Palmer Bruyn & Parker Pty Ltd v Parsons

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

PALMER BRUYN & PARKER PTY LIMITED                   APPELLANT

AND

KEITH PARSONS  RESPONDENT

Palmer Bruyn & Parker Pty Ltd v Parsons
[2001] HCA 69
6 December 2001
S8/2001

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation:

B R McClintock SC with C A Evatt for the appellant (instructed by Hunt & Hunt)

T K Tobin QC with T Molomby and M A Kumar for the respondent (instructed by McDonald Johnson Solicitors)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Palmer Bruyn & Parker Pty Ltd v Parsons

Injurious falsehood – Elements of the tort – Forged letter containing false statements – Initial publication to defined group intended to ridicule subject of letter – Report in newspaper of "bogus letter" – Contract terminated as a result of newspaper report – Whether loss suffered caused by initial publication – Whether loss suffered was a natural and probable consequence of initial publication – Identification of relevant falsehood – Relevance of reasonable foreseeability as criterion for limiting liability – Causation of plaintiff's damage – Whether actual damage to plaintiff proved or assumed by expert report.

Words and phrases – "Natural and probable consequence", "grapevine effect".

1. GLEESON CJ.The appellant claimed damages from the respondent for the tort of injurious falsehood.  In order to succeed, it was necessary to establish that the respondent maliciously published a false statement about the appellant, its property or business, and that actual damage resulted from such publication.  The present case does not raise for decision the question as to how far the action for injurious falsehood extends beyond concepts of business or property[1].  The appellant carries on, as a corporation, the professional practice of a surveyor.  The statement in question was made about its professional conduct.  The element of malice was found in the appellant's favour by the trial judge.  The central issue in the appeal, and the point on which the appellant failed, at trial, and in the Court of Appeal of New South Wales, is whether there was a causal relationship between the making of the false statement and the damage of which the appellant complained.

   [1]cf Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 692-693.

2. The detailed facts are set out in the reasons for judgment of Gummow J and Callinan J.  In brief, the appellant made an application to the Newcastle City Council on behalf of a client, McDonald's Australia Ltd ("McDonald’s"), for the rezoning of certain land for purposes of development.  The respondent, a member of the Council, opposed the proposal.  He concocted a letter, purporting to come from the appellant, which contained absurd inducements and threats.  This was described by the trial judge as an act that was "calculated to ridicule the [appellant] and injure it in its effort to persuade the Council in favour of approving the development application", and as "a crude attempt to influence members of the [Australian Labor Party] caucus [within the Council] in responding unfavourably to the application".  A facsimile copy of the letter was sent by the respondent to another member of the Council, Councillor Manning, who, for a short time, took it at face value.  The damage of which the appellant complained was that McDonald's terminated its retainer.  That was not directly the result of the circulation of the hoax letter, which was shown to only a few people in addition to Councillor Manning.  It was the direct result of a newspaper article which reported the fact of the hoax.  McDonald's decided that it was no longer in that company's interests to retain the appellant to pursue its application before the Council.  The trial judge found, and the Court of Appeal agreed, that the loss of McDonald's business was caused by the publication of the newspaper article about the hoax, for which the respondent was not legally responsible.

3. The case for both parties was conducted upon a surprisingly literal approach to the question of falsity.  The appellant's contention was that the respondent communicated to the people to whom he showed the bogus letter the false information that the appellant had offered the inducements, and made the threats, appearing in the letter.  The letter, both in its contents and its physical appearance, looks like such an obvious concoction that it is difficult to accept that it could be regarded by a reasonable reader as genuine, and as containing statements actually made by the appellant.  Nevertheless, Councillor Manning apparently understood it in that way.

4. Although it was not recognised as such by Councillor Manning, the letter was intended to be an exercise in parody.  Whether it was clever or clumsy, witty or heavy-handed, humorous or tasteless, is beside the point.  Parody may convey false representations, but the falsity, if it exists, does not lie in the fact of the parody.  A comedian, impersonating a public figure, may attribute to that public figure outrageous statements and may thereby falsely attribute to that person beliefs or attitudes which the person does not hold.  But the falsity does not lie in the fact of the impersonation.

