky” in the document (although the “Blue Sky Group” is identified as the listed entity and its subsidiaries). As a consequence, the relevant part of the Information Memorandum extracted above is not pellucid. But contextually it is important to bear in mind that this was an information memorandum prepared on the basis of the knowledge and belief of the issuer and trustee, that is, Blue Sky, to wholesale clients or sophisticated investors. Contrary to the submissions of both parties, properly construed by reference to the commercial context, it seems to me that by the Information Memorandum, Blue Sky as issuer and trustee represented that notwithstanding any contractual arrangement it entered into in relation to the charging by its subsidiary of management fees, that in the event that Blue Sky as trustee on behalf of the SoP Fund was no longer investing in Shoes of Prey (Exit Date), then at the time of the Exit Date, the trustee, Blue Sky, would take whatever steps as were necessary to augment the assets of the SoP Fund by an amount representing the quantum of annual fees that up until that time had been held in trust but had not been earned by BSPE by the time of the Exit Date. By way of aside, contrary to the submissions of Fairfax and Mr Aston, Dr Stead did not raise funds or make promises on this topic – the issuer and trustee did.

211    But returning to the consideration as to whether (2), (3) and the balance of (4) were substantially true, it is worth detailing the following chronology of events:

(1)    the offer closed in November 2015: Ex 2, p 353;

(2)    as at early 2018, approximately two and a half years into the life of the SoP Fund, it is an agreed fact that the balance of the fees raised in advance were used by BSVC, a “division” of Blue Sky (whatever that is supposed to mean in this context) in the bridge funding round: ABF [35];

(3)    in August 2018, that is three years into the fund (leaving two years’ worth of fees in the fund yet to be earned), Shoes of Prey ceased trading (Ex 2, p 587A) and in March 2019 Shoes of Prey entered into a liquidation process in the United States and Blue Sky believed that there would be no return of capital: Ex 2, p 590.

212    Fairfax and Mr Aston point to the fact that by at least March 2019, it was apparent that the capital in the investment was lost, “and it would have been prudent for Blue Sky to write off the investment and return the unearned fees to investors, by Blue Sky replenishing the fund with the money that it had not yet earned (but had used by investing it in the bridging round)”.

213    Although not relevant to the objective question as to whether there had been a “promise”, Dr Stead appeared to be of the view on 12 March 2019 that investors would be reimbursed for the remaining portion: Ex 1, p 2991A. However, that did not occur, despite Blue Sky itself describing the company as “failed” in its update to investors dated 13 March 2019: Ex 2, p 592. By way of explanation, Dr Stead agreed that this was because there was a view within Blue Sky that there had not been an “exit” (T325.6–7), and hence a need to replenish the SoP Fund and, in this way, return the money to investors.

214    Dr Stead makes three points.

215    First, it is said that what was contained in the Information Memorandum was “a representation not a promise” and subject to legal obligations. Any distinction between a representation and a promise in this context is wholly devoid of merit and the promise was subject only to the qualifications identified in the Information Memorandum.

216    Secondly, it is said that the pleaded facts are based on a false premise that the investment was exited before 2020 and “the available evidence is that Shoes of Prey remains in administration and the investment has not been exited”, and thus, as Dr Stead put it: “it’s premature to say that investors won’t get any fees back”: at T306.11–13. It is fair to say that on such of the financial material as I was taken to, any suggestion there is any realistic prospect of a return to investors is a surprising one for Dr Stead to make.

217    Thirdly, and more substantively, on the evidence available, at least as of 30 June 2019, and the time of the Second Matter, it is said that “Blue Sky continued to manage the Shoes of Prey investment”, a proposition which is said to be established by the Investor Update issued by Dr Stead on 13 March 2019 (Ex 2, p 591). The term “Blue Sky” in this self-serving document is again used indiscriminately, but does appear to encompass work apparently performed by the investment manager (BSPE) and not just the trustee.

