Papua New Guinea Law Reports

MRS PAUL &#16 ; He, aid, ‘That’s right your credit has cut o217;.
OD What did ydid you saou say to y to him?

MRS PAUL ¦&#1 s; I said that I didn’t ask for this to be done. I hadn’t asked for credit to be cut off.

WOOD Did you tell him what you had asked for?

MRS PAUL ¦t I said that I had just asked for the accounts to be closed as we just didn’t want to deal with them anger.

WOOD What did Mr. Holmes say?

MRS PAUL ; He said, &id, ‘Well, your credit has been cut off: It’s all the same to me.

WOOD Did you then say anything else to him?

MRS PAUL &#16 ; He, aid, ‘I have told people your credit has stopp217;.I saihim, ‘W216;Well, ell, that&that’#8217;s all I wanted to know. Goodbye’.”

This version of the conversation does not appear to be controverted by Mr. Holmes.

Apparently before seeing Mr. Holmes on the morning of 22nd April, Mrs. Paul in the company of Mrs. Brown, herself made a purchase of stationery in Steamships Rabaul store. Credit was extended in respect of this sale. It seems a fair inference that though Mr. Holmes had told Mr. Zinner of the hardware department of this store that Mrs. Paul had closed the plaintiff companies’ accounts, no complete action had been taken by the company at that stage to cut off the plaintiff companies’ credit. At a ‘phone conversation later again, Mr. Holmes stated, “Heads of departments have been advised but none of the actual staff members and I am waiting to see events and then I will issue instructions”. This was said in reply to something said by Mrs. Paul after she got back to her office from seeing Mr. Holmes.

I am satisfied that it is not a fair description of events, to state that as at the time of this last telephone conversation, Steamships had cut off the plaintiff companies’ credit. I am satisfied that the reality of the situation was that when threatened with a restriction of credit even more stringent than that set out in the letter of 12th March, the plaintiff companies closed their accounts and asked for them to be made up so that they could be paid. In that situation, on 22nd April, and apparently before the final accounts were submitted as requested by Mrs. Paul, Mr. Holmes had the conversation with Mr. Darcey of New Guinea Company Ltd. I accept that this was in the form averred by Mr. Darcey, namely, Mr. Holmes said, “He had seen Mrs. Paul that day and she was going to close their account at Steamships, but in any case he had cut off their credit and as far as further purchases were concerned, would be [sic] on a cash basis”. To my mind that is not a true version of what happened. It misrepresents the actuality.

I am of the opinion that the conversation had with Mrs. Paul and Mrs. Brown by Mr. Holmes, was had on an occasion of qualified privilege. It appears to me that Mr. Holmes’s remarks as given by Mrs. Paul were probably made in an abrupt, possibly ill-tempered way, but I am not satisfied that they were made with such absence of good faith as to destroy privilege. Credit managers are perhaps accustomed to “bounce” clients sometimes, in the interests of their employer companies. Perhaps their ability in that regard is one of the reasons for their selection to such a position. I do not consider Mr. Holmes’s action on this occasion was so unreasonable as to show that he was acting from improper motives (in the defamation sense); nor am I satisfied that the words spoken in those circumstances sound in damages. I proceed now to a consideration of the conversation had between Mr. Holmes and Mr. Darcey.

This was a conversation between the credit managers of two of the principal suppliers in Rabaul. Mr. Holmes stated that he had had for some time an arrangement with Mr. Darcey, that they would mutually inform one another of any credit restrictions they imposed on clients in the Rabaul district. The conversation was said to be on a privileged occasion, in that a communication was being made in good faith for the protection of the interests of the person making the publication or of some other person Defamation Ordinance (s. 16(1)(e)). Alternatively, it was said that it was about a matter in which Darcey had an interest in knowing the truth, Holmes having reasonable grounds for believing he had such an interest so as to make Holmes’s conduct reasonable. I would have some doubt as to the extent to which credit managers are entitled to avail themselves of such a privilege, when the matters which they are retailing may be actually related to their own companies’ need to restrict credit because of their situation of liquidity or otherwise, rather than to the commercial footing of the people whose credit they are restricting. (I may say no such possibility is suggested here.) But in any event, counsel for the plaintiffs agrees that a necessary interest has been shown, and (as I understand it) that it is not necessary to show mutuality of interest (see Fleming, The Law of Torts, 3rd ed., p. 545; Clines v. Australian Consolidated Press Ltd.[clxviii]2); that the occasion could have been a privileged one. He takes his stand on the existence of malice, or absence of good faith, which he says destroyed the privilege that would otherwise have shielded the defendants. The defendants say the statement was not capable of bearing a defamatory meaning as alleged. In addition the defendants rely on the privileged occasion itself as raising a presumption that they were acting with proper motives (Ronald v. Harper[clxix]3); and say the evidence indicates concern only for the defendant company’s welfare—that no vindictiveness in Holmes or Corbett against the plaintiffs is shown. In reporting as he did, Holmes believed, it is said, that an account cannot be “closed” until it is paid—that is, he had no bad faith. He was not stating something he believed to be untrue.