5. The respondent did not give evidence, but a record of a police interview was tendered at the trial.  The respondent told the police that he meant the letter to be recognised immediately as bogus by Councillor Manning and other Councillors who might see it, although it is clear that he intended the letter to have an adverse effect upon the rezoning application.  He meant to ridicule the appellant, and to be seen to be mocking it.  He never intended that anyone would seriously believe that the appellant had actually sent the letter.  The trial judge held that it was obvious that the words in the text of the letter "were not to be taken at face value". 

6. Even allowing for Councillor Manning's initial reaction to the letter, there is a degree of artificiality in seeking to relate falsity to damage where, in a case of parody, the falsity is alleged to consist in the representation that the object of the parody actually made the attributed statements:  a representation that was unintended, and that would only be conveyed to someone who failed to notice obvious signs that, although, as the trial judge said, the bogus letter was intended to carry a sting, it was never meant to be taken literally.  Additionally, the appellant has a problem arising out of the nature of the damage it suffered, and the circumstances in which the damage occurred.

7. The damage claimed by the appellant was financial loss resulting from the decision by McDonald's, following the newspaper article, to terminate the engagement of the appellant to prosecute the application before the Council.

8. There is no evidence that McDonald's was shown the bogus letter by the respondent, or that it took it seriously in the sense that it believed the appellant had in truth offered the inducements, and made the threats, contained in the letter.  The newspaper article, to which McDonald's reacted, reported that police were investigating a "bogus" and "forged" letter purporting to have been written on the appellant's letterhead, in connection with a rezoning application.  Even if the respondent had represented that the appellant had written the letter in question, and made the threats, and offered the inducements, contained in it, the newspaper article, far from repeating or republishing those representations, contradicted them.  The gist of the article was that there was trouble about the concoction of the letter, and that the police were investigating the matter.  Why this caused McDonald's to terminate its association with the appellant is not entirely clear.  Perhaps it simply took the view that it did not need this kind of trouble in connection with its application, that the appellant appeared to have enemies within the Council, and that its commercial interests were best served by either finding a new surveyor or dealing with the matters without further expert assistance.  That would not be an unreasonable commercial response; but it would not be a response to a representation that the appellant had offered bribes, or made threats.  It would be a response to evidence that relations between the appellant and the Council were bad.

9. The trial judge found that the false statement, as identified above, was originally published by the respondent to Councillor Manning, and that its further re-publication to members of the Council's ALP caucus was the natural and probable result of the original publication.  But he was not prepared to find that the article in the newspaper was the natural and probable result of the publication of the false statement and, in addition, he pointed out that the difference between the substance of what was published in the newspaper and the substance of the false statements complained of by the appellant meant that there was no causal connection between the making of false statements by the respondent and the damage suffered by the appellant.  The Court of Appeal upheld those findings[2]. 

   [2]Palmer Bruyn & Parker Pty Ltd v Parsons [2000] Aust Torts Reports ¶81-562.

10. In the Court of Appeal, Heydon JA, whose reasons were agreed in by Stein JA and Foster AJA, summarised the appellant's argument as being 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".  The same argument was put in this Court, it being made clear that the appellant also contended that, if the respondent intended to cause the appellant some harm, and the appellant in fact suffered some harm, it was beside the point that the harm suffered was different from the harm intended. 

11. The reason for the qualification was, no doubt, that there was no evidence, or finding, that the respondent intended that the appellant would lose McDonald's as a client.  Insofar as the respondent was found to have any intention to cause harm, it was an intention to impede the progress of the development or rezoning. At the level of local government, this was a political issue, and the respondent was hoping, by making the appellant appear ridiculous to other members of the Council, to damage the prospects of success of the application that was before the Council.

12. Heydon JA, while expressing some reservations about whether the trial judge found intent to injure the appellant, said that, in any event, the damage actually suffered by the appellant was different from any harm intended.  He rejected the appellant's case based on intention to cause harm.  He also agreed with the finding of the trial judge that the loss of McDonald's business was not the natural and probable consequences of the publication of the false statements. 

