Palmer-Bruyn & Parker Pty Ltd v Parsons S8/2001 [2001] HCATrans 259 (21 June 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S8 of 2001

B e t w e e n -

PALMER-BRUYN & PARKER PTY LTD

Appellant

and

KEITH PARSONS

Respondent

GLEESON CJ

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 21 JUNE 2001, AT 10.20 AM

Copyright in the High Court of Australia

MR B.R. McCLINTOCK, SC: May it please the Court, I appear with my learned friend, MR C.A. EVATT, for the appellant. (instructed by Hunt & Hunt)

MR T.K. TOBIN, QC: If your Honours please, I appear with MR T. MOLOMBY and MS M.A. KUMAR on behalf of the respondent. (instructed by McDonald Johnson Solicitors)

GLEESON CJ: Yes, Mr McClintock.

MR McCLINTOCK: Your Honours, the issues which arise on this appeal are these: the first is, what is the test of causation in the tort of injurious falsehood? Does it differ, in any respect, from the test of causation for every other tort, or at least the tort of negligence, as exemplified, for example, by cases in this Court, such as March v Stramare and Bennett and Medlin?

In this case, your Honours, the trial judge and the Court of Appeal posed, if I say so, with respect, the wrong question on the issue of causation and, as a result, came to the wrong conclusion. What they did, in fact, was to apply a test from a quite different area of law involving a quite distinct issue, which had no relevance at all, in my submission, to the question of causation in fact of loss in injurious falsehood. The test they applied was a test for liability for republication by another person in the law of defamation.

The Court of Appeal never asked, again with respect, the correct question, and one can search through the appeal book in vain for that question. The correct question was this: was the respondent's false and malicious letter, which I will take your Honours, a cause of the loss to my client of the contract with McDonald's?

That would have been the test in any other area of tort and should have been the test here. When one sees the facts of this case, there can have been only one answer to that question, "Was the letter a cause of the loss of the contract?", and the answer to that question could only have been, in my submission, "Yes."

The second broad issue on the appeal, which is also a causation issue, can be stated as follows: Assuming that the letter was a cause of the loss to my client of his contract with McDonald's, is there any reason, nevertheless, why the respondent should not be found responsible for that loss. The possibilities are these, that even though the letter was a "but for" cause, so to speak, of the loss, in other words, a necessary condition of the loss, is there any commonsense reason - I am thinking of the words used by the Court in March v Stramare - here why the letter did not cause the loss of the contract? None, in my submission, comes to mind. The second sub-issue on this point is, should the respondent's responsibility for loss of the contract be restricted or removed, for example, because the loss was not reasonably foreseeable? In my submission, the loss was plainly reasonably foreseeable.

The trial judge's findings that the letter was intended to cause my client harm and was calculated to cause my client harm are really findings about reasonable foreseeability. In any event, there may arise an issue as to whether one needs reasonable foreseeability in an intentional tort such as that of injurious falsehood. That is an issue that is open, at least in relation to deceit on the authorities in this Court.

KIRBY J: I hope you will clarify that because I have not got clear in my own mind what that question is, whether there is a second question or whether it is part of the first question. You will remember that you or Mr Tobin have quoted, I think from an American tort book, the test which is proposed as a three-fold test: intention, privilege to re-communicate and reasonable and probable foreseeable consequence. Now, I am not quite clear how they fit together.

MR McCLINTOCK: Your Honour, the first two issues, which are both causation issues, obviously have a very substantial degree of overlap, as they must, on the authorities. The authorities seem to suggest that the test of causation is the "but for" test but applied in a practical commonsense way. The first issue goes to, so to speak, what is the first step in a test of causation in this area, and the second issue goes to the second matter which is: is there any practical commonsense reason why the defendant should escape liability?

KIRBY J: But if commonsense is part of the test, then one would think that that comes up under the first, but it may just be a matter of convenience for you to - - -

MR McCLINTOCK: It really was, your Honour.

HAYNE J: That method of analysis may obscure, in truth, what is happening. First, is it not important to identify the matter of historical fact, that is, what as a matter of history the connection, if any, between the letter and the asserted loss was, and then to consider separately whether there is some limitation to be imposed, or filter to be applied, in determining responsibility for certain kinds of historical connection between events, but step one is to identify, is it not, the historical connection between the events, and that requires attention to what the judge found?

MR McCLINTOCK: Your Honour, with respect, I accept that. I hope that what I said was not - with respect, I would say that what I was saying was really another way of saying what your Honour has put to me.

GLEESON CJ: There is a small technical problem, Mr McClintock. The statement of claim in the appeal book in paragraph 2 on page 2 identifies as the tort the false and malicious publication of matter annexed as the schedule. I just cannot find the schedule at the moment.

MR McCLINTOCK: Your Honour, I see it has not been reproduced in the appeal book, for which I apologise to your Honours, but there will not be any dispute that the schedule - that the document in question, was exhibit A, and it appears at appeal book page - I think it is 245, your Honour - I am sorry, it is quoted at 245. The actual - - -

HAYNE J: Was it 166?

MR McCLINTOCK: The actual letter itself, your Honours, appears at, for example, 165.

HAYNE J: Now, 165 does not have the "moving finger writes" annotation. Which is it? Is it 165 or 166 which is the annexure to the statement of claim?

MR McCLINTOCK: Your Honour, I will have to ask Mr Evatt. 165 is the annexure to the statement of claim. Your Honour will recall from the findings made by the trial judge that what occurred - I am taking this slightly out of order - was that the defendant obtained a letter from my client, cut the letterhead off, cut the signature line off, pasted them to a piece of paper and then wrote the words that appear on the letter and those words were these - I take it from 165, your Honour:

To The Newcastle City ALP Caucus

Dad said to tell you his final offer 4 Big Macs and 2 choc sundaes per week for the rest of your life AND one free Golden Arches birthday party per year with Mum available to play the accordion.

GLEESON CJ: Now, just pausing there, the tort consisted of the publication to the Newcastle City ALP Caucus.

MR McCLINTOCK: Your Honour, it has to be taken in steps. There were two publications. The first publication was by the respondent to Councillor Manning. This was the letter that was published to Councillor Manning. Councillor Manning received this letter by fax about 1.38 pm on 24 March 1996.

GLEESON CJ: I am only trying to identify the tort alleged in paragraph 2 of the statement of claim.

MR McCLINTOCK: Certainly, your Honour, but it goes further than merely the first publication to Councillor Manning because Councillor Manning republished the letter with an additional matter, that is, the "moving finger" annotation to - - -

GLEESON CJ: Now, is that additional matter part of the matter referred to in paragraph 2 of the statement of claim?

MR McCLINTOCK: Your Honour, literally, no. If your Honour goes to the "PARTICULARS OF PUBLICATION" below paragraph 3 on page 2 of the statement of claim your Honour will see:

The Defendant published the matter by facsimile transmission to the members of the Newcastle City Council ALP Caucus, including Councillor John Manning -

That allegation that it was all of them was not made out. It was only Councillor Manning. Then it says:

the said Councillor John Manning republished the matter by facsimile transmission to persons whose identities have not yet been ascertained, but who include Mary Gayner, Phillip Jackson and Greg Heys, members of the Newcastle City Council, and William Grant, General Manager of the Newcastle City Council; and the Defendant is liable for these republications which were the natural or probable consequence of his publication to Councillor Manning.

GLEESON CJ: It is not easy to understand how the concept of republication got into the argument here, is it?

MR McCLINTOCK: I think your Honour is saying it is not difficult to understand.

GLEESON CJ: No, not difficult to understand why people started talking about republication.

MR McCLINTOCK: It is perfectly easy to understand it, your Honour. The case that was made by Mr Evatt in opening - and I will need to take your Honours to it, and it is made in the statement of claim - is that there was one publication of the letter to Councillor Manning. Councillor Manning republished it to the ALP Caucus, the Greens Caucus, the Council staff and the plaintiff itself - I think that was the extent of it - and that the defendant was liable for those publications because they were the natural and probable consequence of the original publication. His Honour found - and there has been no challenge to it - that those publications, the subsequent ones, were the natural and probable consequence of the original publication and therefore the defendant was liable for them.

As your Honour the Chief Justice says to me, with respect, absolutely correctly, it is not hard to understand how liability for republication got in; it was relevant on this issue. But when one looks at the statement of claim on page 3, one does not see any assertion there of liability on the part of the defendant for the publication in the Newcastle Herald. What one sees is particulars of damage next to line 35 - paragraph 6 is relevant:

In consequence of the Defendant's said publications and republications, the Plaintiff has suffered loss and damage.

The particular is:

(a) As a direct consequence of the said publications, the Plaintiff lost its consultancy to McDonalds Australia Limited in respect of its proposed development at Wallsend -

I have stepped away from what I was saying to your Honours by way of opening but, as I am here, I will - - -

KIRBY J: You have to come to your third issue, have you not?

MR McCLINTOCK: I have not come to the third issue, your Honour, but, as we are here, unless your Honours wish me to go back to the third issue - I will. I will come back to the point - - -

KIRBY J: The third issue is proof of actual loss, is it not?

MR McCLINTOCK: Yes, your Honour. The learned trial judge found that my client had suffered actual loss of $38,000 by losing the contract at McDonald's. The appellant, my client, led evidence, which the trial judge accepted, from accountants, two accountants' reports. The evidence in question was admitted without objection. As I said, his Honour found it was reasonable actual compensation for the loss of a significant contract to my client. That finding of his Honour appears at appeal book 232.

The Court of Appeal reversed that finding, and the sub-issues that arise are these. Was the Court of Appeal correct? We say, no, they were not, and the trial judge was right. But the second issue is this: even if the $38,000 was not the actual loss, it was perfectly clear and there was never any dispute about this, because I questioned the causation, that my client had lost a valuable contract under which it could expect to receive fees. It falls fairly and squarely, then, within what Lord Bowen said in Ratcliffe v Evans, where he said that a general loss of business, even if there is fuzziness around the edges as to the precise amount, is sufficient special damage for the purpose of the tort of injurious falsehood.

KIRBY J: I see that different words are used, "special damage, actual damage." What is the legal criterion?

MR McCLINTOCK: Your Honour, the legal criterion is "some financial loss", and I will need to take your Honours to what Lord Bowen said in Ratcliffe v Evans. Special damage is, as is notorious, a term that is used very differently in different contexts. But in the context of injurious falsehood - - -

KIRBY J: It would normally mean a quantified or quantifiable sum in money terms.

MR McCLINTOCK: Normally it does, but "injurious falsehood", it means some financial loss, and it can be proved by proving a general downturn in business. That is the point of Ratcliffe v Evans.

Customarily, in cases like this, the way the evidence is given is the plaintiff answering the question, "The article was published on such and such a date, what occurred then?" "My business dropped", or, "two-thirds of the customers stopped coming to my shop." "Are you aware of any other reason why that would occur, other than the article?" "No." That is very often how it is proved.

Your Honours, the fourth and final broad issue is, what happens to the proceedings if your Honours are minded to accept the submissions that I have put.

KIRBY J: You have raised a question your argument about punitive damages, but you abandoned that in the Court of Appeal. Why would we allow you to argue that again here?

MR McCLINTOCK: Your Honour, I accept the force of what your Honour has said. The only thing I would say is that while it was abandoned in the Court of Appeal, it was a matter that - well, it was determined against us by the trial judge. There are - - -

KIRBY J: But if you abandoned it in the Court of Appeal, we are sitting on an appeal and the Court of Appeal has not determined the matter, why would we enlarge the matter for the first time here on an appellate level for us to deal with the issue?

MR McCLINTOCK: If your Honours were against me - and I could understand readily why your Honours would be, given what happened - I would not wish to take the matter any further.

KIRBY J: I just speak for myself, but I would not be inclined to give you a second wind on that.

MR McCLINTOCK: Your Honours, the problem that arises in the area - and I appreciate that there may be other difficulties, this not having been considered below - is this, that on the authorities in Australia, it is an open question as to what the totality of the damage in this tort is. The open question is this: is the element of special damage in injurious falsehood the limit of the damages, so that is all you get, or - - -

KIRBY J: It is a complicated question in the sense that, as Mr Tobin says in his written submissions, your client is a company and a question would arise as to whether there is a differential principle relating to companies or human individuals, and that is a matter on which we ought ordinarily to have the benefit of the Court of Appeal decision.

MR McCLINTOCK: Your Honour, I would not dissent from what your Honour has put to me at all. It is a difficult question and, as I said, it is an open issue in Australia. There has been English Court of Appeal authority on the point involving whether you are entitled to recover hurt to feelings in the tort of injurious falsehood, not something that my client would be entitled to, it being a corporation, of course. But, your Honours, having said that and if your Honours - - -

GLEESON CJ: No, the Court is of the view that you should not be able to argue that on this appeal.

MR McCLINTOCK: As your Honour pleases. Your Honours, I will turn then to the first issue that I identified, causation, which really, your Honours, takes me back to the point that I had reached in the appeal book, the statement of claim. As I was putting to your Honours, the way the case was put was publication to Councillor Manning and then republication by Councillor Manning for which the defendant was liable. As I said, there was no assertion that the respondent was liable for the publication in the Newcastle Herald which, in fact, your Honours will see was not even mentioned in the statement of claim.

KIRBY J: We cannot really ignore the terms of the letter, can we? I mean, the reference to Mum playing the accordion makes it so manifestly a joke that the question is whether that does not sever the - you need a lot of steps to come together to render the defendant liable.

CALLINAN J: Ridicule can be an extremely potent weapon and a very, very dangerous one, in my opinion.

KIRBY J: I have jumped ahead but I think we have to get into the facts.

MR McCLINTOCK: I am going to take your Honour to the facts. There are two things I want to say in response to what your Honour Justice Kirby has just put to me. The first is that on the findings of the trial judge this was not a joke and there was no attack on that in the Court of Appeal.

CALLINAN J: Mr McClintock, before you go on, why do you have to be so defensive about something that was written derisively anyway.

MR McCLINTOCK: Your Honour, I am not - - -

CALLINAN J: I mean, the media take the view, for example, in defamation, that if you ridicule somebody it is not defamatory, but the definition of defamation is hatred, ridicule or contempt.

MR McCLINTOCK: Absolutely, your Honour. I am not frightened of taking this on as a joke, and that was going to be my second answer. The most devastating and the most vicious and the most effective political satire is the funniest. One can think of political figures in this country whose careers have been ruined by satire and by jokes.

CALLINAN J: Well, Swiftian writing is the best example.

MR McCLINTOCK: I will not name any names but it does not take much to think of some.

KIRBY J: I cannot think of any at the moment.

MR McCLINTOCK: The purpose of the political satire in those circumstances is to destroy the career of the man in question. That is the purpose of it. The funnier it is the more effective it is. People laugh at all satire and the whole purpose of them laughing is to damage them because if someone is being laughed at they are not being taken seriously and if they are not being taken seriously they have been neutered and rendered ineffective. I accept with enthusiasm what your Honour Justice Callinan has put to me but, in any event, this was not a joke on the findings of the trial judge and it was not treated as a joke by Councillor Manning. The way this letter works is to ridicule, belittle, berate and assert that my client is incompetent - either incompetent or vicious - as a lobbyist on behalf of McDonald's.

HAYNE J: How?

MR McCLINTOCK: If your Honour looks at the letter - - -

HAYNE J: Yes, I have read it several times. How?

MR McCLINTOCK: Because, your Honour, it says that my clients are going to run off to a former Minister for Planning and Environment, Mr Webster, to the Premier, to the Minister for Local Government, Mr Page.

HAYNE J: Yes, it says all those things. What do you say the sting in it is?

MR McCLINTOCK: Your Honour, it is two things. It is that my client was an incompetent negotiator on behalf of McDonald's, and the real sting comes in the last lines that my client was a bully who would use legal process unjustly and unjustifiably to terrorise people opposed to its views. That is what the words in the last paragraph mean, "Final warning, do a deal" - I do not need to read the rest.

GLEESON CJ: I am sorry to take you back to the statement of claim, but if you look at paragraph 3 it contains the allegation of the falsity and the matter is false in that it attributed to Mr McNaughton junior statements he never made.

MR McCLINTOCK: Yes.

GLEESON CJ: That is to say, the matter was false in that it attributed to Mr McNaughton an offer to give people four hamburgers a week for a year and two kinds of drink.

MR McCLINTOCK: Your Honour, it was never treated at the trial that the meaning to be given to this letter was restricted in any way by what was pleaded and the trial judge made findings about this; made findings about the meaning of the letter and the way in which it was false, which have never been challenged by the respondent. Your Honour, the point about - - -

KIRBY J: Mr Tobin, as I understand it, says that any reasonable person looking at this would not infer an intent; they would infer that it is a joke or that they would not infer that this is the reasonable and probable consequence, that it would damage your client, because nobody reasonably and probably would look at this and say, this is really a letter from Palmer-Bruyn. I mean, Mum playing the accordion, providing hamburgers for a year and "fuck all residents". I mean, this is not something one would expect on a - - -

MR McCLINTOCK: Your Honour, look at the last paragraph, your Honour. What the last paragraph is saying is that my clients proposals on behalf of McDonald's involve fucking the residents in the way that is said in parentheses in there. That is that my client and therefore McDonald's does not care about the residents or their rights or interests and - - -

GLEESON CJ: I do not suppose that was meant to be taken literally.

MR McCLINTOCK: No, your Honour. Of course, it is almost the literal meaning of those words now, of that word, to mean, as well as the sexual intercourse meaning, to damage or destroy utterly.

KIRBY J: That is why - your delicacy prevented you from reading it in the first place, but it is, in fact, part of Mr Tobin's argument, I think, that nobody would reasonably and probably consider that this was a letter that came under the authority of this firm of surveyors. There are no surveyors in Australia that would write such a letter about Mum playing the accordion.

MR McCLINTOCK: Your Honour, this did not appear to be funny to my client when it saw it and, nor to Councillor Manning, but look at the - - -

KIRBY J: I take very seriously - your client has suffered a loss; the question is the linkage and I am just putting to you Mr Tobin's argument so that you can respond to it.

MR McCLINTOCK: Your Honour, people would take this seriously. Yes, the opening paragraphs of it are ridicule and in some ways it is obvious that Mr C. J. McNaughton's father was not offering "4 Big Macs and 2 choc sundaes", but the sting comes in the tail of it. The sting is that my client's proposal for the Wallsend McDonald's Rezoning involved destroying or ignoring the interests of the residents. That, with respect, is meant to be taken seriously.

HAYNE J: Well, step one to the whole of this argument is that this letter on being read would be taken as a letter from Palmer-Bruyn signed by McNaughton; that is an essential step in your argument?

MR McCLINTOCK: With respect, your Honour, no, it is not an essential step, it is a possible step. If the letter had been written making these assertions by the respondent himself, it would be just as false and so on, but could I go on and say this - - -

HAYNE J: No, just stay with that. Your statement of claim asserted, as I understood it, as an essential element, that the falsity was that statements were attributed to McNaughton that he did not make. So step one of your claim was that this would be understood as something McNaughton in fact wrote. Is that so? If not, why not?

MR McCLINTOCK: Yes. That is the point made in paragraph 3 of the statement of claim.

HAYNE J: Yes. So an essential element of your argument is, is it not, that the reader would understand this as having been written by McNaughton.

MR McCLINTOCK: Your Honour, I would not say an essential part, but certainly it was open to it, and that seems what Councillor Manning did when he faxed on the letter. But it is not an essential part of it, your Honour.

HAYNE J: I do not understand that, Mr McClintock. You will need to explain it to me. I just do not follow it.

MR McCLINTOCK: I am sorry, your Honour, I will try. If your Honour goes on to the next words, where it says this: "Or Dad will remember something you said about someone about" - I can't quite read it - "somewhere, sometime - - -"

GUMMOW J: It is really the terms of the pleading you have to grapple with in this particular - - -

MR McCLINTOCK: Your Honour, I am happy to deal with it on the basis of the terms of the pleading, but - - -

GUMMOW J: I know you may not have drawn it, but you are stuck with it.