I am satisfied that the words used by Mr. Holmes are capable of bearing the connotation or imputation that the plaintiff companies were bad payers or were in pecuniary embarrassment, being companies to whom no credit should be given; and I am satisfied that the reputation of the plaintiffs was likely to be injured by them and they were likely to be injured in their trade by them. I find that the matter alleged was defamatory.

As to the question of malice (or more correctly, absence of good faith), the authorities suggest that it is not sufficient that the evidence be equally consistant with malice or no malice (see the judgment of Jordan C.J. in Mowlds v. Ferguson[clxx]4). Absence of genuine belief in the truth of the statement however, puts the publisher beyond the pale of privilege, because, save in exceptional circumstances, one who knowingly asserts a falsehood must be using a privileged occasion for a dishonest and improper purpose (Fleming, 3rd ed., p. 50). A Howe v. Lees[clxxi]5 situation of ignorance of the falsity is to be distinguished.

I have reached the conclusion that whe Holmes mads made the defamatory communication to Mr. Darcey he was not acting in good faith. He was not using the occasion for the protection of the interest of either his or Mr. Darcey’s company; but in the exercise of some animus against the companies. This conversation occurred shortly after his company had cut off the credit to each of two building companies which shortly thereafter suffered the attention of creditors’ meetings and consequently financial troubles. When asked did he realise the possible consequences of his action (in informing Mr. Darcey that the plaintiff companies’ credit had been cut off), he replied “No”. I am unable to accept the truth of his reply. He has denied entertaining any animus against the plaintiffs and says he believed he was correctly representing the facts. An account cannot be closed, he said, until it is paid. In my opinion, the actions of Mrs. Paul in telephoning him, delivering the letter, and asking for a final account to be made up is capable of only one interpretation as a matter of English, namely, that she (that is, the companies) had “closed” the accounts. I accept Mr. Darcey’s version of the conversation with Mr. Holmes and I have come to the conclusion that Mr. Holmes misrepresented what he must have known to be the facts of the situation, namely, that the plaintiff companies had indeed closed their accounts. By saying that the companies “were going to close their account, but in any case he had cut off their credit”, he conveyed the impression that the dissatisfaction initiating a cutting off of credit was his, and that credit had in fact been cut off. In fact, the application of the upper limit sanction directed by Mr. Corbett’s letter of 12th March, 1969, had not been called for; as one of the plaintiff companies was still some $4,000 below the figure indicated. Mr. Holmes suppressed the information that Mrs. Paul had closed the companies’ Steamships account by verbal instructions on 21st April and by a letter of that date in confirmation, delivered by hand on 22nd April. On the day Mr. Holmes had his conversation with Mr. Darcey, after the second visit to him by Mrs. Paul, he had not advised staff members that credit had been cut off—to use his expression to Mrs. Paul, “I am waiting to see events and then I Will issue instructions”. He did not reveal to Mr. Darcey that Mrs. Paul had asked for the companies’ accounts to be made up, but that his company had said it could not comply for a week. Nor, apparently, that Mrs. Paul had “appealed to Caesar”—complaining to Port Moresby about his attitude adopted in the absence of Mr. Corbett, the manager. Mr. Holmes volunteered the news of the “cutting off of credit” when another matter was being disclosed. No doubt, credit managers carry heavy responsibility—they are accustomed to adopting hard lines in the interests of their employers, but they have a duty to be meticulously fair in regard to other people’s reputations. Clearly, they should be most scrupulous when using the privilege of such an occasion as was said to have been created here—when the reputation of others, their business interests, can be at stake. I have had the advantage of observing the personalities both of Mrs. Paul and of Mr. Holmes as exhibited in the giving of evidence; and I can understand that Mrs. Paul’s excitable and abrupt personality, and manner of speaking, might well irritate and arouse the animus of a man of Mr. Holmes’s apparent temperament; more particularly when she seeks to “carry the fire”, so to speak, “into his camp”, by appealing to Port Moresby, when he, as he thought, had been pursuing his company’s interests in properly demanding payment from a customer to whom considerable credit had been given. After observing the demeanour of Mr. Holmes in the box and scrutinising the evidence, I think the inference should be drawn and I so do, that unfortunately he allowed himself to be carried away, so as to use this occasion in a way not allowed by the law—that he made this communication to Mr. Darcey from a motive improper (in the law of defamation), one of spite towards the plaintiff companies and their secretary, Mrs. Paul; and with reckless disregard for the possible consequences to the business reputations of the plaintiff companies. I would therefore hold that the privilege provided for by both sub-ss. (c) and (e) of s. 16(1) of the Defamation Ordinance was lost; because the communication complained of was not made in good faith.