13. There was some discussion in argument in the Court of Appeal, and in this Court, of the role of reasonable foreseeability of harm in a case such as the present.  The arguments on the point do not appear to have been entirely consistent.  Heydon JA recorded that the appellant "said that the natural and probable consequence test was only another way of putting the foreseeability test".  I understood the argument in this Court rather differently.  As a practical matter, on the facts of this case, it is not easy to see that a different result would flow from asking whether the loss of McDonald's business was the kind of harm from the making of the false statements that was reasonably foreseeable and from asking whether it was the natural and probable consequence of the respondent's conduct.  As a matter of principle, this being an intentional tort, if relevant harm was intended, or was the natural and probable consequence of the respondent's act, then it is difficult to see why foreseeability should operate as an independent factor limiting the respondent's liability for damage.  I agree with the reasons of Gummow J on that question.

14. As was pointed out in Ballina Shire Council v Ringland[3], injurious falsehood may involve the making of statements which, although untrue, are not defamatory of the person about whom, or about whose property or business, they are made.  But it is the falsehood which must cause the harm; harm of a kind which is intended, or, of a kind which is the natural and probable consequence of the making of the false statements.  The loss to the appellant of McDonald's business resulted from the publication, by a newspaper, of the fact that someone had concocted a bogus document and thereby falsely attributed certain conduct to the appellant.  It was the publication of the truthful information that someone connected with the Council, on the approach to falsity described above, had made false statements about the appellant, with all the implications that had as to relations between the appellant and the Council, that caused the harm of which the appellant complained.  It is not the case that the respondent, having set out to make trouble of some kind for the appellant, and (let it be assumed), having made false statements for that purpose, is now liable for all harm to the appellant that followed in the events that ensued.

    [3](1994) 33 NSWLR 680 at 692-693.

15. The trial judge and the Court of Appeal were right to find against the appellant on the issue of causation.

16. The appeal should be dismissed with costs.

17. GUMMOW J.   The appellant company claims damages for injurious falsehood.  The appellant failed in the first instance before the District Court of New South Wales (Taylor DCJ, sitting without a jury).  An appeal to the Court of Appeal of the Supreme Court of New South Wales[4] (Stein and Heydon JJA, Foster AJA) was also unsuccessful.

    [4]Palmer Bruyn & Parker Pty Ltd v Parsons [2000] Aust Torts Reports ¶81‑562.

    The facts

18. The appellant carried on a surveying business under the name of Palmer Bruyn & Parker Pty Ltd.  A part of that business involved the preparation of development applications in respect of proposed developments and the making of submissions to, and lobbying of, municipal councils with a view to obtaining approval for those applications.   In mid‑1995 McDonald's Australia Ltd ("McDonald's") engaged the appellant to act on its behalf in relation to a development application for a proposed McDonald's restaurant at Wallsend in Newcastle.  A necessary step towards obtaining development approval was the rezoning of the proposed site.  The appellant submitted a rezoning application to the Newcastle City Council ("the Council").  The person responsible for the carriage of this rezoning application was Mr Christopher McNaughton, a technical surveyor employed by the appellant.  It should be noted that Mr Christopher McNaughton is the son of Mr John McNaughton, a director of the appellant company and a former Lord Mayor of Newcastle.

19. The Council was to decide the outcome of the rezoning application on 26 March 1996.  On 24 March 1996 a caucus meeting of the councillors representing the Australian Labor Party ("the ALP") took place.  At that meeting, one topic of discussion involved the position that the ALP would take in respect of the rezoning application.

20. The respondent, Mr Parsons, was a member of the Council and represented the ALP.  On 24 March 1996, that is to say, on the day of the meeting of the ALP caucus, the respondent sent a letter by facsimile to one of the ALP councillors, Mr John Manning.  Councillor Manning is not a party to this litigation and did not give evidence at trial.  It is this letter, and the statements contained therein, which form the basis of the claim for injurious falsehood.