MR McCLINTOCK: Your Honour, the matter was dealt with in various ways in the trial, and his Honour the learned trial judge made findings about this which I am shortly about to come to. Your Honours, the case in relation to causation was opened on this point and this appears at page 11. I do need to take your Honours to this, because part of this was quoted in the Court of Appeal. If your Honour picks up at page 11, you will see that Mr Evatt is quoted as saying, below line 30, that:

Now your Honour one matter that may arise is what we call republication. Your Honour will see that if we look at the particulars of publication at the bottom of page 2 of the statement of claim, it's alleged in paragraph A that the defendant publish the matter by facsimile transmission to councillor Manning and that councillor Manning republished the matter by facsimile transmission to - then over the page, members of the Labour caucus -

And so on. A little further:

it is further alleged in that particular - that republications with a natural or probable consequence of his publication to councillor Manning. Now the republication may be an issue for your Honour to determine.

Then it says this, and this is the passage that is quoted in the judgment:

The defendant in - and the law of republication is the same in defamation as it is for injurious falsehood, and the defendant is always liable for the natural and probable consequences of his original publication, if that publication be republished.

Your Honours, the case as I said was a very simple one. It was, as pleaded and as opened by Mr Evatt, that the defendant published the letter falsely and maliciously, that McDonald's found out about the letter, and as a result of finding out about the letter, cancelled the contract. That did not involve in any way proof - as the learned trial judge seems to have thought, and the Court of Appeal seems to have thought - that the defendant or the respondent was in any way liable for the publication in the Newcastle Herald.

There is an analogy in defamation which is this - and this is to illustrate how the case was being put. If there is an article published in the Sydney Morning Herald that refers to person A; it is read by person B who is a friend of A, who concludes that it is defamatory of A; he mentions it to a second friend, C, who has not read the article and C thinks the less of A as a result. It has always been the case in defamation that even though damage is done to the reputation in the minds of people who have not actually read the article itself, that you can recover compensation there.

KIRBY J: Is that the so-called grapevine effect or is that different?

MR McCLINTOCK: It is one way of describing the grapevine effect, your Honour. Another way would be to say that the defendant is liable for all the harm caused directly or indirectly by the publication.

GLEESON CJ: Am I right in thinking that on your argument, ridicule or satire in the form of attributing to someone a ridiculous statement that the person did not make for the purpose of seeking to defeat a political objective with which that person is associated, if it causes actual damage always constitutes the tort of malicious falsehood?

MR McCLINTOCK: Subject to the requirement of malice, which your Honour did not mention in the proposition your Honour put to me, yes.

GLEESON CJ: What would you need to constitute malice in that form of political satire - that is, taking a political opponent or somebody associated with a political opponent and putting into the mouth of that person a ridiculous statement for the purpose of belittling that person?

MR McCLINTOCK: It would either be knowledge of the falsity of what you have said or, alternatively, as the authorities say, publication for some improper purpose.

KIRBY J: Do you remember that program we used to have with puppets and silly things being attributed to politicians? Could we never laugh at politicians any more?

MR McCLINTOCK: No, of course not, your Honour. I am sorry, I wanted to go further and I had not finished answering the Chief Justice's question. An intention to harm the plaintiff in its business would be sufficient. This is not the same, although there are obviously similarities in some ways, as a situation where one ridicules a politician because one wishes to do him political harm. Here the findings of the trial judge were that this was an attempt to harm my client in its business. That is sufficient malice, as his Honour found. May I also say, your Honour, there has been no challenge in the Court of Appeal, or indeed here, to the findings made by the trial judge and affirmed by the Court of Appeal that this letter was false and was published maliciously. I will take your Honours to those findings.

KIRBY J: Does that include the finding of reasonable and probable consequences? There were certain reasonable and probable consequences which the trial judge found. They are not challenged either?

MR McCLINTOCK: It was never challenged in the Court of Appeal that it was the natural and probable consequence of writing and transmitting the original letter to Councillor Manning that it would be republished to the ALP Caucus as it was, to the Greens Caucus as it was, to Council staff as it was and to the police as it was and, indeed, to my client as it was. Of course, I cannot rely upon publication to my client - - -

KIRBY J: It is the next step that was challenged?

MR McCLINTOCK: It was the next step that was challenged.

KIRBY J: That the police would investigate it, that the investigation would lead to a leakage and that the leakage would be reported in the local newspaper and that that would lead to the withdrawal of the contract?

MR McCLINTOCK: That step was challenged, but there was no challenge to the finding of the trial judge that the defendant was liable for the publication to all of the people I have nominated. Your Honours, the position that we put though is that, necessarily, by setting the letter running, the defendant is liable for wherever it turned up and however it came to the attention of the relevant McDonald's executives in whatever manner.

KIRBY J: That overstates it, does it not, because you yourself accept that there has to be a reasonable and necessary consequence, a natural and reasonable consequence test, as Justice Hayne said earlier, a filter that the law imposes to, as it were, mark out the boundary beyond which consequences are not, in law, attributed to having legal effect?

MR McCLINTOCK: Your Honour, if reasonable foreseeability is relevant in this area, we would say that it was, that one never needs to be precise for the precise type of harm to be reasonably foreseeable. We would say that this type of harm was foreseeable, reasonably foreseeable, and that was what the findings of the trial judge about intention to cause harm and calculated to cause harm really involve.

Could I take your Honours to the findings of the trial judge on these points? If I could take your Honours to page 222, which is part of the judgment of the trial judge. Your Honours will see there at lines 20 to 25 of page 222 the contention is set out. Your Honours will see there:

The defendant also conceded the letter was a hoax and contained false statements.

May I say this? The defendant did not give evidence in these proceedings. The defendant, through his counsel, tendered a record of interview, which is exhibit 3, which the defendant had given to the Newcastle police and the basis of that finding is that record of interview.

GLEESON CJ: I have not checked on whether there was evidence about that. Is Mr McNaughton Senior the former Lord Mayor of Newcastle?

MR McCLINTOCK: Yes, he is, your Honour.

GLEESON CJ: Was there evidence about that?

MR McCLINTOCK: Yes, there was, and it was common ground. He was the former Lord Mayor of Newcastle and that was never disputed by anyone.

KIRBY J: And that is his signature, is it?

MR McCLINTOCK: It is implicit in something that the Court of Appeal said too and he did give evidence, of course, and while I do not have the reference handy to where he said what his career was, no doubt he said just that.

KIRBY J: Now, what is his first name, Mr McNaughton Senior?

GLEESON CJ: John.

KIRBY J: John. So the signature which is - is Mr Chris McNaughton - - -

MR McCLINTOCK: That is the son, your Honour. It is Mr J.E. McNaughton who gave evidence appearing at page 30.

KIRBY J: I see.

MR McCLINTOCK: He was the former mayor, I believe. I will be corrected if I am wrong. Mr C.J. McNaughton was the son. He gave evidence also, your Honour. That gives the point, no doubt, to the reference to "Dad", "Dad said to tell you", in the first line of exhibit A. Your Honours, as I said, at page 222 the trial judge records a concession by the - - -

KIRBY J: It is a very familiar tone to adopt in a letter from a firm of surveyors. However, you make the point that that is part of the sting.

MR McCLINTOCK: Your Honour, I have taken your Honours to the passages on 222 where his Honour records the concession by the respondent the hoax letter and its falsity. At 231 his Honour indicates, as he says:

The Court, as already noted, has concluded the material complained of was false and it was likely to injure the plaintiff in its business.

At 45 on the same page or, perhaps, a little bit below, his Honour expresses his finding as to malice:

The Court has concluded that on this test -

that is quoting from Fleming -

the publication and republication to the limited number of people - - -

GUMMOW J: "The Court has concluded" means "I," does it not?

MR McCLINTOCK: Yes.

GUMMOW J: "I have concluded".

MR McCLINTOCK: Yes. Your Honour, that is an Americanism that seems to be creeping in Australian judgments.

GUMMOW J: A good idea if it crept out.

MR McCLINTOCK: I will not dissent from that proposition, your Honour.

GLEESON CJ: What page are you reading from, Mr McClintock?

MR McCLINTOCK: Page 231, your Honour, and I take your Honour to lines 25 to 30 at lines just above 50 to 55.

HAYNE J: What is the cross-reference back that we should note against 231 line 25, "The Court, as already noted, has concluded"? Where is that?

MR McCLINTOCK: I have just mislaid the reference to that, your Honour. I apologise.

KIRBY J: That might just be a reference to 222, where the defendant has conceded - - -

MR McCLINTOCK: I think it may be a reference to 222, your Honour, but the significance in the reference back only struck me as I was taking your Honours to the passage in question. Mr Evatt suggests 229. At 229, again - - -

GUMMOW J: Line 26.

MR McCLINTOCK: - - - line 26 - one sees the reference to, again, the court's opinion:

In the Court's opinion the hoax letter was calculated to ridicule the plaintiff and injure it in its effort to persuade the council - - -

GLEESON CJ: Now, can we just pause there for a moment. That expression, "injure it in its effort to persuade the council" - this is a political issue that is in front of the Council and there are party politics coming into it, and there is a proposal to have a McDonald's outlet, which happens to be supported with professional assistance by your client company. Now, to talk of injuring it "in its efforts to persuade council" means, does it not, blocking the development proposal?

MR McCLINTOCK: Well, blocking the development - that is the ultimate aim, your Honour.

CALLINAN J: Causing commercial damage to both the surveyor and McDonald's.

HAYNE J: Why? Why damage to the surveyor?

MR McCLINTOCK: Well, what better way of damaging the proposal than damaging the person who is propounding it in the Council - - -

CALLINAN J: He is the agent for the applicant.

MR McCLINTOCK: What better way of hampering the proposal than, for example, getting the surveyor dismissed by McDonald's?

GUMMOW J: They would find another one pretty quick smart, would they not?

MR McCLINTOCK: Well, your Honour, they did not. They went on with the job themselves, in fact, but these are matters of perception at the time in question. In my submission, it could readily be an effective but illegitimate method of killing the McDonald's restaurant to introduce in the way this letter did the surveyors in question.

HAYNE J: Now, is this a finding about what happened? Is it a finding about what was intended to happen? Is it a finding about the subjective thought processes of someone? What is it a finding about?

MR McCLINTOCK: Your Honour, in my submission, it is a finding about both by - - -

HAYNE J: Both what?

MR McCLINTOCK: It is a finding about the objective likelihood there and it is a finding about the intention on the part of the defendant. If your Honour goes back up the page, towards the top of page 229 - perhaps I should take your Honours back to page 228, where his Honour dealt with the issue of whether this was a joke. It is line 25. His Honour said:

The publication as a joke

In the electronically recorded interview between Detective Sergeant Hill of the Newcastle Police Service and the defendant on 9 May the defendant emphasised a number of times that the transmission was a joke meant for councillor John Manning. He said it was over the top and was meant to be ludicrous. When he learnt that Councillor Manning had taken it seriously he was quite `shocked' and suggested Councillor Manning contact the persons identified above and so inform them.

HAYNE J: Stopping there, although this is out-of-court statements, if those statements were accepted at face value, they would deny any subjective intention of the kind found.

MR McCLINTOCK: Well, they might go some way towards doing that, your Honour, but when one goes on and sees the entirety of the record of interview and, indeed, what the defendant is quoted as saying here in the next paragraph, one will see that, taken as a whole, the record of interview very strongly supports the finding of malice or intent.

HAYNE J: Really, Mr McClintock, my question was designedly narrow.

MR McCLINTOCK: I am sorry, your Honour. The answer to your Honour's question is yes, in part, but could I go on then, your Honour. Mr Evatt reminds me, your Honour, that the elder McNaughton was Lord Mayor for eight years and that appears on page 31. The passage in question continues:

When he learnt that Councillor Manning had taken it seriously he was quite `shocked' and suggested Councillor Manning contact the persons identified above and so inform them. At the time he prepared the document the defendant was angry with Mr Chris McNaughton because he had, in a vigorous and persistent way, tried to lobby the defendant. The defendant told police he thought that Mr Manning may have referred to it that evening at a caucus meeting to discuss the ALP councillor's attitudes towards the rezoning application which was on the council's agenda the following Tuesday 26 March.

The publication was apparently thought by some of the recipients that it was a joke. The choice of language such as used in the letter rather than in colloquial speech, the notion of offering hamburgers and sundaes was ludicrous, as was the idea that Mrs McNaughton would play the accordion. It is obvious that the words in the text were not to be taken at face value but cloaked as they were in ridiculous language they nevertheless carried a sting. If the letter, which was the case when it was first received, was not understood to be a hoax its thrust, dressed up as it was, could easily be taken as a clumsy way of trying to influence the ALP caucus in favour of them not support the rezoning. Attempting to influence was one of the matters opened by the plaintiff's counsel.

In the Court's opinion the hoax letter was calculated to ridicule the plaintiff and injure it in its effort to persuade the council in favour of approving the development application.

GUMMOW J: Now, what did the Court of Appeal say about this reasoning on 228 and 229?

MR McCLINTOCK: Your Honour, that is dealt with in Mr Justice Heydon's judgment at page 250 of the appeal book. The prefatory material appears on page 249, but the factual matters are dealt with on page 250. At the top of the page his Honour said:

The argument of the appellant was that the loss of the McDonald's contract was either the natural and probable result of the impugned letter, or the result which the defendant in publishing the impugned letter intended.

In relation to the argument that the loss of the McDonald's contract was the result which the defendant in publishing the impugned letter intended, the plaintiff contended that the trial judge had found that the defendant "intended to injure the Appellant . . . in its efforts to persuade the Newcastle Council to approve the development application made on behalf of its client McDonald's."

There are several problems with the submission.

First, it is far from clear that the trial judge did make the finding alleged.

The submission referred to the following passage:

"In the Court's opinion the hoax letter was calculated to ridicule the plaintiff and injure it in its effort to persuade the council in favour of approving the development application."

A little further on the trial judge said:

"In this way it was calculated to injure the plaintiff in its business."

Later, in discussing malice, the trial judge said:

"The court, as already noted, has concluded the material complained of was false and it was likely to injure the plaintiff in its business."

Taking those passages together -

this page 251 -

the trial judge's conclusion appears to have been that the impugned letter was "calculated" to injure the plaintiff -

GUMMOW J: You do not need to read it all out to us.

MR McCLINTOCK: I am sorry, your Honour.

GUMMOW J: We can do that, but it starts at page 250, does it, and his Honour makes one, two, three, four, rather telling points about it, to my mind at the moment, and you have to overcome them.

MR McCLINTOCK: Your Honour, the passage in question continues over to page 253 and his Honour points to the issues that go both ways. The contrary - - -

GUMMOW J: Well, his conclusion is at page 253, line 27.

MR McCLINTOCK: Yes, your Honour, but that is dealing with a slightly different issue to which this material, which deals with the facts, is prefatory. He was dealing with the submission that was put that the plaintiff's intention was sufficient to infer causation from. The finding of the contrary position appears on page 251, below the point where I had read, where his Honour quotes the trial judge, at line 10, where he says:

A pointer in the other direction is the trial judge's quotation of the following words of Fleming, Law of Torts, 9th ed (1998), p 780 -

and then he quotes the passage -

"Today the dominant view seems to be -

and then sets out the test about -

dishonest or improper motive.

and then goes on and says -

The trial judge then said:

"The Court has concluded that on this test the publication and republication to the limited number of people identified in this judgment (that is the full publication of the Newcastle Herald article) was malicious."

That was his Honour's finding as to malice. Then Mr Justice Heydon said:

If this is a finding that there was malice in the sense of intent to injure, it would support the plaintiff's submission. But Fleming propounded two distinct tests, and it is not clear that the trial judge thought both were satisfied, or, if he thought only one was, which he thought was satisfied. The defendant could have had an improper motive without necessarily having an intention to injure.

His Honour then went on to deal with the legal arguments. But, your Honours, we would say that the finding that his Honour is quoting there, which, in fact, I have already taken your Honours to in the trial judge's findings, is a perfectly clear finding of intention in the sense that it is set out in Fleming.

Your Honours, the learned trial judge's judgment was given extempore, and the learned trial judge no doubt on this issue faced all the difficulties that trial judges do in the District Court when they are away from Sydney and so on. To approach the judgment on the basis that his Honours findings on this issue were anything other than relatively clear, would, in my submission, not be correct. He correctly instructed himself as to malice and he made a finding after quoting from Fleming of malice in those terms. As I said, the fact that the judgment is extempore appears from its first page.

GUMMOW J: Well, suppose it is. I do not see why we have two standards.

MR McCLINTOCK: I am sorry, your Honour?

GUMMOW J: I do not see why litigants expect two standards. Are you saying the result would be different if it was a reserved judgment?

MR McCLINTOCK: Your Honour, one would expect, if it is a reserved judgment - when one speaks extempore obviously there is a desire to determine the matter as quickly as possible. There is obviously room for, (a), for slightly less precision than when one comes to write.

GUMMOW J: You are talking about a greater margin of permissible error? Is that the doctrine, is it?

MR McCLINTOCK: No, I am saying that it can sometimes be a counsel of perfection to expect absolute precision of words and what I am saying is that what his Honour was finding is clear. He was making a finding of malice in the sense that there was an intention to injure my client, and that is what the finding is.

KIRBY J: It is a question, is it not, really, at what level the intention to injure is? If it is at a level of intention to stop this transaction going forward, and that is a transaction in which your client is involved, then there is that level of intention to injure your client, but if it is an intention that such a letter should be taken seriously as coming from your client and that your client would be considered to be the author of such a ridiculous letter then it is difficult to infer actual intent at that stage. This is why I have always thought your better argument is the natural and probable consequence, if people let these things loose. Well, maybe, the law should say, "Well, you have your little joke but if you are going to do harm to people you are going to have to bear the consequences".

MR McCLINTOCK: I accept that, your Honour.

GLEESON CJ: Mr McClintock, your client is a corporation.

MR McCLINTOCK: Yes, your Honour.

GLEESON CJ: When you use the expression "intent to injure" what is the kind of injury you are talking of? It is obviously economic loss of some kind.

MR McCLINTOCK: Yes, your Honour. It would ultimately end up in economic loss, your Honour.

GLEESON CJ: You cannot mean "hurt its feelings" can you?

MR McCLINTOCK: No, of course not, your Honour.

GLEESON CJ: And you cannot mean "do it physical harm"?

MR McCLINTOCK: No, it has no body to hang nor soul to damn.

GLEESON CJ: Right. It has no body and it has no feelings.

MR McCLINTOCK: Yes.

GLEESON CJ: So, we need to be a little careful when we talk about injury being inflicted on your client, and I would like to know what kind of injury you are talking about.

MR McCLINTOCK: Your Honour, it has a goodwill and it has a business reputation.

GLEESON CJ: Yes.

MR McCLINTOCK: This was an attack on its goodwill and it has a business reputation.

GLEESON CJ: Yes. You mean this was an intent to cause your client either to have a diminished reputation and goodwill or to suffer financial loss, specifically the benefit of a business association with a good client.

MR McCLINTOCK: Yes, your Honour. It is an attack on the reputation of my client. It is an attempt to ridicule it and damage its standing as a lobbyist for McDonald's. That will have economic consequences, but it is, in the first instance, an attack on my client in its competence - an attempt to ridicule it, and therefore neuter it as an effective lobbyist for McDonald's.

HAYNE J: Now, in that context, do you accept the trial judge's finding at page 229, line 9:

It is obvious that the words in the text were not to be taken at face value - - -

MR McCLINTOCK: The answer to that question is yes, in respect of some of them, but if that is a finding that they would not be taken at face value it is overcome by other findings his Honour made which was that Councillor Manning took the letter seriously. Your Honours, I am speaking with respect to a very, very sophisticated audience who see immediately that this letter was a hoax. This letter was not directed to a group of lawyers trained in words, it was directed to an ALP councillor on Newcastle City Council who did take it seriously, on the findings of the trial judge.

KIRBY J: Well, did they take it seriously as a true attempt to suborn them from their duty or did they take it seriously because we live in a time where even the smallest - such an attempt must be given to the Independent Commission Against Corruption and therefore people have to take it seriously lest they later be criticised?