I propose to deal later in more detail with the question of the conduct of counsel for the defendants. I understand the statement of the law by Sir Frederick Jordan C.J. in Guise v. Kouvelis[clxxii]6 to accurastly state the law, if I may say so with respect, when His Honour said as follow8220;. . . the defendant munt must take the responsibility for his counsel’s conduct of the case. I think that counsel’s behaviour is capable of being regarded as reinforcing the inference that the defendant was animated by ill-will towards the plaintiff at the time of the publication of the slander—an ill-will which continued and received a new manifestation at the trial.” Contrast Brown v. Citizens’ Life Assurance Co.[clxxiii]7 whhe slandelanderer was the servant only of the defendant&#his state of mind could not be said to be e be exemplified by the later conduct of the defendant his employer through the employer’s counsel. I consider that I would have been entitled here to take into account the conduct of counsel, to evidence malice of one of the defendants, Mr. Holmes (and therefore of the other), at the time of publication (Triggell v. Pheeney[clxxiv]8); but I have preferred to come to my decision aliter. I consider the conduct of counsel to clearly have been “not a legitimate litigating of the issues open to him” within Walsh J.’s exception in Uren v. Australian Consolidated Press Ltd.[clxxv]9.

I propose therefore to find a verdict for the plaintiffs against the defendants.

The question of damages in defamation cases is one of great difficulty. I have found myself considerably exercised as to this aspect of my decision. No head of special damage has been pleaded or shown. The facts indicate that the plaintiff companies were able to retain credit facilities with other than Steamships, and apparently they have continued in business, presumably making profits.

The defendants have maintained throughout this trial their right to make the communication to Mr. Darcey in the form in which it was made. No concessions were made as to its unfairness. No apology was tendered. The result that the plaintiffs were able to continue profitable trading was indeed a fortunate one for the defendants, as they might otherwise have attracted an award of heavy damages against themselves. Should the considerations have stopped there I should have thought an award of $500.00 a suitable verdict in the case.