218    I do not consider Blue Sky failed to discharge a legal obligation when the instrument is properly construed. Further, its subsidiary provided consideration for some of the fees and no Blue Sky entity literally keep for itself $1.6 million in fees. Despite this, I consider it is true in substance that Blue Sky promised investors that all annual fees paid upfront would be refunded if it exited the investment before 2020; as a matter of substance the investment was exited, and despite this promise, investors were not given any refund of the fees.

Vinomofo Specific Material

219    As to (6) (at [192] above), no real effort was made to prove the substantial truth of the proposition that Vinomofo was, at the time of the Second Matter, imminently likely to suffer significant financial difficulty. The actual phrase used in the article describes Vinomofo as a company “whose own collision with reality is surely imminent” (in [8]). Although Dr Stead suggested that this amounted to the assertion that “Vinomofo was about to go insolvent at the time of the second matter”, this puts it too highly; a company can suffer a collision with reality and yet be solvent. Fairfax and Mr Aston suggested that the relevant fact was stated as “Vinomofo, which was performing poorly at the time of publication of the second matter”. But this is to pitch the factual assertion at too low a level. It seems to me the assertion was one of imminent, likely significant financial difficulty. This was an example where Fairfax and Mr Aston, for understandable reasons, did not rely on subsequent events to justify the financial position of an entity at an earlier time. Although in the period between the publication of the First Matter and the Second Matter Blue Sky’s estimated unit price for the Vinomofo Fund was reduced to $0.8595 (Ex 2, p 781), this does not get near proving to the requisite standard that it was substantially true that Vinomofo was, at the time of the Second Matter, imminently likely to suffer significant financial difficulty.

D.5    Opinion reasonably based on Facts Proved to be true – s 31(6)

220    As is evident from the above reasoning, critical aspects of the facts, which are contained or referred to in the publications, have not been shown to be true in substance and the opinions expressed by Mr Aston could not, as a consequence, be reasonably based on such of the material that can be shown to be substantially true and amount to proper material (as identified above at [158], [187], [188], [205] and [218]). It follows that s 31(6) is of no benefit to Fairfax and Mr Aston.

221    As a consequence, the defence fails.

D.6    Defeasance

222    It follows from the above that it is unnecessary to deal with the question as to whether Dr Stead can establish that the opinions expressed were not honestly held at the time the defamatory matters were published: s 31(4)(a). No distinct case was advanced that Fairfax did not believe that the opinions were honestly held by Mr Aston: s 31(4)(b). The case was conducted on the express basis that the knowledge of Mr Aston is the knowledge of Fairfax.

223    I have already made findings above as to Mr Aston’s belief concerning Dr Stead appearing cretinous (but not being, in an unqualified way, a cretin) and his want of genuine belief that Dr Stead was actually seeking to raise funds to go to Mongolia. For completeness, it is appropriate to make some further findings on the factual issues specifically identified by Dr Stead as being relevant to defeasance, should my treatment of the proper material above be erroneous.

Elaine Stead rashly destroyed capital causing enormous losses to unitholders

224    Mr Aston: (a) was aware that due diligence was undertaken by Blue Sky and that an Investment Committee made investment decisions with a requirement of unanimity before an investment decision was made (T593.8–14); (b) did not have any criticism of the process of investment (T596.12–15); and (c) “never believed” that any investment proceeded with at Blue Sky was because of carelessness or misconduct on the part of Dr Stead (T610.15–30). Despite this evidence, I have little doubt that Mr Aston did hold the opinion, expressed repeatedly in his evidence, that Dr Stead was a very bad venture capitalist who did make rash, reckless and stupid decisions which occasioned the losses to investors referred to in the First Matter.

Elaine Stead is a venture capitalist, who made stupid investments in two worthless companies, Shoes of Prey and Vinomofo, which had no prospects of success

225    More particularly, Mr Aston did not believe Shoes of Prey and Vinomofo were worthless at the time Blue Sky invested, but firmly believed both investments were in companies which had business models he genuinely considered were either wholly flawed (in the case of Shoes of Prey) or sufficiently flawed to prevent revenue of the scale necessary to justify the investment (in the case of Vinomofo). Further, the continued support given to Shoes of Prey by the later bridging round was, in Mr Aston’s genuine opinion, wholly misconceived.