MR McCLINTOCK: Your Honour, it was taken seriously by Councillor Manning and the findings made in relation to that are at, Mr Evatt reminds me, 225. Your Honours, this is taking it out of order, but in a sense it does not matter whether the letter was a joke or not. The fact is that the letter had a number of false aspects about it. It was a false use of the letterhead of my client to do it.

The matter was sufficiently serious to end up spending a lot of time on Council investigating it. There were special Council meetings of it. There was a report commissioned from Sparke Helmore, the Council's solicitors. Council was advised to refer the matter to the Independent Commission Against Corruption, which it did. There is no evidence about the result. The police were involved and carried out an investigation. To say that this letter was not serious, or seriously intended or did not have serious effects, in that context, whatever the defendant said in his record of interview with the police is, in my submission, belied by all those events.

At 224 is the finding by the trial judge as to how Councillor Manning took the letter. It says, at line 55:

At the caucus meeting the defendant told Mr Manning the facsimile was a joke. When Mr Manning received it he did not take it that way. The defendant thought that this was most likely because there had been some animosity between himself and Mr McNaughton in the past.

That is the finding that it was not taken as a joke by Councillor Manning when he received it.

KIRBY J: Well, I suppose one question is whether that is a reasonable and natural consequence or whether "Mum" playing "the accordion", free Choc Wedges and so on, are so manifestly a joke that the law should not attribute liability to your client because Councillor Manning is a solemn sort of chap who had some previous dispute with Mr McNaughton Senior, not even the signatory of the letter, and therefore thought he would send it off to the police. You have to overcome the step that still further down the track you have to make it reasonably foreseeable or a consequence that McDonald's would, in a sense, overreact and in such a ridiculous situation blame your client. I mean, that on one view, was a real overreaction on the part of McDonald's.

MR McCLINTOCK: Your Honour, it may well not have been an overreaction on the part of McDonald's. McDonald's may well have correctly interpreted this as an effective attempt to neutralise and neuter, as I said, my client's effectiveness as a lobbyist and got rid of it for that reason.

CALLINAN J: A multinational that has occasion to be very sensitive to public opinion for all sorts of reasons.

MR McCLINTOCK: I do not know that there is any evidence about that, your Honour. It is notorious - - -

CALLINAN J: Well, there has been a major case in the Federal Court in Brisbane about McDonald's. It is all a matter of public record. Mr McClintock, it has struck me that the words "just like the good old days" have a somewhat sinister ring about them. There are all sorts of inferences you can draw from that. Return to corruption, for example. It seems to me that that is what those words unmistakably convey.

MR McCLINTOCK: That is clearly a reference to that, your Honour. The good old days. That is clearly a reference - - -

HAYNE J: Was that pleaded?

MR McCLINTOCK: Your Honour, not in terms - - -

HAYNE J: The only plea was that the letter was false because it attributed to the man concerned authorship of these statements. That was the nub of the case, was it not?

MR McCLINTOCK: That is part of the nub of the case, your Honour, but of course, it went further at trial. And the trial judge made findings as to falsity in other respects.

GUMMOW J: Wait a minute. What you are really saying is that the trial departed from the pleadings. If that is right, we need to know in what respects. It just cannot be left floating around.

MR McCLINTOCK: Your Honour is correct, but it can be dealt with by the findings which I have taken your Honour to, in relation to the falsity of the letter and because those were - may I say, there was no challenge to those findings by the respondent in the Court of Appeal and nor is there any finding challenged here. Nor, for that matter, is there any challenge to the finding that this was not a joke, as found by the trial judge, and as confirmed by the Court of Appeal. Your Honours, the - - -

KIRBY J: The defendant, the respondent, in this Court, did not own up straight away in the meeting of the ALP Caucus, when the matter was raised.

MR McCLINTOCK: No, he did not. Councillor Manning had no idea who the letter came from, in the sense that he did not know that it came from the defendant.

KIRBY J: One would have thought that if he saw things going bad, and that other people were taking it seriously, acting reasonably, he would have said, "Now, steady on, this is really a joke and I really sent this out to illustrate" something or other. But he did not do that, apparently.

MR McCLINTOCK: He did not do it at the Caucus meeting, but he said in his record of interview that he had called Councillor Manning after the Caucus meeting and then told him that it was a joke. But by that stage, Councillor Manning had sent the letter on, had faxed it to the people I have indicated.

KIRBY J: He said it was a joke, but did he say: and I am the jokester, I am responsible for this joke? He owned up.

MR McCLINTOCK: In fairness, he did, but by then it was too late. The letter had gone, and was in the hands of the people that I have mentioned. Could I just take your Honours to the evidence as to - although I do not suppose there will be any dispute about this, I guess I do not need to. The last piece of reference I wish to make is this. The evidence in relation to Mrs Richards, who was the New South Wales property manager of McDonald's, she found out about the letter by reading the article in the Newcastle Herald.

That article - and I should take your Honours to the article - appears at page 183 of the appeal book. It was exhibit E, below. Your Honours will see that it is headed "Bogus letter offered free fast food", and it reads like this:

Newcastle police confirmed yesterday they were investigating a bogus letter sent to ALP councillors on Newcastle City Council around the time the council was considering rezoning land at Wallsend for a McDonald's restaurant and service station. The rezoning was sought by Newcastle surveying firm Palmer Bruyn and Parker, whose managing partner is a former Lord Mayor of Newcastle, Mr John McNaughton. The Newcastle Herald has learned that the forged letter purported to be from Mr Chris McNaughton, the son of the former Lord Mayor. It was written on a Palmer Bruyn and Parker letterhead. The bogus letter offered the councillors a free supply of items from the McDonald's menu.

Your Honours, the evidence from Mrs Richards was that she thought a franchisee of McDonald's had forwarded her a copy of this article and that as a result of seeing the reference to the letter in the article, she had a conversation with Mr McNaughton in which all the details of what had happened were explained to her, and that as a result of the letter, she terminated the contract with McDonald's. That was done by exhibit 1. That appears on page 187 of the appeal book, which is the letter from McDonald's. It is dated July 16, 1996. It says this to Mr McNaughton:

Thank you for your letter of 9 July informing us that Palmer Bruyn & Parker are not taking action against Councillor Parsons of Newcastle Council. We further understand that you and Mr John McNaughton are taking this action. Whilst we appreciate all the efforts that you have made in approaching Councillors and members of the public in getting very positive media for the application, we feel that McDonald's best interests will now be served by running the rezoning itself. We are also concerned at the very high ongoing costs on this matter. We therefore must instruct you to refer any inquiries from Councillors or the public regarding the rezoning to the writer. We look forward to discussing and using your company's services on other matters and again thank you for the service your company has given us at Wallsend.

Mrs Richards gave evidence - - -

KIRBY J: Your client did not allege that by reason of this hoax and the publication and so on that your client had lost ongoing contracts? It was just the one that he - - -

MR McCLINTOCK: It was just the one contract with McDonald's.

GLEESON CJ: And it was not the case that Mrs Richards thought any the less of your client as a result of this. She did not believe that they had offered bribes. As I understand it, she thought that it would be best just to sever any association in relation to this - - -

MR McCLINTOCK: No, the evidence was, your Honour, that there was an effect on her estimation of my clients.

GLEESON CJ: Let us take it step by step. Is there a suggestion that she thought that a free supply of items had been offered by your client?

MR McCLINTOCK: Yes, your Honour. The evidence that she gave was that she thought my clients - that being the people involved of course, the executives or the directors - were probably honest. She had in effect a doubt in her mind. She was cross-examined into saying it was a fairly small doubt but there was certainly evidence to that - - -

KIRBY J: How could she possibly think that your client, a firm of surveyors, would say, "We'll offer Choc Wedges and Big Macs every Sunday and Mum will play the accordion"?

MR McCLINTOCK: That is because, your Honour, she did not ever see the letter.

GLEESON CJ: But the one thing the newspaper article makes clear is that the letter was bogus.

MR McCLINTOCK: Yes, that is true, your Honour, it makes it clear that it is bogus. It describes it as a hoax but it does not make it clear what is bogus about it.

GLEESON CJ: What else might have been bogus about it?

MR McCLINTOCK: It does not, for example, say that - I am sorry, I have just lost the article.

GLEESON CJ: You are not suggesting that it carried the imputation that the letter was bogus in that there was no real intention to offer four hamburgers a week; they only meant three hamburgers a week?

MR McCLINTOCK: No, I am not suggesting that, your Honour.

HAYNE J: Harmonica rather than accordion.

MR McCLINTOCK: I am not suggesting that. Mrs Richards' evidence appears at page 72 of the appeal book. This is where she was being cross-examined by Mr Molomby. Just above line 5 it says this:

Q. Now when you spoke to Chris McNaughton he told you the letter wasn't genuine didn't he?

A. Yes.

Q. And you had no reason to disbelieve that did you?

A. I believe I did.

Q. You thought he might be lying to you did you?

A. There was certainly doubt in my mind about it.

Q. Yes but did you think he might be lying to you when he told you it was a forged letter?

A. Yes there's a possibility.

Q. But you thought that did you at the time?

A. I didn't want to think that that sort of action would be what he would do. I didn't - I didn't - it was neither - it wasn't clear, there was doubt.

Q. There was doubt. That's the real situation you were in, isn't it? You didn't know really what was going on?

A. That's correct.

Q. That's correct isn't it?

A. Yes.

Q. You didn't actually think Chris McNaughton was lying to you when he said it was a forged letter?

A. There was doubt.

Q. There was doubt? You thought that it was possible he was lying to you?

A. Well until I found out definitely and I've only read it in the paper that it's a bogus letter how do I know?

Mr Evatt suggests I take your Honours back to her evidence at page 68 and I will do so on this point.

KIRBY J: Basically I think there is a lot of sense in what Justice Callinan said, that McDonald's is a big corporation. They do not need any smear or smell or stink of bogus letters and fraudulent dealings. They just do not need it. Why would they put up with it?

MR McCLINTOCK: Absolutely, your Honour. As soon as he suggests there is a smell about it, it is going to be goodbye consultant.

CALLINAN J: Well, they have been working on this project for years. By the time of trial they had been working on it for eight years. That is at page 69. That shows how difficult it was to obtain the approval.

MR McCLINTOCK: Absolutely. By the time Mrs Richards left McDonald's shortly before, the proposal had not been dealt with by Council and was still alive.

KIRBY J: And they had a letter from a franchisee, which rather suggests that the franchisees did not like this, too. This is not good news for McDonald's. The golden arches were unhappy.

MR McCLINTOCK: That is one possible view, your Honour, although one would have to say that the franchisees would probably pass onto McDonald's any matter which they thought was of interest to McDonald's, either in their own general interest - - -

KIRBY J: But this was not good news, though, passing on.

MR McCLINTOCK: True, your Honour. That is true.

HAYNE J: Yes. The evidence about that is page 67 line 45 and following, franchisees would send anything about McDonald's.

MR McCLINTOCK: That is correct, your Honour. Could I take your Honours to page 68 and the question - at the bottom of page 67 your Honours will see Mr Evatt asked Mrs Richards in-chief - it is the last question:

Well, now if you look at the article headed "Bogus letter offered free fast food" -

There was an objection to the question, but it was allowed by his Honour. The question was:

What effect did that article when you saw it have on you?

The answer was this:

A. Well, a great concern obviously because McDonald's have never given any inducements to councillors or any officials anywhere to get approvals even if it takes a long time, we're quite prepared to go through the normal channel. So to be - feel that initially that that might affect our reputation, it certainly gave us cause for concern about the reputation of our consultant Palmer, Bruyn and Parker, and in the long - you know, it took - I think it was probably a month or two later that we decided that we couldn't become involved in this and didn't want to be - we wanted to disassociate ourselves then from a company that might - we were reasonably confident from our meetings with the principals of the firm that they seemed honest but we didn't want to be in any way sort of contaminated by, or affected by it, so we discontinued their services.

CALLINAN J: You would have had to have lived in submarine for the last 20 years not to know that the establishment of any McDonald's outlet is likely to be highly controversial. There was a defamation action in England that went for nearly two years about McDonald's.

MR McCLINTOCK: Absolutely, your Honour, about the handing out of pamphlets outside McDonald's restaurants by two hippies.

CALLINAN J: Somebody has just written a book about McDonald's.

MR McCLINTOCK: May I say I think that the trial was conducted by Mr Rampton and, as your Honour said, it went for about two years, the trial itself. It is now been to the Court of Appeal and the judgments have been substantially affirmed by the Court of Appeal. I think it has ended there.

KIRBY J: But what has that to do with this case?

MR McCLINTOCK: Nothing, your Honour, other than to say it is an example of how precious McDonald's regards its reputation.

CALLINAN J: How fragile their opportunities sometimes are to establish one of their outlets. I was in a case in Toowooba once that went for weeks about the establishment of a McDonald's outlet. Hundreds of residents participated in that case.

MR McCLINTOCK: Your Honour, it is notorious. There has be agitation in the Blue Mountains for years to stop McDonald's restaurants being opened in Katoomba.

KIRBY J: And, no doubt, to support it. Lots of people eat McDonald's, even thought they are far too sweet.

MR McCLINTOCK: The buns have 13 per cent sugar, your Honour, as I remember from acting for them years ago. Your Honours, the effect of the passages that I read you from Mrs Richards' evidence is that there was an impact on the reputation of the plaintiff, the appellant, in the eyes of McDonald's, and it was the desire not to be associated with a company that was contaminated in that way that led to the cancellation of the contract. One way or another, that was the result that was intended to be brought about by the publication of the letter.

KIRBY J: Well, you say "intended". I wonder if it can be said that the respondent actually thought down the track. He was putting around a joke as a contribution to the persuasion of his fellow Caucus members to oppose the planning approval, so it is a question of whether he actually intended to harm the respondent. Natural and probable consequence, I can understand, but actual intent to harm - I wonder if he really thought that through. Now is there a finding, except the ones you have taken us to, about malice?

MR McCLINTOCK: I will, your Honour. Not merely are there findings about it; it is conceded on the appeal. Mr Tobin's submissions put the proposition that the intention was to prevent McDonald's application from being approved and, as he says, only thus was it calculated to injure the plaintiff in its business.

KIRBY J: Where is that?

MR McCLINTOCK: It is paragraph 3(b) of Mr Tobin's submissions. The reference though - - -

KIRBY J: Submissions in this Court or in the Court of Appeal?

MR McCLINTOCK: In this Court. Page 229 of the appeal book is where the trial judge dealt with the matter, and I have taken your Honours to that page. It is on page 4 of Mr Tobin's submissions, your Honour. But page 229 is where it is dealt with in the judgment of the learned trial judge.

Your Honours, could I then go to a finding that I wish to highlight at page 223 of the learned trial judge, which is also reflected in the Court of Appeal. It is this. It says, line 14:

Ultimately on 11 May an article appeared to the Newcastle Herald referring to the hoax letter. That newspaper article came to the attention of Mrs Robyn Richards, then the NSW Real Estate Manager for McDonald's. She was the person who, on a day to day basis, dealt with the plaintiff. Once McDonalds became aware of the assertions (as they were published in the newspaper) it terminated its business relationship with the plaintiff. The plaintiff claims an actual loss of $38,000 as a result of losing the McDonalds contract together with a sum for punitive damages.

The key part of that is, of course, once McDonald's became aware of the assertions, as they were published in the newspaper, it terminated its business relations with the plaintiff. At page 249, the Court of Appeal made this finding at paragraph 18, above line 5 - it is a reflection of what the trial judge said, I should say:

The trial judge found that the plaintiff lost its contract with McDonald's as a result of Mrs Richards, a responsible executive, learning of the 24 March 1996 letter through the newspaper article.

Your Honours, could I say this, that, in fact, is a finding of causation by the trial judge accepted by the Court of Appeal. Their Honours are saying that the plaintiff, my client, lost its contract with McDonald's because Mrs Richards learnt of the letter through the newspaper.

KIRBY J: Well, that is one interpretation; the other interpretation is that it is a sine qua non, but not necessarily causally related in a legal sense.

MR McCLINTOCK: Yes, your Honour.

HAYNE J: Or it is a bare recitation of history which is undisputed. There is no dispute about the history. There was a letter. There was an article. Mrs Richards saw the article. Mrs Richards did something following the article as a result of what she had read in the article. The history is undisputed.

MR McCLINTOCK: Yes, your Honour.

HAYNE J: But that is not the killing ground in this case.

GUMMOW J: No, we do not seem to be getting there.

MR McCLINTOCK: Your Honour, I am trying to get there and I apologise. Your Honours, the reasoning of the Court of Appeal on this point commences at paragraph 31 of the judgment and that appears on page 254. Their Honours there set out, continuing over to paragraph 38, which appears on page 262, four arguments that were advanced in the Court of Appeal and their reasons for rejecting the arguments. I will deal with them, but I will deal with them briefly, before I come back to say what, in my submission, what the Court of Appeal should have done.

In paragraph 31 the Court of Appeal really is putting the proposition that this was a point not taken below, that they refer to the passage in Mr Evatt's opening which was not related to the Newcastle Herald letter, but to the on-publication by Councillor Manning to the other people who received the letter.

The next issue that their Honours dealt with was, in effect, the grapevine effect, which also is dealt with in the next paragraph, paragraph 33. Their Honours reject that as a possible explanation of the way in which the Newcastle Herald published the article referring to the letter.

Your Honours, this was a matter in Newcastle of obviously extreme political controversy. The restaurant rezoning had been a live political issue for many years at the time in question. The letter would only have point if it was a matter of political controversy. It related obviously to a matter of extreme or high local Newcastle public interest. The respondent caused the letter to be published to all members of the ALP Caucus, all members of the Greens Caucus, the police, Council staff and the plaintiffs.

As I said to your Honours, there was an investigation then carried out by the Council and it was referred to ICAC. It would, in my submission, be very strange if it was thought - and this is my submission where the Court of Appeal went wrong on this point - that a cone of silence descended upon all those people who had learned of the hoax letter and that it was not discussed outside that group. It is a matter of practical commonsense that they would do so.

As a matter of common knowledge and commonsense, we all know that people who receive materials like this or learn discreditable facts about people gossip about them. Our society is rife with rumour mongering and scandal mongering. One does not have to practise very long at the Sydney Bar to know that, for example. It is absurd to suggest - and I say this with respect to the Court of Appeal - that this letter would not have been discussed outside the group of people to whom it was originally directed. The very terms of the letter were an invitation to pass the information on, in effect, because of the florid and, indeed, facetious and sarcastic references.

HAYNE J: To pass what information on?

MR McCLINTOCK: The allegations made in the letter, that is, indeed, in much the same way as they ended up, that there has been a bogus letter for those who knew it was a bogus letter and - - -

HAYNE J: So what is being conveyed is, is it, "There has been a forgery sent to us"?

MR McCLINTOCK: Yes.

HAYNE J: I that what is being conveyed?

MR McCLINTOCK: Yes.

HAYNE J: Yes.

MR McCLINTOCK: That could. For people who did not take it seriously and at the ALP Caucus meeting in exhibit 3, the record of interview, the defendant said there were some who saw it as a joke, and who would then have recognised it as - although Councillor Manning did not - who would have then recognised that it was a forgery. It is an invitation to pass on the fact that the letter is bogus. That is a matter that would interest anyone.

KIRBY J: Is it that it is a forgery or is it that this funny letter has come under the notepaper of the lobbyist for McDonald's and it is a really funny letter and that fact itself might lead to its reticulation if you start talking about "Mum" and "the accordion". I mean, it is rather amusing, if you are not on the receiving end of it.

MR McCLINTOCK: If you are not on the receiving end of it, yes, your Honour, it might be amusing. I have read it too many times now, your Honour, to see any humour left in it but that happens with - - -

GLEESON CJ: A problem, Mr McClintock, seems to be that you are pursing a claim for damages for mischief.

MR McCLINTOCK: I am sorry, I am not sure I understand, your Honour.

GLEESON CJ: It does not matter.

HAYNE J: You see, what is the test that is underlying the rhetoric you have just deployed? Is the test simply the bare historical connection that we have earlier identified suffices, without filter, without test of any kind?