However, there is another aspect of the defendants’ behaviour through their counsel, as mentioned above, that called for my attention. Cross examination of the plaintiffs’ witnesses was conducted by the defendants’ senior counsel only. It was directed to establishing in open court, with all the extensive publicity that could ensue, that the financial position of the plaintiff companies was a very risky one. Senior counsel sought to maintain by cross examining as to the position of trade debts qua trade credits, and that $23,000 had been written off in one year for bad debts (this was explained by Mrs. Paul as an accountancy procedure—that in fact $15,000 of this amount was recovered from the debtors who were not bad debtors, but “slow payers”); that the plaintiff companies were not in a liquid position, that they were “hanging on by the skin of their teeth”, that they were hoping “to get money in”—hoping they would have money to meet their bills. He sought to show that they were “paying when they could”, that since April 1969 they had “not paid one cent of $10,000.00” owed. Through the witness Darcey, counsel elicited that Holmes was aware that companies in New Britain were “trading in various shady financial circumstances”, that Holmes was in 1969 “concerned about Paul & Sproul and Paul & Thompson”, that Holmes was “by April 1969 getting worried about Paul & Sproul and Paul & Thompson”. He drew from the defendant Holmes that the difficulties of other construction companies that got into financial trouble brought him “concern in relation to accounts” (he) had with Paul & Sproul and Paul & Thompson. I am satisfied that the defendants through their counsel used these procedures to maintain a challenge to the financial credit of the plaintiff companies such as would necessarily come before the eyes of the community. By that cross examination conducted by their senior counsel, the defendants sought to ridicule the balance sheet of the company by avoiding reference to the important questions of work in hand and unpaid for, and amounts owing from associated companies. The defendants have more than remained indifferent to the consequences of their original conduct. By their action of this whole matter they have potentially aggravated the plaintiff companies’ complaint. Senior counsel allowed himself to say of the plaintiffs in his final address: “A more appalling state of financial instability it would be difficult to find. They were operating on other people’s credit . . . there was no evidence of the real value of the plaintiff companies’ contracts. They are” (my italic) “on a very shaky ground indeed. No financier ought to be prepared to lend (them) a penny.” A more damaging attack on a construction company’s reputation and financial credit than that would be hard to conceive. It is a well established principle that a jury would be entitled on the question of damages, as well as on the aspect touched upon earlier in my judgment, to consider the conduct of the defendants after the action and in court at the trial of the action, including the conduct of their counsel who cannot shelter his clients by taking responsibility for the conduct of the case (Gatley on Libel and Slander, 6th ed., para. 1260). Thus in Lamb v. West[clxxvi]10 all the j iges in the Full Court were agreed that the acts of counsel during the course ot defamation trial were thee the acts of the client; and see the judgment of Halsbury L.C. in Watt v. Watt[clxxvii]11. Madden C.J. was of a similar opinion in Swinburne v. David Syme & Co.[clxxviii]12. The reasons of the Full Court therein were approved by the High Court in David Syme & Co. v. Swinburne[clxxix]13. I consider the conduct of senior counsel in the trial to have caused an aggravation of the mischief calling for the award of an amount by way of exemplary damages. I propose to include therefore an amount in my verdict to cover this aspect. I should mention that junior counsel for the defendants who took over half way through the address on behalf of the defendants in no way continued his leader’s attack, but, when asked to address on this aspect at my invitation (as he was obliged to address before the plaintiffs’ counsel), maintained that the conduct of the company could be taken into account, but not that of its counsel, and that in any event the conduct of counsel was not such as should put at risk the question of aggravation of damages. I find myself unable to agree with his submissions in this regard. I find the verdict for the plaintiffs against the defendants in this consolidated action in the sum of $2,000 in all.

I order the defendants to pay the plaintiffs costs of the actions.

Verdict for the plaintiffs.

Solicitor for the plaintiffs: G. R. Rissen.
Solicitor for the defendants: J. K. Smith.

[clxvii]Section 16 (1) (e) provides that it is a lawful excuse for the publication of defamatory matter “if the publication is made in good faith for the protection of the interests of the person making the publication, or of some other person”.

[clxviii](1966) 84 W.N. (Pt. 2) (N.S.W.) 86.
[clxix][1910] HCA 43; (1910) 11 CLR. 63, at p. 74.
[clxx][1939] NSWStRp 43; (1940) 40 SR. (N.S.W.) 311, at p. 322 et seq. and p. 332.
[clxxi][1910] HCA 67; (1910) 11 CLR. 361.
[clxxii][1946] NSWStRp 42; (1946) 46 SR. (N.S.W.) 419, at p. 423.
[clxxiii][1902] NSWStRp 45; (1902) 2 SR. (N.S.W.) 202.
[clxxiv][1951] HCA 23; (1951) 82 CLR. 497.
[clxxv](1965) 83 WN. (Pt. 2) (N.S.W.) 229, at p. 258.
[clxxvi] (1894) 15 NSWLR. 120.
[clxxvii][1905] UKLawRpAC 16; [1905] A.C. 115, at p. 118.
[clxxviii][1909] VLR. 550, at p. 578.
[clxxix](1909) 10 CLR. 43 by Sir Samuel Griffiths at p. 59, O'Connor J. a p. 62 and Isaacs J. at p. 67.