MR McCLINTOCK: The answer to your Honour's question is, yes, it does, in my submission. The second answer is, if that answer is wrong, it was perfectly foreseeable or, alternatively, was the natural consequence of the original publication that it would come to the attention of McDonald's. The actual mechanism, in my submission, is not to the point. The actual mechanism was in fact the Newcastle Herald, but the fact is that that is not essential to establish the chain of causation. It was obvious when one - if one turns to the second issue, and I do not wish to do it quite yet - if one is talking in terms of reasonable foreseeability in an area such as this, in my submission, it is perfectly foreseeable that McDonald's would learn about the letter and would act as a result. The letter itself was calculated to be talked about and to be discussed.

GUMMOW J: What, to stir up trouble between your client and McDonald's?

MR McCLINTOCK: Yes, that is the purpose of it, your Honour, and really what the trial judge's findings were, to stir up trouble.

GUMMOW J: Well, between your client and its client?

MR McCLINTOCK: Your Honours, certainly that was objectively likely and would have been foreseeable to anyone who thought - - -

GUMMOW J: Or just to stir up trouble?

MR McCLINTOCK: Yes. I am not saying it is the only reason but it is certainly a reasonably foreseeable consequence, as in fact happened.

GUMMOW J: Well, just to stir up trouble is not malicious falsehood, really.

MR McCLINTOCK: If "stir up trouble" means damage the relationship between my client and McDonald's, it is and that would be an improper purpose, but is the findings that were there. Could I then step back, your Honours, and deal with one last point in relation to what the Court of Appeal said. The Court of Appeal said, and this appears on pages 256 through to 259, that - - -

GUMMOW J: You see, the letter that the executive of McDonald's wrote, eventually, proceeded on the basis that the action would be taken, on your side, by the individuals, not the corporation which is curious, is it not?

MR McCLINTOCK: Yes, your Honour, it was, but at that stage the corporation had not lost the contract and, no doubt, what was being contemplated then was defamation proceedings and, as a matter of reality, defamation proceedings are always more attractive when they are brought by individuals rather than corporations. But when the company lost the contract by that letter which, of course, would have come - there is no evidence that my clients knew it was coming - the position must then have changed.

GUMMOW J: Do we know whether there was any defamation action?

MR McCLINTOCK: No, the only action, your Honour, is this one which pleaded two causes of action, injurious falsehood and a breach of section 52, which was either not pressed or found against us because of the trade and commerce element. Your Honours, the pages I have just identified at 256 through to 259, at those passages the Court of Appeal made a finding that because the recipients of the material were - - -

GUMMOW J: Now, stop for a minute, Mr McClintock. Is there not a tort about intentionally - well, it may be under development but it certainly exists in New Zealand, I know - the tort of intentionally causing economic injury to your competitor?

MR McCLINTOCK: Your Honour, I have always understood that to be a species of injurious falsehood.

GUMMOW J: Yes, but it does not require the falsehood, you see.

MR McCLINTOCK: Your Honour, there are authorities that I recall in New Zealand but I do not recall there is any authority in this country that is simply said to cause economic harm.

GUMMOW J: No, no, maliciously. By malicious means.

MR McCLINTOCK: Again, the difficulty with that though becomes, when one starts talking about, is what does malice mean there and one species of malice, of course, is knowledge of falsity which, of course, would require proof of the falsity.

CALLINAN J: Indirect motive may be malice, may it not?

MR McCLINTOCK: Absolutely, your Honour.

CALLINAN J: Is there any difference between malice in this field and malice in defamation areas?

MR McCLINTOCK: No, your Honour, there is not.

CALLINAN J: In fact, the cases make it clear that injurious falsehood has subsumed, as it were, the law of malice in defamation. Is that right?

MR McCLINTOCK: Yes, the cases say it is either knowledge or recklessness as to the truth or falsity of what is published or publication for some improper motive such as - and the classic one is an intent to injure the plaintiff, usually in defamation, injure the reputation of the plaintiff.

GUMMOW J: People think defamation is the only relevant response of the law in these matters, then they tack on a bit of injurious falsehood. That seems to be where legal memory in this country stops. I do not quite understand why.

MR McCLINTOCK: Yes, your Honour.

GUMMOW J: Then we get this case which, at the moment, may require some torturing of injurious falsehood to give you a remedy.

CALLINAN J: If you have the falsehood and you have malice and you have an intention to do harm - do you need intention to do harm? If you have an indirect or improper motive, and you have a falsehood as a means of achieving your purpose and you have damage, do you say you need anything more?

MR McCLINTOCK: Probably not, your Honour.

KIRBY J: In the American textbook, which I referred to which is in the papers, there are three possibilities: intention, privileged re-communication or natural and probable consequence that it would be communicated. You do not have to establish intention. You do not rely on privileged communication. It is enough for you to say that the link is natural and probable consequence.

MR McCLINTOCK: Yes, your Honour.

KIRBY J: If people have these jokes, they can have their jokes if they want to, but if the purpose was to stop this transaction going ahead and if that is the natural and probable consequence that it will do so and damage you, they have had their joke but they have to pay the fee.

MR McCLINTOCK: Basically yes, your Honour.

CALLINAN J: Mr McClintock, in the ninth edition of Fleming at page 780 there is a discussion about this. The author says:

malice came to be treated as a necessary element even where no question of privilege was involved; and today the dominant view seems to be that malice, in the sense of some indirect, dishonest or improper motive -

that is one basis -

or at any rate an intent to injure without just cause or excuse -

which looks to me like an entirely different test, I might say. Then the author goes on:

It is sufficient evidence of malice that the defendant knew the disparaging statement to be false -

then if you look at footnote 223:

The second formulation was preferred in Joyce v Motor Surveys -

It seems to me that the two tests, I must say, at first sign are not the same. Do we have to decide what the tests are and what has to be satisfied?

MR McCLINTOCK: Your Honour, probably not, we would say.

CALLINAN J: We might here. I am concerned about it.

MR McCLINTOCK: The passage in question, realistically speaking, the findings by the trial judge - which again, as I have said with tedious repetition for which I apologise - which have never been challenged, were that this was malicious really on any view.

CALLINAN J: But I think what Justice Heydon says, although he may not say it explicitly, involved some contradiction of that. I notice in Ballina v Ringland all members of the Court of Appeal, including the presiding Judge here, Justice Kirby, and Justice Mahoney who dissented, all simply accepted what Fleming said in a slightly earlier edition, which I assume would have been the same as this. I have looked at it. All of their Honours do in Ballina.

MR McCLINTOCK: They do.

CALLINAN J: There is no case in this Court which throws any light on it, is there?

MR McCLINTOCK: No, there is not. It is many years since this Court has ever considered the tort of - - -

GLEESON CJ: I think when you are looking at Ballina you need to remember that the Court of Appeal was answering some questions that had been formulated by Justice Levine, which appear on page 683. The questions that we were considering were whether a particular party was entitled to maintain an action of a certain kind.

MR McCLINTOCK: Yes, your Honour, it was entitlement essentially, I suppose, for policy reasons.

CALLINAN J: It was not really necessary to consider in any detail the elements of the tort itself.

MR McCLINTOCK: That is true.

CALLINAN J: The question was whether the tort lay at the suit of the council.

MR McCLINTOCK: That is true. With great respect, your Honour, there was no necessity for your Honour or Justice Kirby to consider the elements of the cause of action, because - - -

GLEESON CJ: Except in so far as an understanding of those elements bore upon an understanding of whether somebody had a right to maintain an action.

MR McCLINTOCK: Yes, although, your Honour, the element of malice and the element of actual harm, in the tort of injurious falsehood, may I say with respect, was obviously significant in both your Honour's mind and Justice Kirby's mind in finding the tort could be relied upon by a local council, in contrast to defamation, where, of course, it is unnecessary to prove, at least in the first instance, malice or actual harm. That was the point of distinction so I suppose it does arise in that sense between the two torts in the area there.

GUMMOW J: Now, Mr McClintock, it is accepted, is it, that there was an illegal act here, an unlawful act, forgery?

MR McCLINTOCK: In fairness to Mr Tobin, your Honour, there is a debate as to the nature of characterisation of what the respondent did. There is no dispute as to the actual physical thing that he did, and the physical thing was taking a genuine letter from my client and cutting off the top and cutting off the bottom, so the text was gone, and pasting it to a piece of paper and then writing it.

GLEESON CJ: Now, why would that not be forgery?

MR McCLINTOCK: It would be forgery, your Honour.

GLEESON CJ: Forgery is making a document appear to be something other than it is.

MR McCLINTOCK: Exactly, it was.

CALLINAN J: Was it not also some breach of the code of conduct? What was the status of that code of conduct?

MR McCLINTOCK: The code of conduct was the Council's code of conduct. I cannot say, your Honour, it had legal force.

GUMMOW J: Now does anything flow from the fact that this damage, which certainly is made out by an ordinary chain of causation, the loss of the contract, flowed from this unlawful act?

MR McCLINTOCK: I did not hear the first - is there any challenge to - - -?

GUMMOW J: Is there any relevant tort that is engaged by the fact that you have an unlawful act which brings about this commercial loss to your client?

MR McCLINTOCK: In addition to injurious falsehood?

GUMMOW J: Yes. Not in addition to; as the right legal category.

CALLINAN J: Not since Smith v Beaudessert Shire Council was overruled perhaps.

HAYNE J: Well, is that right, given what was said in Northern Territory v Mengel 185 CLR 307. Reference also needs to be made to Sanders v Snell 196 CLR 329, and the question as yet I think unanswered in this Court, about the tort which is seen to emerge in the United Kingdom, a tort of interference with trade or business interests by an unlawful act directed at the person injured although not necessarily done for the purpose of injuring his or her interests.

MR McCLINTOCK: Your Honours, it will be apparent from my silence in response to what Mr Justice Hayne just said, and frankness is always better, is that I have not thought of those issues.

KIRBY J: What is the relevance of these? That you have chosen the wrong cause of action, is that what you mean?

MR McCLINTOCK: That is what seems to be being suggested.

GUMMOW J: Well, the relevance is, you are straining one cause of action when you may have had another, so therefore why should we strain the first merely because you overlooked the second? That is the relevance of it.

MR McCLINTOCK: Yes, your Honour, but in my submission we do fall within the tort of injurious - - -

GLEESON CJ: It is not a question, perhaps, of a default in legal system if your client does not have this remedy.

MR McCLINTOCK: But the case was run on the basis that we did have this remedy - - -

KIRBY J: Well, that is the only matter that is before us.

MR McCLINTOCK: - - - and, in my submission, we did satisfy the tort of injurious falsehood. All the elements other than the one were found in my client's favour, and there has been no challenge to them. The one was the element of causation. That is the only reason why my client lost by the trial judge. There was an additional element in the Court of Appeal, but there was no dispute, there was no submission addressed to the proposition in the Court of Appeal that the elements of the tort had not been satisfied, of injurious falsehood.

CALLINAN J: But the trouble about that is - yes, I see. So that you say what your contention - that even if Justice Heydon was correct in some of the things he said about the elements not having been made out, that was not an issue that was open for his Honour to decide in the Court of Appeal.

MR McCLINTOCK: Yes, I do say that, and in any event, your Honours, he did not reverse the findings below. He expresses hesitation about them.

CALLINAN J: Mr McClintock, it may turn out to be, as you say, not relevant, but for my own part, I would like to know precisely what the test is, because it does seem to me that if the test is merely of the existence of some indirect, dishonest or improper motive, rather than of an intent to injure without just cause or excuse, then your case is a much easier case, because I take an intent to injure without just cause or excuse an intent actually to injure the plaintiff. You may or may not have established that and you may or may not have findings to that effect, and I understand your submission that you say you do. But assume for present purposes that that is not completely clear. Which is the correct test? You cannot say they are the same, can you?

MR McCLINTOCK: No, I cannot, your Honour. Obviously, there would be an overlap but I cannot say they are the same.

CALLINAN J: Which should we adopt if we have to adopt any, either of them, and why should we do so?

MR McCLINTOCK: Your Honour, the test that should be adopted, in my submission, is the first test, that is, of indirect, dishonest or improper motive, to the extent that it does differ from the - - -

CALLINAN J: Because it is almost identical with the defamation test. But do you have any other reason their Honours should adopt?

MR McCLINTOCK: One is seeking to impose liability upon people at least in part because of their state of mind. If someone does have an indirect, dishonest or improper motive, there is no reason that one would step back from imposing a liability upon them. If it was simply an intent to injure, there might be other reasons why one would not. But if someone has that intention, the dishonesty, it is analogous to the tort of deceit, your Honours, and both actually have to be proved in the cause of action, rather than as a matter of defeasance of a privilege in defamation.

CALLINAN J: Taking up what Justice Gummow put to you before about some other action, just explain to me why a defamation action could not have been brought, if actual damage had been sustained by the company?

MR McCLINTOCK: Your Honour, a defamation action probably could have been brought. I do not know, nor does Mr Evatt, who came into this case very shortly before the trial, know why it was not. But I could not put to your Honours that a defamation action could not have been brought.

CALLINAN J: That is the only difference, is it not, because as a company you would have to prove - much what you would have to prove for injurious falsehood, actual damage, is that right?

MR McCLINTOCK: Essentially, your Honour, yes, essentially. I mean, the authorities say that companies can get damage for damage to their reputation and it is not necessary to prove special damage, but it would be a pretty feeble defamation case for a company if you could not prove some loss of good will or financial downturn because that is how you would test whether there had been damage to reputation for a trading corporation at least, that is, that people stop going to it or its business did not - - -

CALLINAN J: Anyway, your submission is you have a good cause of action regardless whether you might have had others.

MR McCLINTOCK: Exactly, your Honour. Your Honours, could I go back to the causation issues and say this: if the test in the other areas of law apply, that is, "but for" provided in the commonsense way as appears to be the case in the negligence area, my client established that. But for the letter there would have been no publication in the Herald. The letter would never have come to the - - -

GUMMOW J: What is the content of this phrase, "commonsense"?

MR McCLINTOCK: Your Honour, it is the phrase - - -

GUMMOW J: I know it is used in March v Stramare, I have never understood it and what does it mean? It rakes up a lot of unrevealed policy choices, does it not? What are those policy choices here?

MR McCLINTOCK: The policy choice primarily is what are the circumstances in which one should make someone liable for an act that is caused, at least in part, by them, by that person? That is the policy choice. It is there, though, is it not, to provide a way of assessing the likelihood that intervening events in some way broke the chain of causation or resulted in a totally independent cause of the harm being suffered.

HAYNE J: Again, those have got more baggage wrapped up in them, those phrases, than one cares to examine. Let us go back to the policy choice you earlier identified. If that is the policy choice, do you say that invites attention, either to the subjective foresight of the tortfeasor, does it invite intention to the objective foresight that a reasonable person in the position of the tortfeasor should have had? What do you say?

MR McCLINTOCK: Your Honour, I will have to give several answers to that question. The first is this. I would say that it is unnecessary, in an intentional tort such as this, to prove any degree of reasonable foresight, be it subjective or objective. This is an intentional tort where it has been found that the tortfeasor has done an act deliberately, maliciously and falsely and, in such circumstances as that, the questions of reasonable foreseeability should not enter into the matter.

HAYNE J: If that is your submission, and I understand why you put it and how you put it, it seems to me your submission on causation is that it is "but for" stop.

MR McCLINTOCK: Stop.

HAYNE J: No reference to commonsense or anything else, bare historical relevance. Now, if that is the submission, let us understand it.

MR McCLINTOCK: That is my first submission. Your Honour, the issue as to whether reasonable foreseeability is necessary in the intentional tort of deceit was left open by this Court in Gould v Vaggelas by Sir Harry Gibbs in that case. Could I put the second submission - - -

GUMMOW J: What about in the other intentional torts?

MR McCLINTOCK: Your Honour, in Gould v Vaggelas - - -

GUMMOW J: The notion of reasonable foreseeability was evolved in dealing with what torts? They did not talk about it in Lord Mansfield's time. They started talking about it at some later time. Now, why did they start talking about it?

MR McCLINTOCK: Your Honour, they started talking about it really because of the effect of the tort of negligence.

GUMMOW J: Exactly.

MR McCLINTOCK: And it does not appear. One never sees in the pleadings of torts of deceit, for example, or conspiracy - - -

GUMMOW J: Is not this your strength?

MR McCLINTOCK: Yes, it is what I am putting, your Honour.

GLEESON CJ: Well, a possible way of putting it is, is it, that if you intend to cause somebody harm and you do cause them harm, it does not matter what relationship there is between the harm that you actually cause them and the harm that you might have foreseen?

MR McCLINTOCK: That is it, your Honour. That is the proposition I am putting. It is the proposition I am putting and, in my submission, it is as a statement of the law correct. When one looks at the intentional torts, which were around for many centuries in greater or lesser developed forms - - -

GUMMOW J: Well, long before negligence.

MR McCLINTOCK: Long before negligence, and it is only because in the tort of negligence and its effect on everything else - one thinks of the Court's recent decision in relation to nuisance and Burnie Port Authority in relation to Rylands v Fletcher. The proposition, as I said to your Honours, was left open in Gould v Vaggelas 157 CLR 215 at 223 to 224, which is not on the list of authorities, where Sir Harry Gibbs quoting Lord Denning in Doyle v Olby (Ironmongers) said:

"The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement . . . All such damages can be recovered: and it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen."

That is the proposition that I would say applies to all intentional torts and questions of reasonable foreseeability only arise in relation to negligence. It is a nonsense to talk in terms of causation when one is dealing with a tort that involves intention of this type, to talk of questions of reasonableness at all. It is like talking about reasonable foreseeability in fiduciary obligations areas. In any event, your Honours, that is my primary submission.

The secondary submission is that if it is necessary to determine reasonable foreseeability, we have done so. In none of the authorities has it ever been necessary to prove that the exact type of harm was precisely foreseeable. Here there was an intention and a calculation to harm. Here the findings as to calculation by the trial judge are sufficient because they involve, obviously, objective likelihood. There was a reasonable possibility that this would damage my client's business and it is irrelevant that it did so in precisely the way it did or that it was found out in precisely the way by McDonald's that it did.

Second, if it is a matter of the subjective intention or subjective foreseeability, there was no evidence from the respondent here and one would readily infer that his state of mind was to do the kind of harm in question.

CALLINAN J: Mr McClintock, I am sorry to come back to it but it is relevant to what you have just said. It seems to me that Mr Justice Heydon rejected the defamation-type test because at page 251, line 44, after referring to the trial judge's reference to the former test which was described as the defamation-type test his Honour said:

The defendant could have had an improper motive without necessarily having an intention to injure.

That suggests to me that Justice Heydon regarded an intention to injure as essential. In other words, he seems to be preferring the second test that is referred to in Fleming.

MR McCLINTOCK: He is, your Honour.

HAYNE J: Is that fair, given what his Honour says at paragraph 20, page 250? His Honour identifies two ways in which the appellant put the argument. Here he is dealing with one of them. Is he necessarily choosing that that is the preferred view or is he simply dealing with one of two alternative arguments advanced and saying, "On that test it fails"?

CALLINAN J: I think it might be the latter because his Honour then says:

Secondly, even if the trial judge did make a finding -

I do not know. I think it is a little doubtful, with respect. He seems to be marshalling the reasons why his Honour was wrong and the second one follows what I take to be the first, which is possible absence of an intention to injure - proof of it.

MR McCLINTOCK: The way this came up, your Honour, in the Court of Appeal reveals what actually was occurring. His Honour was not trying to contradict the finding of malice below but merely to understand it. The reason was that it had been put based on what is said in Spencer Bower's work that - - -

GUMMOW J: I am sorry, Mr McClintock, but then if you go to page 253, line 27, his Honour says:

The plaintiff's argument based on the supposed finding of intention to cause harm is rejected.

Again, that would rather suggest to me that that is the test that his Honour in the Court of Appeal thought preferable.

MR McCLINTOCK: Your Honour, I do need to explain what is actually going on. I am sorry for not answering your Honour's question directly. If your Honour goes to page 249 your Honour will see that it is being urged on the Court of Appeal - this is the quote from Spencer Bower - that it was sufficient:

to the effect that the tort of injurious falsehood is actionable if the plaintiff proves that the matter published was false, that it was actuated by malice, "that he has sustained actual damage by reason thereof, and that such actual damage was either the natural and probable result of the publication, or the result which the person publishing such matter intended." The argument that was being advanced that the harm that was intended - it was being put as an independent way - as independently of causation, that if the harm was intended that was sufficient. His Honour's reasons for rejecting that - there are a number of reasons. One appears, for example, in paragraph 25 at the end of it:

Even if there were an intention to cause damage, there would have to be proof of causation of loss in fact.

His Honour is saying there that the underlying submission is wrong. Also, your Honours, I accept that his Honour is dealing with - if I could say this. What his Honour is saying when he deals with malice on page 251 is his exploring to determine what the trial judge had found so as to test it or test the test that Mr Evatt was propounding against that finding.

What he was saying, and the issue may not have been directly debated, that the malice could have been found on the basis of impropriety of motive but not on the basis of intention to injure. If the intention to injure is necessary in the Spencer Bower test, it was not established here.

His Honour does not say or engage, in fairness to him probably because it was not urged upon him, in any consideration of the distinction which is the right one set out in Fleming. If it necessary to do so, it is perfectly clear that his Honour is saying that there was impropriety of motive here, and it is certainly capable of saying that there was no adequate finding of intention to injure. If that is the case, impropriety of motive is, in my submission, sufficient for the reasons I have already urged upon your Honours in response to your Honour Justice Callinan's earlier question.

CALLINAN J: If it is not sufficient, do you say there was also an intention to injure?

MR McCLINTOCK: I do.

CALLINAN J: You say that there was an irresistible inference taken, among other things, from the failure of the defendant, the respondent, to give evidence?

MR McCLINTOCK: Yes. And, also, for example, the failure - one could think of other reasons, too - of the defendant to come clean at the Caucus meeting.

KIRBY J: In the statement that was admitted, did he deny an intention to injure the appellant.

MR McCLINTOCK: He said repeatedly that it was a joke. It is a very lengthy record of interview, your Honour.

CALLINAN J: Where is it, Mr McClintock?

MR McCLINTOCK: It is exhibit 3. It appears commencing at page 168 of the appeal book. Your Honours will see if your Honours go to line 15 on 168 it was 9 May 1995 The letter, of course, was first disseminated on 24 March, and the defendant was being interviewed by Detective Senior Constable Smith and Detective Sergeant Hill was present.

There are passages here where he explains, for example, on page 171 that the circumstances in which - this is line 35 and below - what he did to the letter and so on.

KIRBY J: There is no doubt about what he did. The question is what either his intent was or what the natural and probable consequence of what he did is deemed by the law to be.

MR McCLINTOCK: Your Honour, if one goes to 173 in the course of that long answer, where he sets out the reasons why he wrote the letter and the reasons why he was dissatisfied with - - -

CALLINAN J: There is a passage at 173 from which an inference might be possible - I am not saying it is necessarily is irresistible, but - - -

MR McCLINTOCK: Line, your Honour?

CALLINAN J: About line 25, that he was getting square, as it were on McNaughton for being a pest, in trying to lobby him, because the previous page deals with complaints about attempts to lobby him.

MR McCLINTOCK: Then lower down the page your Honour, is, in my submission, correct. Then he continues:

The fact that I have been constantly lobbied by him, or attempted to be lobbied by him by - - -

CALLINAN J: He said:

I felt under, under, a certain amount of anger about his, his behaviour -

MR McCLINTOCK:

over the, the weeks leading up to this being sent and I felt that he'd acted improperly in one instance and in terms of what, what, what is right, attempts to lobby me through the parliamentarian, so on the afternoon the caucus were going to discuss the, the matter, the re-zoning application, because the, the matter was coming to council the following Tuesday, I cut and pasted -

and so on.

on it which was meant to be a joke -

One wonders whether - - -

CALLINAN J: Why could it not be readily inferred from that, that he intended to injure to get square on Mr McNaughton or Mr McNaughton's firm?

MR McCLINTOCK: Your Honour, if one continues on one will see that he says:

on it which was meant to be a joke -

and one might say that one can readily understand why, in so far as it was being urged, without evidence from the defendant himself, on behalf of the defendant that this was a joke. One can understand why the trial judge rejected it, because he continued:

I sent it to John Manning because I knew John Manning knew that, about the background and I knew he knew that I'd been, had had a, many phone calls from Chris McNaughton and I'd shown him the original letter that Chris McNaughton had sent me and I told him about the, the lobbying, the attempt to lobby himself and me using this federal politician, so I sent this to him as a joke. It was not meant to be taken seriously, in fact, I still really don't understand why he, why he, why he took it seriously `cause the, the tone of it was a, it was a completely over the top, it was meant to be a ludicrous quite frankly and I, and I believed that he, he would just read it and have a bit of a, a, a laugh at it and, and that'd be the end of it, he might have mentioned it to be that night when we met in caucus that hew received it as a joke. So that's the background to it.

Then he said - - -

CALLINAN J: But also, Mr McClintock, it seems that he may have disguised the authorship because he well knew that Mr McNaughton would sue him and that follows from page 176, line 12.

MR McCLINTOCK: It does, your Honour, and that is the reference to Hunt and Hunt in the letter itself. When one understands the background of this letter there is a degree of seriousness about underlying the words that are actually used in the letter:

Well, I understand that Hunt, well, Mr McNaughton, that's John McNaughton, has on a number of occasions in my presence said that he would litigate against anybody who he felt sullied his reputation in anyway politically, and I know he had take, he's used the firm in suing one of my colleagues, Councillor Mary Gayner and I think he also used the same firm to attempt to litigate against Councillor John Manning in the past over matters said with, within the ALP.

And so on. That is the reason why he - that comes up in relation to the response to the question as to why he mentioned Hunt and Hunt in - - -

KIRBY J: There is a denial at the bottom of page 176:

it is not an attempt to deceive John Manning, I did, I believe given the context of the letter the, the ludicrous text of the letter that he would have seen it as a joke . . . wouldn't have entered my head -

he says.

GLEESON CJ: That presumably is the point of issue about whether this letter was a forgery, the intention with which it was concocted. If the intention with which it was concocted was, as he appears to say on the bottom of page 171, that it was intended to be the basis of a private joke "between myself and John Manning", then presumably that would not be a forgery, because there would not be the intention to represent the letter to be anything other than a false document.

MR McCLINTOCK: Your Honour, that would have been a very difficult case for the defendant to make at trial, without calling the defendant to say in the witness box that that was what he had in mind.

GLEESON CJ: I understand that. I am just saying that presumably that would be the point at which you would conduct a defence if you were charged with forgery in relation to this instrument.

MR McCLINTOCK: Yes, your Honour, it would. But, your Honour, this document contains admissions by the defendant, the respondent, who was not, as I said, called to give evidence. We are realistically entitled to pick and choose the ones that we think are right and submit the ones we do not like are wrong. It was put very strongly and rejected that this was not a joke, and was not intended to be a joke, and that was the finding made by the trial judge.

KIRBY J: He complains about the fact that this has made him fairly miserable and so on, as a result of Mr Manning's actions, but it has also made your client fairly miserable, too. He lost a contract and lost some money.

MR McCLINTOCK: Yes, your Honour.

HAYNE J: I do not want to delay you, but at some point if you can give me some authority for this notion that you can pick and choose in an admission, I would be grateful.

MR McCLINTOCK: I will, your Honour.

HAYNE J: I thought if you took a document as an admission you put the whole in, for good and for bad, but there may be authority for the contrary. You will let me have a note of it perhaps.

MR McCLINTOCK: I will find some authority over the luncheon adjournment, your Honour.

GLEESON CJ: I thought the case that suggested you use the whole of it was Jack v Smail?

MR McCLINTOCK: One has to use the whole of it, but different parts of it can be given different weight, and the tribunal of fact is not bound to accept the accuracy of everything stated in it, and was entitled to say, for example, as the trial judge did, "I do not think this was a joke, in the circumstances of the matter". Whereas it would be perfectly open to make findings based on the things that he said about his attitude towards Councillor McNaughton, or former Councillor McNaughton.

KIRBY J: If it was such a joke, why did he not tell his colleagues in the ALP Caucus? Why did he not tell Mr Manning?

MR McCLINTOCK: Exactly, your Honour. Why did he not come clean and say it at the Caucus, where he knew by then, as he says in the record of interview, that Councillor Manning had not seen it as a joke.

GLEESON CJ: Now, Mr McClintock, how long do you think you will expect to require to complete your argument?

MR McCLINTOCK: Your Honour, I will finish the argument within the next 10 minutes, or perhaps by 12.45. Everything, your Honour, is set out in the submissions. I have dealt with, I hope sufficiently, what I wish to say about causation and the way that we wish to put it.

HAYNE J: Can I hark back one moment to causation. Damage is a necessary element of this cause of action, is it not?

MR McCLINTOCK: It is.

HAYNE J: Is any damage sufficient, or is there some qualification to the kind of damage that suffices? The reason I ask is that Lord Justice Glidewell, in Kaye v Robertson [1991] FSR 62 at 67, seems to have described the essentials of the tort as including:

special damage has followed as the direct and natural result of their publication -

as if only some kinds of damage will suffice to constitute the tort. Now, his Lordship may perhaps be running together a number of concepts. What is your submission?

MR McCLINTOCK: My submission is that one has to prove some form of actual financial loss but that one does not have to prove a specific dollar figure and that special damage, in the way that Lord Justice Glidewell was talking in Kaye v Robertson meant, in fact, that kind of special damage. The authority for that proposition, and I will take your Honours to it now, is Ratcliffe v Evans.

HAYNE J: That was the general diminution in business which was asserted to be, and demonstrated to be, direct and natural result of publication. My question is: is any damage sufficient or must the damage that is, in fact, suffered have a particular characteristic, namely that it is direct and natural result?

MR McCLINTOCK: No, your Honour. I would say that any damage is sufficient. That really is perhaps another way of the first proposition I put, that it is not necessary for it to be foreseeable. Your Honour has reminded me, and really it is another way of answering your Honour's question, could I say this? In the Court of Appeal it was found that it was not a natural and probable consequence of the original publication that this loss was suffered.

In my submission - and I will not take any more time about it because I have explored all the reasons why really and they are in the submissions - it was the natural and probable consequence, or being more accurate, it was a natural and probable consequence of the original publication that this harm, or this type of harm or some form of harm, would be suffered by my client, some form of financial harm.

KIRBY J: You take me all the steps along the way to the point of seeing the police, ICAC, the leakage, the publication, but then there is that final step that McDonald's would terminate the contract over something so ludicrous. Now, is there anything more to be said about that than what Justice Callinan said, that in the real world and if you are not living in a submarine and you know that there are sensitivities here, big multinational corporations do not want and do not need the smell and odour and therefore this is just one of those possible consequences and you just have to live with it if this is what follows.

MR McCLINTOCK: That is the case, your Honour. The fact is that some people might have thought that this was an overreaction on the part of McDonald's, but it was a perfectly predictable overreaction for the reasons Justice Callinan has given. As Mrs Richards said in evidence, "we thought they were contaminated", and why bother? Bear in mind that this was - - -

KIRBY J: But that does not seem to square with the fact that they said "We will do business with you in the future", and apparently they did because you do not complain about any further special damage?

MR McCLINTOCK: No, they did not business any further, your Honour, but we did not claim anything further. But can I answer that and say this: Mrs Richards gave evidence that she was being very diplomatic in that letter and that she did not raise, no doubt out of a desire to be kind, the precise reasons why she was terminating the relationship. She made perfectly clear in her evidence what the reasons were and in cross-examination - well, Mr Molomby put to her that she was being diplomatic in that matter.

Your Honours, that is what I wish to say in relation to the causation test, subject to one thing. There was a criticism made by the Court of Appeal of what were said to be questions that were asked by Mr Evatt at the trial and that was put on the basis of an independent reason for rejecting or not giving weight to Mrs Richards' evidence. The questions were never objected to and may I say that on reading Mrs Richards' cross-examination, it is perfectly clear that it was being put to her that she cancelled the contract because of the knowledge of the letter. The finding in question, your Honours, appears at page 262 of the appeal book at lines 5 to 20.

One last matter on causation, I will just join issue with a finding that is made at page 260 by the Mr Justice Heydon, which is where his Honour says:

The short answer to that criticism is that there was no evidence that Mrs Richards had knowledge gained from any other sources.

There was, in fact, such evidence. She had said in her evidence that Mr McNaughton had called her after the article and explained in detail what had occurred in relation to the letter, and that evidence is, in fact, quoted by the Court of Appeal at the top of page 259 of the judgment.

I go then, your Honours, to the next issue which is the way the Court of Appeal dealt with the finding of $38,000 actual loss. In my submission, your Honours, there was no sufficient basis for interfering with the finding made by the trial judge; $38,000 was, in my submission, on the basis of the accountant's reports, a fair sum to give in these circumstances. The accountant's reports were admitted without objection, and they do establish, in my submission, the $38,000 loss.

The arguments, and I will not repeat them, your Honours, are set out in your written outline. I appreciate that I have taken much more time than I intended to in the arguments that I have advanced already, but they are set out there. The next subsidiary point on that issue is the point that arises from Ratcliffe v Evans which is that the trial judge found - and this appears in the passages I took your Honours to earlier - that as a result of learning of the letter through the newspaper the contract was lost.

Now, assuming causation in my favour, the loss of the contract is sufficient special damage within the meaning the Ratcliffe v Evans and my client will be entitled to a judgment, a verdict, even though it might not have been the $38,000 figure, precisely, and would have been entitled to an approximation of what the trial judge thought the loss was. To the extent that it is put on the basis that we failed to prove that element of the cause of action, in my submission, it should be rejected for that reason, also. That also is set out in the outlines and I will not repeat it to say anything further about it.

That, your Honours, subject to checking my notes, given the fact that your Honours do not wish to hear from me in relation to the last issue, concludes what I wish to say. Those are my submissions.

GLEESON CJ: Thank you, Mr McClintock. Yes, Mr Tobin.

MR TOBIN: Your Honours, I notice, because of the time, that there is a short topic as to one of the elements in the cause of action, just raised by my learned friend, that we would want to deal with and I may be able to conclude it in the six or eight minutes left.

GLEESON CJ: No, we are adjourning at 1 pm.

MR TOBIN: At 1 pm, thank you, your Honour. Well, your Honours, having started down that track, perhaps I could make a short submission on that topic of damages because as my learned friend concedes, rightly, damage is the gist of the cause of action. We would contest the proposition that in the factual material before your Honours today there is any issue to be raised as to whether other forms of damage have a place in the tort of injurious falsehood. I have in mind what Justice Gaudron and Justice Gummow said in Chakravati's Case as to whether injury to feelings might find a place in the array of loss or damage in the tort of injurious falsehood, but, of course, we have a corporation.

KIRBY J: Did you? I did not take that to be an issue in this case.

MR TOBIN: No, it is not, your Honours. Being a corporation that cannot arise, but I wanted to make the point that in our submission the court of injurious falsehood at common law, as distinct from any statutory version of it, is limited to special or financial loss. That is what it is designed to protect.

KIRBY J: Is that the test there? It seemed to be a different formulation. Some say special damages, some say actual financial loss, and it may not be relevant or it may be relevant.

MR TOBIN: The way we would put it, your Honour, is actual damage because I think that is clearer than the term "special" and it is actual damage in the pocket, that is, going to the loss of profit in this case of a corporation.

KIRBY J: Why was there not, at least in the loss of the contract, actual damage?

MR TOBIN: That is the short point that we wish to develop, your Honours. The pleading of this issue at page 3 under the particulars at line 35 began with a variety of forms of damage, only one of which was persisted in, (a):

As a direct consequence of the said publications -

and they have not pleaded the Newcastle Herald -

the Plaintiff lost its consultancy to McDonalds Australia Limited in respect of its proposed development at Wallsend -

(b), which was about future consultancy work, was expressly abandoned in correspondence on 10 December 1997, and (c), the form of damage that in Ratcliffe v Evans was discussed, that is, general loss in business and custom, was likewise abandoned.

The issue then as conducted at trial was limited to the loss of the actual consultancy to do with the development application at Wallsend - no other future loss of other contracts with McDonald's and no claim for general loss of business. The importance of that is that the development of the law in this country on that issue is to be found in Andrews v John Fairfax (1980) 2 NSWLR 225 in the Court of Appeal. If I could remind your Honours of the background of the case. Mr Andrews was a well-known architect and he designed and there was built in this city a large public building which the Fairfax Press, the Herald and Weekly Times and Queensland newspapers reported had a leaky roof. He sued and his company sued in libel. In the course of the pleadings - and this appears at 235 at the top on the third line from Mr Justice Hutley:

The plaintiffs did not allege any special damages. The paragraph in the statements of claim dealing with damages reads as follows -

your Honours see there it is a claim for general loss -

will be greatly injured in his/its credit, profession, occupation . . .

One consequence of pleading in this way was that the defendants were not entitled to discovery of the International's records, and it was contended that precise proof of International's loss could not be given. International contended, however, that it was entitled to give evidence of its business activities in order to permit the jury to understand what had happened to its business after the libel, relying upon Ingram v Lawson, a case in which there was no allegation of special damage.

Now, that case, which was conducted successfully by now Justice McHugh, as I recollect, in the Court of Appeal and at trial, established that in some circumstances it may be an injurious falsehood is a tort for these circumstances to apply. It may not be possible to nominate or designate the actual loss in financial terms. I imagine the classic example is where at an auction someone challenges the right of title of the owner and the prospective bidders melt away, or that a hotel is selling adulterated liquor - - -

GLEESON CJ: If a barrister lost a brief, how would you calculate the loss if you did not know how long the case was going to last?

MR TOBIN: You do it very roughly, your Honour, very roughly. Here, of course, by analogy there were witnesses who did know how long the case would last. If I could explain that this way. The McDonald's representative was called and she gives evidence at pages 68 and 69 of the appeal book. Her evidence went to the proposition that after July 1996 when they severed the relationship with the plaintiff, she did the work, and she told the court, and this was not challenged, that there was an application to go before the Council in July 1998, which is shortly after the trial. So she was in a position to tell the court precisely how much work she did, how many hours she had put in and the type of work involved in pushing ahead with another development application before the Council.

Now, I say this, I hope, with sufficient directness. It is a great puzzle that in a case where actual damage in the financial sense is the gist of the cause of action, and where there is a witness who is examined and says that she did some work up to the date of the approval going up to the Council again two years later, and is never asked what work she, in fact, did and is not asked to quantify the number of hours of work. As I say, it is a great puzzle that the plaintiff asserts that it has proved its actual loss.

KIRBY J: Yes, but it will have lost.

MR TOBIN: It will, your Honour, and I concede that on her evidence there has to be some work which she did which otherwise would have been done by the plaintiff. But of course, your Honours, it is not sufficient if using the example that the Chief Justice put to me, in the absence of a situation where you cannot estimate how long the court case might go, or you cannot estimate what members of the passing trade did not drop into the hotel to have a beer. In those circumstances the courts have recognised, and we accept without question, the court does the best it can.

The question then is, as we would formulate it as follows, where there is a case pleaded of special damage in terms of the loss of an identified contract and where a witness is available both from one side of the contracting parties, McDonald's, and the other side, Mr McNaughton, if where in those circumstances no evidence is led to inform the court how much work was involved in the running out of the contract until the middle of 1998, and what value was to be put on it, has the plaintiff thereby discharged its onus of proof? And we contend that the plaintiff here - the appellant before your Honours - has simply failed to make out that necessary element in its cause of action, not - - -

KIRBY J: They say exhibits F and K, which were admitted into evidence, were sufficient to establish it.

MR TOBIN: Yes, that is the argument they have put. And of course, those exhibits, your Honour, are the exhibits of Mr Coughlan's report, who was the accountant. And your Honours will see from that that this report dealt with the previous contract. That is, it dealt with the circumstances, at 211, of the value to the firm, to the appellant, of the work it did for McDonald's, in the right-hand column under the block "Wallsend". So that is the value of the Wallsend contract, as it happens, over the preceding financial year from August 1995, as invoiced, until 28 June 1996, the last invoice. The total value of that work was $57,000.

GLEESON CJ: Now, just before you go any further, was this document admitted without objection?

MR TOBIN: It was, your Honour, yes.

GLEESON CJ: The statement of fact and opinion at line 20 on page 211; what is its status? What is the relevance of the belief of the author of this report if it is not to be taken as some evidence of fact?

MR TOBIN: It was challenged in cross-examination and I think that is where the issue can be found.

GLEESON CJ: It could only have been challenged in cross-examination if it was in evidence in the first place.

MR TOBIN: Yes, it was in evidence, your Honour.

GLEESON CJ: What was the relevance of their belief?

MR TOBIN: It was conceded by Mr Coughlan that it had no relevance as to the actual fact. This is of 81 and 89 of the appeal book. At 81 from line 31 or 32, he says:

Q. But you were not given any information to justify the assumption that the work would have continued at the same level were you?

A. The report is based on a continuation of the income at the same level as indicated in the report.

HIS HONOUR: Q. Does that mean yes or no?

A. Yes.

MOLOMBY: Q. But Mr Coughlan what I am getting at is this, you were not given any information to support that assumption were you, to support by way of saying the work would have continued at that level? You have made the assumption it would have been at that level?

A. Correct.

Q. That's correct isn't it?

A. Yes.

Q. And it is only an assumption isn't it?

A. Correct.

KIRBY J: But it would be open to the trial judge to conclude that it is a reasonable assumption to act upon and you would have to establish error. I still have ringing in my ears Justice Callinan's statement on the special leave application, "Why did the Court of Appeal have to do this?" Given its primary conclusions, why did it have to set aside a finding of - - -

MR TOBIN: There was a notice of contention, which it dealt with. The first notice of contention dealt with this issue.

KIRBY J: Well, that perhaps explains why they did it.

MR TOBIN: Yes, that is why they did it, your Honour.

KIRBY J: In the light of the further appeal. Maybe it is as well that they expressed their opinion.

MR TOBIN: Yes.

KIRBY J: But given that this statement on 211 got in without objection, given that it makes an assumption as was brought out that things continued at the same level, given that it might be a reasonable thing to make that assumption and given that the primary judge so concluded, where is the error?

MR TOBIN: The error is, if I could go to the legal principle, that the court, in circumstances where the plaintiff has available to it the material to allow quantification of damages, if the plaintiff fails to quantify the damages by evidence it is not entitled to recover those damages.

KIRBY J: That is a bit hard, Mr Tobin, because the world does not know what might have happened if events had occurred. I mean, it is necessarily speculative.

MR TOBIN: But, your Honour, that is the point I made in answer to his Honour the Chief Justice. In this case, two years had elapsed from the events sued upon and they did know how much work was lost. They did not tell the court, but they did know because McDonald's must have known, they called the witness from McDonald's, and Mr McNaughton could have given evidence of the hourly rates that would attach to such work. So they did know and the puzzle is that they did not lead the evidence, and the learned trial judge commented on the unsatisfactory nature of that. His finding, of course, was in order to cover the circumstance if he had made an error with regard to the reasoning and his conclusion at the trial itself. But his Honour says how unsatisfactory it is, but he said that a year's contract would be an estimate that you could accept in a case of this kind.

KIRBY J: Where is this?

MR TOBIN: Page 232 for the trial judge, lines 35 and following:

However, a truer position in reality could have been derived if the Court had been informed as to what Mrs Richards -

from McDonald's -

would have expected to have taken place had the contract not been lost.

Now, she was in a position two years later to tell the court precisely that.

It would also have been of interest to know what the company's plans were and what the plaintiff's projections were -

and higher up at 232 - - -

HAYNE J: Do you go so far as to say the judge could not make that finding?

MR TOBIN: Yes we make that submission. The other piece of evidence is at 89, lines 35 and following, again Mr Coughlan being cross-examined:

Q. Now there is another assumption behind your report isn't there to this effect? That no work came into the firm to replace the work which was lost from McDonald's?

A. Correct, this work refers to the loss of income from that work.

Q. This refers to, this is your calculation on assumptions we've discussed, of what would have come in from McDonald's if their consultancy had not terminated?

A. Correct yes.

Q. It is not properly described as a loss in absolute terms unless you also know that no work cam in to replace it, is it?

A. Correct, if I follow your questioning, yes.

Q. Now that is not a matter that you investigated at all is it, as to whether any work came in to replace it?

A. No. The report is prepared solely on that basis of.

Now, your Honours, we would submit that this is a case where in fact the plaintiff/the appellant was not entitled to say to the court that it should guess what the loss was because there was available in the chronology of events between the matters sued upon and the trial and a lapse of time that allowed very precise computations to be made as to what the loss was.

KIRBY J: That would be a good submission if the criterion is the proof of special damage, but if the criterion is the proof of actual loss you have conceded that there is an actual loss: they lost the contract, they lost whatever would have been profits. One can reasonably infer - I think even you will allow us to infer that a surveyor does not act for nothing and therefore they have lost the professional fees that they would have got on that contract.

MR TOBIN: I face fairly into that breeze. I accept what your Honour says that there was a loss. The question that we pose is whether as a matter of law there was a failure to make out the necessary element of the cause of action. There is a case called Ted Brown Quarries v General Quarries 16 ALR 23 which your Honours would be familiar with.

KIRBY J: I am not familiar with it. Why should I be familiar with it?

MR TOBIN: When I tell your Honours the facts it will - - -

CALLINAN J: Was it decided before Gould v Vaggelas?

MR TOBIN: Yes, it was, your Honour. This is a 1977 case, that is, Gould v Vaggelas.

CALLINAN J: Was it not criticised in Gould v Vaggelas? I had an idea it was criticised or certainly referred to in Gould v Vaggelas.

MR TOBIN: I will check that, your Honour, but there are two or three authorities that were sent up in the course of the morning where Ted Brown Quarries is either followed or referred to. Ted Brown Quarries was dealt with by the appeal division of the Supreme Court of Victoria.

GLEESON CJ: Where do we find the principle you are relying here?

MR TOBIN: The principle in Ted Brown Quarries is at page 36 of Chief Justice Gibbs, or Justice Gibbs at that time, halfway down the page, the first full paragraph:

Dr Solomon -

who is an expert witness -

gave evidence as to the nature and state of development of the quarry, and as to the cost of removing overburden and opening up faces fore working. The learned Chief Justice -

of Queensland -

also had before him photographs which showed the state of development . . . Nevertheless there was no evidence on which it was possible to reach a conclusion with any pretension to accuracy of the value that the work done on the quarry would have had to a buyer at the date of the contract of sale.

I return then to the question whether General Quarries discharged the burden of establishing its damage. For that purpose it was necessary to prove the fair or real value which the property which it acquired under the contract of sale had at the date of purchase.

And then the outcome of that at the top of 37 line 5:

There was no evidence that the "resource" had no value. Mr Hall did express an opinion as to the value of goodwill but later retracted that opinion.

Then at 35:

It was possible in the circumstances, to prove, with some degree of certainty and precision, the value of the property purchased, and it was not unreasonable to expect General Quarries to call acceptable evidence as to the value of the "resource". General Quarries failed to discharge the burden of proof that rested upon it.

GUMMOW J: Now the other view is that of Sir Garfield Barwick's, at 26 line 40.

MR TOBIN: Yes, His Honour's view in dissent was that he put a figure of $100,000 on it. Perhaps if I could reiterate a point I made in answer to Justice Gummow. What seems to us to be of great significance is that the tort of injurious falsehood obviously fulfils a function in the tapestry of law and it goes to, especially, business damage. That would appear to be the purpose behind it. In those circumstances where it is recognised that actual damage is the gist of the cause of action and where it is open to a litigant to prove that - and that is the qualification I make here - it is open to prove it accurately, has it discharged its onus if it fails to do so, because, your Honours, the injustice of it will be patent. It was known to McDonald's, who was a witness in the hands of the plaintiff company, what the losses were, and these were not elicited in examination by counsel for the appellant.

GLEESON CJ: You seem to be assuming that if the work had been done professionally by the appellant it would have been identical with the work that was done by McDonald's on its own account.

MR TOBIN: No, I do not, your Honour, for this reason: the way I put it is that the McDonald's witness, who was there, was able to say what work she had done which would otherwise have been done by the surveying company, by the appellant. In other words, she was in the perfect position not just to tell the court the balance of the work that had to be done - it may have been $5,000 or it may have been $50,000, there is no way of knowing. We say that she could have said that, and she could have said, "But the work I would have given to the consultants, or to the surveyors, would have been limited to this", and that is something that she had control of.

GLEESON CJ: Is that a convenient time, Mr Tobin?

MR TOBIN: It is, your Honour.

GLEESON CJ: We will adjourn until 2 pm.

AT 1.01 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.03 PM:

GLEESON CJ: Yes, Mr Tobin.

MR TOBIN: Your Honours, there are two other cases I wanted to refer briefly to following Ted Brown Quarries. One I mentioned, I think, at the adjournment is JLW v Tsiloglou [1994] VicRp 16; [1994] 1 VR 237. Mr Justice Brooking at 248 was dealing there with the absence of evidence of the valuation on stock admittedly stolen from the premises upon which the plaintiff sued but for which that plaintiff was unable to establish value. If your Honours would go to 248 line 30, his Honour there says:

No doubt the respondents suffered loss as a result of the burglary. But they failed to provide credible evidence of the amount of their loss, the nature of the loss being such that precise evidence of its amount was available and was led.

That evidence was rejected. Top right of 249, second line:

If a party chooses to go to trial with incomplete evidence he must abide the consequences.

And in the last paragraph on that page, halfway down:

Loss or damage is the gist of the statutory cause of action for which s82 -

of the Trade Practices Act 1900 -

provides, and accordingly there is no cause of action until actual loss or damage is sustained.

CALLINAN J: Mr Tobin, at page 209 of the appeal book the accountants say, at about line 37:

Estimated work has been calculated based on work performed for McDonalds in the Hunter area in the preceding 12 months.

MR TOBIN: I am sorry, your Honour. Estimated work performed by McDonald's - - -

CALLINAN J:

has been calculated based on work performed for McDonalds - - -

MR TOBIN: Yes.

CALLINAN J: So there was precise evidence of the previous 12 months. The assumptions referred to in cross-examination were assumptions that work at about the same level and at about the same value would have continued.

MR TOBIN: Yes.

CALLINAN J: Why could the trial judge not act on that?

MR TOBIN: What is absent in that evidence is the facts upon which the assumption was based.

GUMMOW J: That the work would continue.

MR TOBIN: At the same rate. Indeed, your Honours, there was evidence that really rather militated against that that Mr Parker gave, who is a principal of the firm. He was the first witness called on their behalf. At page 22 of the appeal book, lines 25 to 35, he said:

My recollection is as of that refusal by council to proceed with the rezoning in March, that we then waited for response from council to that effect and very little work was done after that time because it had been not approved by council.

I think he agrees. I will turn up the reference, your Honours, but shortly after he agrees with the proposition that was put by my learned friend, Mr Molomby, that there are rhythms to this type of work and, obviously, after the refusal of the rezoning, there was going to be a dead period. We do not know for what stretch of time. If I could give your Honours the final reference, and it is a decision of the Court of Appeal of the Supreme Court of New Zealand, [1980] 1 NZLR 504.

I will not read the passages to your Honours but note that Justice Woodhouse at 508, line 40 and following, adopted the reasoning of Justice Gibbs of the High Court in Ted Brown Quarries and Mr Justice Cooke similarly quoted and adopted Justice Gibbs' judgment which is to be found at the bottom of 509. I put those to your Honours because it does seem that this proposition is one of strong authority, and a fortiori, in circumstances, where the loss itself is the gist of the cause of act as Mr Justice Brooking referred to in the Appeal Division in Victoria.

Paragraph 24 of our submissions, your Honour, deals with the proposition which is that no safe assumption in the circumstances of this case was available that would have continued at the previous level, the purpose of the contract being to get the Council to approve the rezoning application, and that being unsuccessful, it was impossible to estimate from the evidence what further work was required to be done.

We emphasise, your Honours, that after the challenge to Mr Coughlan's evidence, the accountant, he went away and prepared a further report, and in the running of the trial, Mr McNaughton was also available to close, as it were, the evidentiary gap. It was squarely, we say, on the table that the assumptions had not been made out, as by dint of the cross-examination that Mr Molomby conducted. In those circumstances, we submit that there is no warrant for the plaintiff in these circumstances to have failed to make out and satisfy the evidentiary onus.

CALLINAN J: Do you say the plaintiff failed to prove any loss, or failed to prove the loss that was assessed?

MR TOBIN: Failed to prove that kind of loss, which is actual damage or special damage, required to make out the tort.

CALLINAN J: Well, what about at page 69, where Mrs Richards was asked, line 6:

Q. Well had there been no forged letter would you have continued with the services of the plaintiff company in this matter?

A. Yes.

When she had earlier said what she had done herself, after the plaintiffs were dismissed. Why does that not establish some special damage?

MR TOBIN: It establishes no more damage than could be pointed to in Ted Brown Quarries or in JLW v Tsiloglou. In JLW v Tsiloglou, which was a burglary case, the court accepted that there was valuable stock lost and it said the plaintiff had failed to discharge its onus of providing when it was able to provide a quantification of that loss.

KIRBY J: I can understand that principle if the test is proof of special damage, but if it is simply proof of actual damage, actual loss, and you get the evidence of Mrs Richards, you get the evidence of the accountants, you seem to have brought out your least palatable bottle - I know you did that because you thought we were retiring at 12.45 - but it - - -

MR TOBIN: With respect, not, your Honour, for this reason, that - - -

KIRBY J: Do you think it is a good label?

MR TOBIN: No. With respect and I hope conscientiously, your Honours, I take this to be a very powerful point against the appeal succeeding and it is based on a proposition or a principle of justice and that principle is this. If a plaintiff, if the appellant here, is in the position to quantify its loss - and we say that proposition is unarguable - McDonald's and the plaintiff company, both offering witnesses to the court, could quite meticulously have identified how much was lost.

KIRBY J: You say that, but there are lots of imponderables, it is a matter of speculation. I mean, there might have been a decision of McDonald's Milwaukee to have four new McDonald's outlets in Newcastle. Who would know?

MR TOBIN: But, your Honour, two years after the cause of action is alleged to have arisen, two years later, the evidence is given and the evidence relates to what was the work lost to the plaintiff company in that two-year period. No effort is made to put an hour or a dollar upon what was lost to the plaintiff and the principle of justice seems to us to be this: whatever your Honours might think of the conduct of the defendant below, why should a litigant be subject to a process of invention by the courts as to what might be the loss sustained by a plaintiff and to be paid for by a defendant, when that plaintiff was uniquely in the position and able, we say, to inform the court, roughly if need be, but with some degree of persuasiveness, how many hours work it had lost and how much was the value on it? The answer may be - - -

KIRBY J: The key lies in your adverb "roughly" and that is what they have tendered. They have got Mrs Richards saying what would have happened, they have got the accountants, they tender that evidence and the judge does his best and there is an element of speculation in it anyway as to what would have happened.

MR TOBIN: Could I say in answer to your Honour that it could not be gainsaid if I were to say that that speculation could stretch from $5,000 to $50,000 and it would be, to put it crudely, simply taking a punt as to where the figure lay, because the appellant declined to lead the evidence.

CALLINAN J: Say we formed the view that there was damage of at least $1,000. What should we do?

MR TOBIN: If your Honours can, without guessing, in the circumstances of this case, on the evidence, form a view as to a quantity of damage which the plaintiffs were not able to lead to the court, and thus for us to test, then your Honours would find that special damage had been proved. But if your Honours take the view, "Well, we would say at least $1,000, but note in passing no effort made by the appellant at trial to have put any figure on it at all", then your Honours, following the approach in Ted Brown Quarries, would simply say, "You have failed to discharge the onus of proof of an essential element."

CALLINAN J: Unless you prove an amount with precision, you cannot get any damage?

MR TOBIN: No, your Honour. The principle, with respect, is where you are able to prove the amount of damage, where damage is the gist of the cause of action, and you fail to do so, then you have not satisfied the onus of proof. That is a slightly different proposition.

CALLINAN J: Well, you say it is an element of the cause of action that damages, if they are provable with precision, must be proved with precision? You say that is an element of the cause of action?

MR TOBIN: No, the element of the cause of action is that the plaintiff has sustained actual damage, that is, business loss. The next step is to say that following that Ratcliffe v Evans, there is a degree of space available to a plaintiff as to what it is able to prove, and the courts recognise that and are, if I may say, generous to plaintiffs and to recognition of their loss. But here they have not proved what they could prove, and we should not be burdened with a speculative sum by way of damages as a result.

Your Honours, perhaps, if I could indicate what seems to lie behind the circumstances in which this matter comes to the Court. My learned friend opened before your Honours with a proposition that this letter, when asked by Justice Hayne, the sting of it, was McNaughton - I assume he means McNaughton as a servant of the company, the plaintiff company - was either incompetent or the real sting was that he was a bully. That is a cause of action in libel, and it is only in Queensland and Tasmania in the Australian jurisdictions that by statute the common law of injurious falsehood has been replaced by the statutory cause of action under the defamation Codes of those two States.

GUMMOW J: It used to be in New South Wales under the 1958 Act but then it has gone.

MR TOBIN: Yes, your Honour.

KIRBY J: Just tell me about that. Justice Gummow drew my attention to an article by Professor Morrison. The abolition in 1958, was the common law then restored?

MR TOBIN: Yes, your Honour.

KIRBY J: So that it was positively and affirmatively restored? We cannot take it that it was simply abolished and then not re-enacted in a new form?

MR TOBIN: No, your Honour, because the way that the Code States deal with injurious falsehood is to refer to an imputation about the plaintiff likely to cause it injury, including injury in its business. The High Court in Hall-Gibbs held that the word "imputation" in the statutes did not connote a derogatory allegation in the way that it is used in the New South Wales Defamation Act. So by that means, the common law of injurious falsehood was absorbed in the statute and there would be no point in pursuing a common law claim, given the strength of the statutory remedies.

KIRBY J: My question was directed to the reviver of the common law once the 1958 Act was repealed.

MR TOBIN: My recollection - and I will check this, your Honours - - -

KIRBY J: It is pretty fundamental.

MR TOBIN: - - - was that the 1958 Act in New South Wales did not abolish that common law cause of action in ipsissimis verbis; it simply replaced it with the statutory provision that made it otiose in effect. Therefore, on the repeal of the 1958 Act, the common law position, which had never been expressly abolished, was reactivated.

KIRBY J: In any case, it is in your interest to raise abolition and non-reviver, and you do not do so?

MR TOBIN: No. My understanding is that there is no contest. The terms of common law - - -

KIRBY J: I will assume that that is so, but I am not absolutely convinced.

MR TOBIN: Your Honour, I am answering on the hop. My recollection is that the common law of injurious falsehood is alive and well in the jurisdiction of New South Wales.

KIRBY J: In Ballina we assumed it was.

MR TOBIN: Yes. So what the appellant has done on a number of occasions in argument is oscillate between the cause of action for injury to reputation, including business reputation on the one hand, and the cause of action that is made available in injurious falsehood on the other. At the very outset, Mr McClintock put to your Honours that the Court of Appeal applied a wrong test on the issue of republication. Republication of the letter applied a wrong test and that it was the test in defamation which was applied.

I do not wish to belabour the point. Paragraph 8 of our submission identifies where it is that the trial judge was invited to adopt that course by counsel for the appellant and it seems to us inappropriate for my learned friend to raise, at this stage and at this appeal, a suggestion that the question of liability for republication was wrongly based on a defamation test. The court below was invited to do it and was furnished with the very extracts from Gatley's 9th Edition, paragraph 6.30, dealing with republication and the principles. We would ask your Honours to, accordingly, reject that submission.

The second issue that arises before coming to the comparison between the letter which was made and the article which was published is the issue of intention on the part of the defendant, the respondent here. If I could give your Honours three or four references. It has been put in argument as a matter of criticism that Mr Parsons did not give evidence and that he did not "fess up", I think were the words used, at the Caucus meeting. Both of those propositions are embedded in a misunderstanding of what, in fact, happened.

KIRBY J: I did not take that to be the submission. I took it to be the submission that in the absence of his giving oral evidence and submitting himself to cross-examination the court will more readily draw inferences than it otherwise would from the evidence that was tendered.

MR TOBIN: Perhaps that was the extent of it. What we submit, though, is that the tender of this statement was made without objection by Mr Evatt and Mr Evatt, perhaps trailing his coat a little bit, told the court and those there that they would no doubt be a little bit surprised at this decision not to object. So, it was a well studied decision by Mr Evatt to let the evidence in and having gone in we would adopt, with respect, what Justice Hayne put to my learned friend that it is not open now to the appellant to pick and choose beyond that which the trial judge has found.

We are bound by his Honour's findings, other than those which we have formally contested on appeal but the other parts of the evidence do not support the suggestion that his conducted indicated the sort of intentional infliction of harm that my learned friend has contended for.

KIRBY J: Is that so? I mean, first of all, as it is simply a written document, are we not in as good a position to draw inferences, with all respect to his Honour and paying regard to what he found, and, secondly, would one not have expected in this case that your client would have entered the witness box and said, "Well, I am a bit embarrassed by it all, now, but I certainly did not intend and did not think about doing any harm to the defendant. This was a hoax. This was a joke. I was using this merely as a means of making a point to my colleagues in the Party Caucus".

MR TOBIN: I would acknowledge the force of what your Honour puts were it not for the fact that the appellant did not object to this statement going in which says those things. You see, your Honour, the statement made to the police - - -

KIRBY J: It does not quite say that. It does not quite say, "I did not intend to do harm to the appellant". It does not quite say. He says, "I took it as a joke. It was a hoax. I thought it was obvious".

MR TOBIN: Could I take your Honours to 179 which deals with the Caucus meeting and has been used as an adverse reflection upon the conduct of the respondent, line 25. He, in question 44, makes this answer:

That, that evening at the caucus meeting -

Your Honours will remember that is 24 March, the Sunday -

when I got there Councillor Jackson made a couple of cryptic comments and I, I, I got the impression that he must have known the about the fax and I, I, I gathered that perhaps John Manning had sent a copy of it to him which is not what I wanted him to do, but I didn't bring the matter up in caucus because I just felt that from the way John, Councillor Phil Jackson was speaking that he did realise that it was a joke as well -

so, the alarm bells had not rung -

and he has a fairly quirky sense of humour, and I didn't raise the matter with John at the meeting, when I got home I, I had a copy of the fax with another fax saying, "Did you receive this?"

That is obviously from Councillor Manning:

I rang John Manning, I said, "Don't you realise that was a joke?" and I asked him who he'd sent it to and he gave me the names of a number of people that he'd sent the fax to and basically he had, told me he'd faxed it to a, the four Labor caucus members including myself, there were three Green's councillors, to the general manager of the council and either Chris or John McNaughton, I think Chris McNaughton. I said to him that he should immediately contact those people and tell them that, explain to them that it was not meant for distribution, that it was a joke, it was a personal joke between he and I. I did contact one of the Greens councillors and explained the situation that person Margaret Hemming -

Margaret Henry I think it should be -

said that she realised it was a joke and that she'd laughed, had a laugh and torn it up. She, she said she'd contact the other two councillors and subsequent to that I, she told me that she had and that they, that both of them, that's Councillor Rene and Councillor Sutton, when they received - - -

GUMMOW J: We can read through to page 181, line 40.

MR TOBIN: Now, your Honours, at 167 there is an independent corroboration of that version that on the Sunday night he rang Manning and told him, "For goodness sake, this is a send-up". At 167, your Honours will see the facsimile - - -

KIRBY J: Did he ever explain why he did not do this at the meeting?

MR TOBIN: In the terms of the statement he made, he said that the other councillor - - -

KIRBY J: He thought it was an obvious joke.

MR TOBIN: He thought that Jackson, who had a quirky sense of humour, and made some cryptic reference to it, knew of the joke but thought it a joke, but when he got home he realised that Manning had sent it to this group within the Council, and he was alarmed by that, and he said, "For goodness sake, you must set it to rights".

KIRBY J: And your client made the point in the statement himself that it is easy with the wisdom of hindsight, but even with foresight, one would have thought that in these days, where people are rightly sensitive to corruption and anything of that kind, that once he sets this hare running that he has to, in a sense, wear the consequences, if he does not own up and say, "This is just a joke".

MR TOBIN: Yes. I am dealing with the case made that he intentionally inflicted harm against the plaintiff, and it was put that he did not give evidence and that he did not fess up to what he had done. 167 happens then, on the night of the Caucus meeting, straight after he has contacted Manning, and Manning sent this fax which came in shortly after the fax that went to the McNaughton firm. It has at the bottom of it, at line 50, "It appears this is a hoax on me", and it is initialled "JM", which is Manning's signature.

HAYNE J: Does this not lead us to what, if there is a difficulty in the appellant's case, is the central difficulty, and if there is not, what your central difficulty is? At trial did anyone give any evidence saying that they believed or thought that this letter had, in fact, been written by the author whose signature appeared on the document?

MR TOBIN: No.

HAYNE J: Did anybody at trial suggest that McDonald's had acted as they had in the belief that, in fact, Palmer-Bruyn had offered lifetime supplies of Big Macs and choc sundaes?

MR TOBIN: Well, the only witness who could do that would be Richards, and I think, on a proper reading of her evidence, the answer is no.

KIRBY J: She did say she had a doubt.

MR TOBIN: She did say that. I think she also said she was 99 per cent sure - I will try to turn up that reference, but, yes, your Honour is correct - - -

KIRBY J: I did not want to interrupt Justice Hayne's question.

MR TOBIN: Yes, thank you, your Honour.

HAYNE J: The central part of the cause of action is that there is a false statement. The falsity alleged is: this statement about Big Macs, et cetera, was a statement said to have been attributed to Palmer-Bruyn. That is the false statement. Now, if nobody believes it, nobody acts on the basis that it is true, where is the claim? If that analysis is not right, if it is enough that McDonald's think there is a doubt, how do you get around that?

MR TOBIN: Yes. Your Honours, that brings the debate to the disconformity between the letter and that upon which McDonald's acted - - -

GLEESON CJ: Just before you pass from the letter, did anybody mention at the trial the fact that the statements said to have been falsely attributed to Mr McNaughton were in handwriting and that if the letter is to be taken at face value, he then typed "Yours faithfully" under it?

MR TOBIN: No, your Honour, no.

HAYNE J: All this is put in terms of causation and high legal theory, but can we possibly come back to what actually happened on the ground?

MR TOBIN: What happened, we would characterise as follows. A hoax letter was written. On the findings of the learned trial judge it was not to be seen or passed over simply as a joke. It was - - -

HAYNE J: You see, the statement "It is not a joke" might mean, it is not funny, it was not meant as a joke, it was not heard as a joke; all three of those. It does not tell me anything to resort to simple slogans which so much of the debate in this case has simply done.

MR TOBIN: I think his Honour had in mind that it was not to be treated as a joke. In other words that in his analysis of the facts he was not prepared to, on the evidence of the written record of interview from Mr Parsons, simply accept it as a joke - - -

KIRBY J: Well, I think you possibly concede that after the appellant lost the contract it would not have been viewing the matter as very humorous.

MR TOBIN: Of course not, your Honour, but to actually characterise the document at the point of publication, his Honour found that it was to have an effect by way of ridicule.

GLEESON CJ: Yes. Now, ridicule is often not seen as humorous by the person who is ridiculed.

MR TOBIN: Yes, of course. Your Honours, the way my learned friend complains of the ridicule is in terms of a libel, not of an injurious falsehood. He did not mention, in his opening submissions, that what the message conveyed by the letter to reasonable readers was that his client was involved in some way or suspected of being involved in bribery.

GLEESON CJ: It does not actually convey much, to my mind, to ask whether this was a joke. I think that expression could mean a number of different things. But was it part of your case that, notwithstanding the conduct of Mr Manning, this was an obvious hoax?

MR TOBIN: Yes.

GLEESON CJ: Well, if this was an obvious hoax, it did not attribute these statements to Mr McNaughton otherwise than by the patently untrue suggestion, made for the purpose of ridiculing him, that this was the sort of thing he would say.

MR TOBIN: Yes.

HAYNE J: The success of the ridicule lies in the fact that the hearer or reader knows that the statements are exaggerated are not to be attributed to the person to whom they are attributed.

MR TOBIN: On the facts, those not contested, within the Council itself, there is a resolution of Council that says no one was influenced by this letter, taking it rather solemnly, to do anything by the offer of hamburgers or whatever was in the letter.

HAYNE J: Mandy Rice-Davies had the appropriate comment to that. They would say that, would they not?

MR TOBIN: Well, no one in the Council would take it seriously - - -

KIRBY J: You say that, but Mr Manning took it seriously enough to put it in the hands of the police or to put it in the hands of the Town Clerk or whatever he is called, and - this is really quite critical, I think - he did not respond, "Well, this is patently absurd". He responded, "This is a serious matter". That, it seems to me, is the weak link in your chain.

MR TOBIN: Yes, but very - - -

KIRBY J: If it had been so obvious, then Mr Manning would have torn it up and if it was not so obvious, then your client did a risky thing.

MR TOBIN: Well, there are two responses we would make. If Max Gillies appears on the television, as he used, and someone actually thinks it is the Prime Minister and believes something ill of the Prime Minister as a result, the approach the law would take is whether that was the reasonable outcome of what was shown on the broadcast and that is the answer we make with regard to Councillor Manning. The second is this, your Honours, that the law of injurious falsehood does not work in the manner of Rylands v Fletcher where he noxious substance escapes and the person who had harboured it will be liable for all the damage that may ensue. That seems to us to be an utterly inappropriate framework for a tort based upon oral communications. Ordinary language does not lend itself to that sort of stricture.

We submit, your Honours, that at the end of the day the appellant's difficulty is the finding by his Honour below, which is supported very strongly by Justice Heydon's analysis in the Court of Appeal, the fact that what is published in the newspaper is different from the letter. It is not a faithful account of what is in the letter, nor indeed was it a faithful account of what had happened as a result of that letter.

GLEESON CJ: What did the trial judge find about the question whether, as a matter of fact, this letter attributed these statements to Mr McNaughton?

MR TOBIN: Yes. I think his Honour's finding is fair at 222, line 20:

The defendant also conceded the letter was a hoax and contained false statements.

GLEESON CJ: I really would like to be precise about this question, because I am harking back to paragraph 3 of the statement of claim. The proposition that you have just read at line 20 on page 222 seems to me possibly to be internally inconsistent but not really to address that question.

I really want to know whether the trial judge found as a fact that this letter attributed these statements to Mr McNaughton, or whether - and this I would have thought a significantly different thing - this letter seeking to ridicule Mr McNaughton made fun of him by manifestly pretending, that is to say the pretence being manifest, that he made these statements.

MR TOBIN: He made the latter finding, not the former.

GLEESON CJ: I would not have thought that the television station that put Mr Gillies to air was attributing to the Prime Minister what Mr Gillies was putting in his mouth. It might be ridiculing the Prime Minister by manifestly pretending - I mean by that by the pretence being manifest - that this is the sort of thing the Prime Minister would say.

MR TOBIN: Yes. Your Honour, the trial judge did make those findings.

GLEESON CJ: I would have thought he might have said the defendant asserted the letter was a hoax, and that the statements it contained were manifestly false in the sense that they were not made by Mr McNaughton.

MR TOBIN: At 227, he deals with it by way of contrast between what is, in fact, published in the letter and what is in the newspaper article. He is adopting the language from the record of interview at line 46. It was "over the top" and "ludicrous" references, and the article:

carries a much more direct and forceful sting . . . The report goes beyond simply recasting the terms of the letter but is a totally different style and communicates a much stronger message than the facsimile. The letter is described in the Newcastle Herald not as a "hoax" but as a "forgery."

I think this where his Honour reaches that conclusion.

This is not meant to be a criticism of the Newcastle Herald because after all it is not known to this Court what information -

it had. So he found that the sense and substance was different, and then, your Honours, I think the fullest discussion is at 229. Perhaps, I should start at the bottom at 228

The publication was apparently thought by some of the recipients that it was a joke. The choice of language such as used in the letter rather than in colloquial speech, the notion of offering hamburgers and sundaes was ludicrous, as the was the idea that Mrs McNaughton would play the accordion.

GLEESON CJ: Come to page 229 line 29. Judge Taylor finds that "the hoax letter was calculated to ridicule the plaintiff". How would it ridicule the plaintiff if the plaintiff had in truth made those statements? What it would do was expose the corruption of the plaintiff. If the plaintiff was offering free hamburgers for life to the members of the ALP Caucus and that was the fact that was being communicated, then that was not a matter of ridicule; that was a matter of exposure. The very statement that this was ridiculing the plaintiff carries with it as a corollary, does it not, the proposition that these statements were not in fact made?

MR TOBIN: Yes. At line 10 his Honour deals with whether it could reasonably be understood literally in its own terms. He said:

It is obvious that the words in the text were not to be taken at face value but cloaked as they were in ridiculous language they nevertheless carried a sting.

GLEESON CJ: I should have thought that is exactly right, but the next question is: what was the sting? The word "sting" itself is one that has two or three meanings.

MR TOBIN: I think what my learned friend put as the understanding he was promoting for the letter is discussed by Mr Justice Heydon at 264. I note in answer to what your Honour the Chief Justice has put to me that Mr McClintock in opening this matter to the Court did not put it that it was other than a defamatory or libellous assertion about the conduct of the lobbying, not that it was true or other than a hoax.

GLEESON CJ: I could easily understand the proposition that this was an offensive and tasteless piece of mischief, but that is not the issue that was before the court.

MR TOBIN: My learned friend Mr Molomby put to the court that there is no tort of injurious ridicule; the tort is of injurious falsehood.

KIRBY J: You have conceded that there were false statements in the document and his Honour has so found.

MR TOBIN: We do, your Honour, but that, as it were, only opens the issue up to analyse, because, yes, those statements were not made under the signature of Mr McNaughton. It would be false to say that they were but, if you are dealing in a field of ridicule or of satire, it is not intended that the language be understood literally. That is what his Honour found, that you could not. Leave aside Mr Manning. For some hours, maybe many hours, on the Sunday he thought it was not a hoax.

KIRBY J: But it cannot only be Mr Manning. He went to the town clerk and the town clerk did not say, "Now, steady on. This is ridiculous". The town clerk put in train serious steps, so it is not only Mr Manning. Then there are the other employees under the direction of the town clerk and then there are the police who conduct interviews.

MR TOBIN: But the town clerk had been alerted to the fact on the Sunday by a fax that this was not a bona fide letter. That was the evidence.

KIRBY J: But that did not stop him from pursuing the matter with the police or the Independent Commission Against Corruption. I mean, people took it sufficiently seriously to - - -

MR TOBIN: The police were called in by the plaintiff, if I may say overreacting long before the contract was lost, one might think even posturing.

KIRBY J: Somebody had used their letterhead and was purporting to engage them in corruption.

MR TOBIN: Well, they did not take it seriously, your Honour, and they enjoyed the contract with McDonald's for another two months or three months.

GLEESON CJ: Mr Tobin, you made an assertion in about one sentence, I think, in answer to this proposition but I would like to investigate it slightly more closely.

MR TOBIN: Yes.

GLEESON CJ: What is the position if we come to the conclusion that in our view this letter is an obvious hoax, as the trial judge found it to be? What is the legal significance of the fact that Mr Manning did not recognise it as a hoax?

MR TOBIN: I referred to the Max Gillies example and said that what was communicated should be judged on reasonable standards, that is that - - -

GLEESON CJ: Why is that?

MR TOBIN: For this reason, your Honour, that with the tort of injurious falsehood the purpose behind it is not, as it were, to deal with satire or ridicule or the like. The purpose behind it is to deal with the malicious making of false statements causing damage. So we would submit that in the case in question, in this case, the falsity which is complained of in the pleading is not the falsity debated at trial. The falsity complained of in the pleading could be summed up by the use of the word "fraudulent". That which is complained of at trial and here is that it is a hoax, not to be taken seriously. Therefore, the operation of the falsity in the element of injurious falsehood upon the damage caused is exactly the reverse situation.

In other words, as Justice Hayne put to me, no one who had, in an operational sense, anything to do with the McDonald's contract believed this to be anything other than a hoax. Even Mr Manning by the night of Sunday the 24th believed it was a hoax and he told - I am sorry, your Honour, I was looking at this to answer something your Honour put to me. At 203 line 5 the town clerk or general manager said they received a fax which said:

"Disregard letter alleged from C McNaughton. It was a hoax."

So by the time the rabbit, as it were, gets out of the trap it runs but 30 yards before - - -

KIRBY J: Well, not quite right, because he ran further when the police came in and then the ICAC was introduced and as you must realise, in this day of photocopiers and so on, that it has the risk that it will run further still and run to the newspapers. There are a lot of malicious people out there who will try to do damage to, especially, public officials and publicly associated bodies.

MR TOBIN: Well, on that issue, your Honour, it does seem to us, in our submission - - -

KIRBY J: That is reasonable and natural in this day and age.

MR TOBIN: - - -that if you do apply a natural and probable republication test, the appellant is met with one very disturbing fact, which is, what the newspaper article published omitted that which is the very essence of the letter. In other words, the newspaper article could not faithfully recount anything about the content of the letter, because it failed to do what his Honour found any reasonable person would conclude; it failed to describe it as a hoax, as a send-up, as a piece of amateur Max Gillies, and that seems, in our submission, to bring the debate back to the question of a, in effect, novas actus. If one leaves foreseeability aside - - -

KIRBY J: This point was found against you by the trial judge, was it not?

MR TOBIN: I do not believe so, your Honour, I am sorry. His Honour found, in the passage on sense and substance, that the article was not a faithful rendering of what was in the letter. That is a finding directly against the appellant at 227. I referred to it briefly in answer to his Honour the Chief Justice. At line 40 to 45, crucially, his Honour found:

The report goes beyond simply recasting the terms of the letter but is a totally different style and communicates a much stronger message than the facsimile. The letter is described . . . not as a "hoax" but as a "forgery".

Well that is perhaps, in a sentence, where we submit that the appellant's argument should fail. His Honour then - - -

KIRBY J: Except that once you let these things run and have intermediate grapevines, then you have to expect, as common experience teaches, that the next person distorts and the next person re-expresses and newspapers notoriously report very briefly. They are not going to spend their newsprint on detailed examination of this. They have advertisements to run.

MR TOBIN: But far from it, your Honour, the version that is offered is a travesty of the facts, both as found by his Honour and which we would invite your Honours to find. Now, the question that perhaps recommends itself is this: since it was this article read by the McDonald's executive, Mrs Richards, which led her to sever the contract, why was not the remedy available to the plaintiff company against the newspaper which had published an inexcusably distorted version of a hoax letter sending up Mr McNaughton.

GLEESON CJ: Mr Tobin, am I right in thinking that this is the key point on which you succeeded at first instance?

MR TOBIN: Yes, it is, your Honour.

GLEESON CJ: That is, the judge decided a lot of other things and the question of exactly what he decided has been the subject of some debate, but he held in your favour on the ground that your client was not responsible in law for the consequences of that newspaper article.

MR TOBIN: Yes, your Honour.

GLEESON CJ: And it was the consequences of that newspaper article that constituted the only form of damage that your client was claiming. That was what the case turned on at first instance.

MR TOBIN: Yes, and he found, in support of that analysis, your Honour, that there was nothing done by those who had received the publication for which my client was responsible, that is the Council staff and councillors and police, that led to the loss of the contract.

GLEESON CJ: Now, I am trying to get clear in my mind the significance of other arguments that we have been having about whether there was an injurious falsehood here. That was not the basis on which the trial judge decided the case in favour of you.

MR TOBIN: Yes, your Honour.

GLEESON CJ: Was it a basis on which the Court of Appeal decided the case in your favour?

MR TOBIN: I do not believe so, your Honour - that is the nature of the falsity.

GLEESON CJ: All right. Now, is this the subject of a notice of contention?

MR TOBIN: No, it is not, your Honour.

GLEESON CJ: Well, why are we getting so excited about whether there was here malicious falsehood? Is that not a point on which your opponents - let me put it a different way. You won on a different point, at first instance.

MR TOBIN: Yes.

GLEESON CJ: You won on a different point in the Court of Appeal.

MR TOBIN: Yes.

GLEESON CJ: And you have no notice of contention on which you are trying to sustain the result, at first instance, on the Court of Appeal on that point; is that right?

MR TOBIN: Yes, that is right. I think I have understood what your Honour put to me but Mr Molomby points out that at 262 and following in the Court of Appeal the plaintiff's arguments based on the similarity of the letter and the article - I think I have understood what your Honour has put to me, but to be safe, Mr Justice Heydon then analysed what his Honour had found and he says at 263 line 10:

(The breaking of the chain of publication is a reference to the finding that it was not the natural and probable result of publication of the impugned letter -

Now, your Honour, to the extent to which there is this disconformity between a hoax and a forgery we did take the point and succeeded on it but we did not analyse it in the terms that your Honour has put it to me.

GLEESON CJ: Well, you talked about Max Gillies before.

MR TOBIN: Yes.

GLEESON CJ: I suppose you could take another current character. There is a man called John Clarke, who is very entertaining, on television and he attributes outrageous statements to public figures and it is amusing to watch him. It is not unthinkable that somebody might attempt to sue him for defamation, but I would be surprised to see him sued for injurious falsehood, so obviously made up are the statements.

MR TOBIN: Your Honour, at trial, we took the point of hoax against forgery, which perhaps distils the point that your Honour puts to me, and we succeeded on it at trial and in the Court of Appeal. We have not formulated the argument that there is absent an element in the injurious falsehood claim of the necessary type of falsity. What we have said is that the falsity complained of, which is the hoax, the sending-up of the lobbying activities, was not a falsity to which the damage could be attributed. The damage could only be attributed to that which is the pleaded allegation, namely, the forgery.

KIRBY J: But the gist of what you say is that they should have sued the newspaper for defamation, because that was the real "cause" of their damage and their harm - - -

MR TOBIN: And the newspaper may have joined - - -

KIRBY J: - - - and they distorted the true version of events. But had you had the brief for the newspaper, you would no doubt with equal eloquence have been saying they should have sued the real cause of this, and they should have sued them in injurious falsehood. You would have put it very eloquently.

MR TOBIN: They could always join, or, realistically, on the argument that is put before your Honours, the appellant - I will not say "ought" - may well have considered suing the newspaper and the author for defamation, and then the issue would be fought out in the way that Mr Evatt invited his Honour below to do it: was the republication in the newspaper the natural and probable consequence of the original letter? And that would leave - if my client was successful on that point - the remedy against the newspaper.

KIRBY J: But if it was a fair and accurate report of the letter, there may have been other defences available to the newspaper.

MR TOBIN: Yes, but with respect to what his Honour said below, it could not be understood as a fair representation or a true representation - - -

KIRBY J: In a small article; calls it a forgery.

MR TOBIN: I suppose that is the risk that both newspaper journalists and counsel take, your Honour, that brevity carries its own consequence, as does - - -

KIRBY J: It is not a default we often see here.

MR TOBIN: No, your Honour. Your Honours, there were some references made to the forgery point, and whether this was an unlawful act. Your Honour the Chief Justice, I think, raised the question. I have had some copies of the New South Wales Crimes Act - and perhaps I should hand those to the Court crier.

GLEESON CJ: Thank you.

HAYNE J: Are we to proceed on the basis, do you say, that a false statement was made, or are we not to proceed on that basis?

MR TOBIN: Your Honour should proceed on this basis, a false statement was made which had no bearing on what was published in the Newcastle Herald and what prompted McDonald's to break the relationship.

HAYNE J: What was the false statement that was made?

MR TOBIN: The false statement that was made and understood by Manning was that these statements attributed under the signature of McNaughton were made by McNaughton and no one believed it and nobody operated on it until the intervention of the Newcastle Herald which published a version of events - - -

GLEESON CJ: You said no one believed it. Manning believed it.

MR TOBIN: He believed it, unreasonably.

KIRBY J: So did the town clerk.

MR TOBIN: I do not believe the town clerk did, your Honour.

KIRBY J: He acted on it. He did not say, "Cut it out, get real".

GUMMOW J: He is a servant, I suppose.

KIRBY J: He is an officer with statutory duties.

MR TOBIN: These engines of government sometimes purr into life automatically. He was told on the Friday night by the man who supplied him with the letter, "Forget it, it is a hoax". So he is told before he got back to work on the Monday and I think it was, your Honours, because Mr McNaughton wrote a letter of complaint to the Council that these events took off.

GLEESON CJ: If I say to you, "If you drink milk, you will fly through the day", I am making a statement, I would have thought, that is so obviously incorrect if taken literally, that no one could seriously suggest it is a false statement.

MR TOBIN: I think that is so, your Honour, yes.

GLEESON CJ: But as I understand the answer that you gave to Justice Hayne's question, you do not contend that this attribution to Mr McNaughton of the statements made in this document were so obviously incorrect that it was not false?

MR TOBIN: Well, that which, if taken literally, would be false was published in such a form that no reasonable person could take it literally and, to that extent, was not false. That does not mean it is both false and not false; it means what are the criteria to be applied in establishing its falsity.

KIRBY J: You are in a difficult position here because at 222 it is recorded that the defendant concedes the letter "contained false statements", so that is - - -

MR TOBIN: Yes, in the way in which that is the way the trial was conducted, yes. The codicil to that is, of course, that it was also conducted on the basis that no one reasonably could understand this to be the case and that is what was the finding which, of course, we did not contest. The finding, in effect, supports the proposition that any falsity is only to be attributed to that which the unreasonable, literal-minded person would take from the communication.

KIRBY J: But as I understand it, the central point you put to us, apart from this third argument that you ran before lunch, is that let it be a false statement, let it contain a false statement, let it be false in that sense as qualifying for the tort, the law will not attribute the cause of the appellant's harm to you because the real cause severed the link and it was the newspaper report and it was not a real report of what had gone before. It is too distant, it is down the track, the cause is broken.

MR TOBIN: But underpinning it, your Honour, is the proposition, which I think we have always adhered to and is supported by the trial judge's finding, that no one could take this at face value as being the offer of a bribe which it purports to be.

GLEESON CJ: But the very word "false" is itself ambiguous. You will have been instructed in your youth, Mr Tobin, that a jocose statement is not a lie for the reason that, being manifestly untrue, no one could take it seriously.

MR TOBIN: Yes.

GLEESON CJ: I would have thought that in the context of malicious falsehood, "falsehood" means "lie".

MR TOBIN: Yes. Your Honour, below in the Court of Appeal, at line 10 the first notice of contention is this:

It is inherent in an action for injurious falsehood that the damages caused as a result of someone accepting the falsehood as the truth and acting on it. This is so in all reported cases discovered. It is not what occurred in the present case, where McDonalds cancelled the consultancy because it feared it might be in some unpredictable way contaminated.

GLEESON CJ: That is part of the reason of the complicating factor of Mr Manning.

MR TOBIN: Yes.

HAYNE J: Does the point you have just made then come to this? A false statement was made. The false statement that was made was, "We offer certain food items for life". What McDonald's acted on was not that false statement. What McDonald's acted on was the antithesis of that false statement, namely, although it is said that these food offers were made, that is a bogus assertion. Is that the nub of the point just made?

MR TOBIN: I do not believe so, your Honour. That may be a testimony to my lack or clarity.

HAYNE J: I give up, Mr Tobin.

MR TOBIN: Can I beg your Honour not to, however late it is. His Honour the Chief Justice has put to me whether there is a case that we can make on the basis that there was no falsehood.

GLEESON CJ: Or perhaps once could have made.

MR TOBIN: Once could have made. The answer I made to that was that we accepted his Honour's finding about falsity but, in the context in which it was argued at trial and on appeal, what was put to the court was that that falsity which was in the form of a hoax which no one would take literally could not operate so as to cause the damage complained of.

GLEESON CJ: If I said of a young man, "He is an old woman", I might expose myself to an action for defamation but I would be surprised if I exposed myself to an action for injurious falsehood.

MR TOBIN: Of course, your Honour.

GLEESON CJ: The same as if I said of a horse, "It's a fair cow".

MR TOBIN: Yes. Your Honours, could I take refuge in the Crimes Act briefly on the question of forgery.

KIRBY J: This is in your endeavour to pass the buck to the newspaper, is it, unless they said it was a forgery?

MR TOBIN: No, your Honour. The question about the forgery arose as to whether there was an unlawful act committed by the defendant - that is, by way of forgery - which might affect the question as to the consequential damage for which he would be liable, but the definition in the Crimes Act involves the altering of the document or whatever, the instrument, with intent to defraud, and I think that is what your Honour the Chief Justice put to us.

GLEESON CJ: Yes. If this was a private joke between your client and Mr Manning, as it was said to have been, then that would negate the possibility of forgery.

MR TOBIN: Yes.

CALLINAN J: It was still improper though, was it not , Mr Tobin?

MR TOBIN: I am sorry, your Honour?

CALLINAN J: It was still improper in the sense that it involved an infringement of the code of conduct. I am not putting that to you in a criminal sense, but your client seems to have accepted that by absenting himself from the debate and voting on the proposal.

MR TOBIN: Your Honour, I would not accept that what he did put himself in a conflict of interest. The only conflict of interest issue that arose was because he was sued and, therefore, was in jeopardy as a litigant, and I think that was basis upon which he no longer sat on it.

CALLINAN J: But I thought he absented himself from the meeting which actually considered it. What date was that meeting, Mr Tobin?

MR TOBIN: There was one in May, your Honour, the 28th.

CALLINAN J: It was to be 26 March, was it not?

MR TOBIN: That was the meeting of the Council that determined the application, and he was at that, as I understand it.

CALLINAN J: It was at a later meeting after he had been sued that he absented himself.

MR TOBIN: Yes, but, your Honours, there was quite a - if I can just conclude by reference to this, there was correspondence that may well have been like setting a match to the petrol, but there was correspondence from the plaintiff company which canvassed the questions of the kind that your Honour has raised on 9 July. It is at 185 and 186. That raised questions as to whether the suit taken or proposed to be taken on behalf of the individuals rather than the company would operate in such a way to prevent Councillor Parsons and Councillor Manning from sitting and voting with regard to the development application. But that would seem to suggest, your Honour, he maintained his position on - - -

CALLINAN J: Anyway, it is sufficient for your purposes. It does not seem as if the actual letter itself was admitted by him in any event and, indeed, was likely and should be regarded as a breach of the code of conduct.

MR TOBIN: We would submit there is no admission by conduct in that regard, and what was done would no doubt have been done at the behest of the Council officers. At 222 line 20 this is the only dealing with falsity by the trial judge:

The defendant also conceded the letter is a hoax and contained false statements.

That, of course, leaves, as it were, unanswered "the cow" of the horse or "the old woman" of the barrister. In other words, the sense of the falsity that is contained in that finding. That, Mr Molomby finally reminds me, is directly taken from the record of interview. That is what Mr Parsons said at the record of interview.

GLEESON CJ: Yes, Mr McClintock.

MR McCLINTOCK: Thank you, your Honour. Your Honour, there are three points I wish to reply on. I will do it briefly. I will take them in the order that Mr Tobin dealt with them. The first is the point about the proposition that there was no evidence of damage. That really has to be a "no evidence" submission. There was evidence before the trial judge on that point. It comes from reports themselves, which your Honours have been taken to, from Mrs Richards' evidence at pages 68, line 35 to 69, line 15.

May I also say that after Mrs Richards had given evidence that there was further work done and to be done there was no cross-examination of her to put to her the proposition that nothing further remained to be done at all. Mr Molomby stayed his hand to put that proposition until the expert, Mr Coughlan got in the witness box afterwards.

KIRBY J: Can I just pause to ask you would that not be in his interest? If it is your duty to prove the evidence then why would he help you to do it?

MR McCLINTOCK: When there was evidence, your Honour, from Mrs Richards that there was work to be done, in those circumstances it would have been incumbent upon him to cross-examine, to put the proposition that there was no work to be done. He could not wait to challenge the assumption, or should not have waited to challenge the assumption that he did in relation to Mr Coughlan because Mrs Richards could have answered and she had answered it in the evidence that she gave at 68 to 69.

Further, your Honours, it is a reasonable extrapolation from past history that it will continue at approximately the same level in the future, we would say. In my submission, your Honour, if it comes down to the authorities, the passage from Sir Garfield Barwick - I am sorry, I have forgotten the name of it - - -

KIRBY J: Dissenting.

MR McCLINTOCK: In dissenting, is to be preferred. If I may say so, it makes good sense. The second point I wish to reply upon is the suggestion that it was never put in the Court of Appeal that the wrong test was used by the trial judge. It was put, and it was put on two occasions by Mr Evatt. It is recorded at page 255 in the judgment where the submission from Mr Evatt at line 15, which was:

"the natural and probably result" was "not the appropriate test" -

was put. And then at page 265, Mr Evatt's submission is recorded at line 25:

The plaintiff submitted that the trial judge "should have determined whether the Respondent's letter was a substantial factor in bringing about the loss and whether such loss was reasonably foreseeable by him".

That was the test, in effect, that I have advanced here today and it was the test that was advanced in the Court of Appeal. His Honour, over the page, indicates the reasons why he is not going to determine that issue at page 266, line 20 to 267, line 35, where he sets out the authorities, some of them well known and some of them not so well known, in relation to injurious falsehood and the test there.

Third and finally, your Honours, the issues as to falsity, that first is an issue that the defendant or respondent, in my submission, is not entitled to raise here in the absence of a notice of contention and it was a point not taken below, indeed conceded, as the trial judge says in the judgment. The finding in the Court of Appeal about it is recorded at page 248 of the judgment, where Mr Justice Heydon says:

The trial judge found, in relation to the allegation in paragraph 3 of the Statement of Claim that the material complained of was false in that it attributed to Mr Christopher McNaughton statements that he had never made, that it was false. He found that it was likely to injure -

and so on. Your Honours, could I go a little bit further though in this. Your Honours have suggested that the letter might be viewed as an obvious hoax. I said in-chief that that might be the case for a sophisticated audience but the audience that received this letter was not necessarily sophisticated and there are people who might reasonably have seen it not as the hoax it was. It was perfectly obvious - I will take your Honours to the Council file - that Councillor Manning thought it was a letter from Mr McNaughton.

GLEESON CJ: That is obvious, I would have thought, from the quotation from the Rubaiyat that he appended to the letter. I presume he thought it was the finger of Mr McNaughton, senior or junior, that had written it.

MR McCLINTOCK: Yes, absolutely, your Honour. If your Honours go to page 202 of the appeal book your Honours will see - this is part of the Council file that was tendered and, for what was said to be an obvious hoax, this document took up an awful lot of time of Newcastle Council - at page 202 - it is part of the general manager's report on what is described as "Confidential Matters" and the subject is "Alleged forged document" and the precis, in effect, sets out a request for a report. Then the background is this at line 50:

On Sunday 24 March 1996 two faxes from Councillor John Manning were received in the General Manager's Office.

Fax No 1 - dated 24 March 1996, time sent 1.23 pm. The message read:

"Attached letter from Chris McNaughton to Caucus Members ALP received Sunday. Needs to be discussed with Greg Heys first thing - for possible legal advice."

Now, Greg Heys is another Council officer. The mayor, I am told, the mayor. I am corrected. The fact is that Councillor Manning clearly believed that that letter was from Mr McNaughton and clearly thought so seriously about it that he thought that he at least needed to get legal advice in relation to it. That was the reason why he passed it on with the notation from the Rubaiyat to which your Honour the Chief Justice has referred.

GLEESON CJ: Would it have made any difference to your case, or to the outcome of this case, if the letter had been recognised as a hoax by everybody concerned immediately, but there had been a police investigation into who was responsible for a possible forgery, and the police investigation was the subject of an article in the Newcastle Herald - that is the paper - as a result of which McDonald's rang up Mr McNaughton's firm and said, "Look, we have to keep our noses completely clean. We don't want to get involved in any mess like this. I am afraid we have to sever our association with you"?

MR McCLINTOCK: It would make no difference to my case, your Honour, none at all. One can frame the falsity of the letter in many different ways, some only subtly different, but one of them involves the misuse of the letterhead itself and the representation, really, of entitlement to use it and so on. But, your Honour, it would make no difference, from the point of view of my case, if that were the case.

Your Honours, I am not going to take your Honours in any detail through the rest of that Council report. As I said in-chief, it triggered a report from Sparke Helmore; it triggered a reference to the Independent Commission Against Corruption in relation to it; it had consequences that would be very surprising if it was really genuinely viewed as a hoax.

KIRBY J: All of that can be given, but what do you say to Mr Tobin's point - and this was the matter on which it is said the case ultimately turned below - that all of that can be accepted, but what caused damage to your client was the story of forgery in the local newspaper, which was not causally related to what went before. It was, in fact, a distortion; it did not mention it was a hoax, did not mention it was a joke, did not give the detail of it, and presented it as a forgery, which is a serious criminal offence.

MR McCLINTOCK: There are two answers to that, your Honour. One is that, perhaps speaking a little loosely, when one sets a particular hare like this loose, with the intention that the trial judge found the defendant had, one has to take responsibility for it, in my - - -

GLEESON CJ: It is like the story of "The Loaded Dog".

MR McCLINTOCK: I had not thought of "The Loaded Dog", your Honour, but it is a little bit like "The Loaded Dog", although the bomb there was made for killing fish but killed another dog, as I recall.

But the dog that was killed here, though, your Honour, was pretty closely related to the dog that was intended. It was not the fish in the dam that was killed here. It was my client's contract. That is the first answer, that you have to take responsibility for it and whatever form it raises its ugly head later. But, second, the evidence did not stop with the article in - - -

KIRBY J: You do not quite have to take it. You bear the onus of proving the causal relationship and there would be a point to which, if, for example, there was a totally distorted newspaper story that said you had published this, then you could not lay that at the door of this hoax. So it is a question of evaluation and causation issues are always really evaluation, but that is the matter that I am concerned about.

MR McCLINTOCK: That is true, your Honour, but it does not stop with the article in the Newcastle Herald. One would not expect, even a company such as McDonald's, which was so concerned to protect its public image, merely to sack a consultant simply because of a letter in the Herald. It did undertake further investigation and, in a sense, the Herald article was a trigger itself that led to finding out about the letter.

The evidence is the evidence I have taken your Honours to, which is quoted in the appeal book, from Mrs Richards where she says that Mr McNaughton called her and explained in detail what had happened and, second, there is correspondence from Mr McNaughton to Mrs Richards - it was tendered by the defendant. The page reference I will just turn up, your Honours, although I do not think I need take your Honours to it in any detail. It is page 185 and it was a letter sent on 9 July 1996. Your Honours will recall that the Newcastle Herald article was 11 May and the termination letter was on 16 July.

It did not stop with the article in the Newcastle Herald and one could take the view that Mrs Richards was fairly informed of the contents of the letter at the - - -

KIRBY J: I suppose you can say that though it is true in the text, it talks of a forged letter, the heading is "Bogus letter" and in the text, the second line, it talks of "a bogus letter". "Bogus" normally would imply a non-forgery or at least arguably imply a non-forgery.

MR McCLINTOCK: It would, your Honour, but one wonders whether the readers of the Newcastle Herald would necessarily have drawn - - -

KIRBY J: But the heading is "Bogus letter".

MR McCLINTOCK: That is true, your Honour. The word "bogus" is also referred to in the third-last line. It also refers to the letter as being "forged" in the third line in the second column, where it says:

The Newcastle Herald has learned that the forged letter purported to be from Mr Chris McNaughton, the son of the former Lord Mayor. It was written on a Palmer-Bruyn and Parker letterhead.

Your Honours, those are my submissions in reply.

GLEESON CJ: Thank you, Mr McClintock. We will reserve our decision in this matter and we will adjourn until 9.30 tomorrow morning in Sydney and in Melbourne.

AT 3.28 PM THE MATTER WAS ADJOURNED