21. The letter sent by the respondent was composed in the following way.  The respondent cut the letterhead and signature block from a letter previously sent to him by Mr Christopher McNaughton.  The respondent hand wrote the body of the message, and then photocopied the letterhead together with the body of the message and the signature block to form a composite document ("the letter").  The respondent then sent the letter to Councillor Manning by facsimile at approximately 1:38 pm on 24 March 1996.

22. The body of the letter was as follows:

    "To The Newcastle City ALP Caucus

    Dad said to tell you his final offer is 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.

    If you don't he's gonna tell his best friend Robert Webster and Bob Carr and Ernie Page and Kim Beazley and Fred Nile and anyone else who'll listen.  They're gonna pressure you to support the Wallsend McDonald's Rezoning just like the good old days.

    Frank and Dennis said they're disgusted with yous.

    Final warning, do a deal (fuck all residents; they'll love it when it's built) OR Dad will remember something you said about him somewhere, sometime and you can expect a letter from Hunt and Hunt next Wednesday at the latest.  You'll be sorry."

23. Despite the apparent absurdity of the contents of the letter, Councillor Manning initially sent a reply facsimile to the appellant indicating that he had in fact taken the matter seriously.  Later, following the meeting of the ALP caucus, which both Councillor Manning and the respondent attended, Councillor Manning sent a second reply to the appellant indicating that by that time he understood the letter to be a hoax.

24. It is convenient here to say something more respecting the background circumstances in which the respondent composed and sent the letter.  Prior to the date on which the letter was sent, the appellant, and in particular Mr Christopher McNaughton, had been lobbying the respondent intensively regarding the rezoning application.  The trial judge noted that at the time the respondent prepared the letter he was angry with Mr Christopher McNaughton over this conduct.  The respondent had sent the letter to Councillor Manning as a joke because Councillor Manning was aware of the lobbying by the appellant and the respondent's reaction to it.

25. Apart from sending his two replies to the appellant, Councillor Manning also sent copies of the letter by facsimile to four members of the ALP caucus including the respondent, three councillors representing a party identified as "the Greens", and the general manager of the Council.  On 25 March 1996 the two facsimile replies sent to the appellant by Councillor Manning were brought to the attention of the appellant.  The appellant subsequently informed the police.  On 26 March the directors of the appellant signed a letter on behalf of the company to the general manager of the Council informing him that the letter was "clearly a forgery".  Shortly thereafter, the appellant made a copy of the letter available to the police.

26. On 11 May 1996 an article appeared in The Newcastle Herald.  It stated:

    "Bogus letter offered free fast food

    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."

27. On 9 July 1996, Mr Christopher McNaughton wrote a letter to Mrs Robin Richards, who was, at all relevant times, the New South Wales Real Estate Manager for McDonald's.  The purpose of this letter was to brief Mrs Richards about the current state of the rezoning application in light of the forged letter and the publicity surrounding it.

28. On 16 July 1996, Mrs Richards, by letter, terminated the appellant's retainer in relation to the Wallsend development and the rezoning application.  The termination letter included the following:

    "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."

    The claim

29. The appellants initiated proceedings in the District Court of New South Wales by statement of claim dated 2 September 1996.  By par 2 of the statement of claim, the appellant alleged that on or about 24 March 1996 the respondent "falsely and maliciously wrote and published" the letter complained of.  Paragraph 3 of the statement of claim stated:

    "The entirety of the matter referred to in paragraph 2 herein was false, in that it was a forgery which attributed to Christopher McNaughton, an employee of the Plaintiff, statements he had never made, whether by the purported signatory or otherwise."

30. The appellant alleged publication to Councillor Manning and republication by Councillor Manning to other members of the Council and the General Manager of the Council.  By par 4, the appellant alleged that "[t]he [respondent] published the said [letter] maliciously in that he wrote the false material, forged upon it the signature of the said Christopher McNaughton, and intended thereby to injure the [appellant] in its said business."

31. Paragraph 5 contained what appears to have been a statutory claim in respect of misleading or deceptive conduct.  However this was not pressed at trial.

32. The appellant claimed loss and damage in respect of the following heads:

    "(a)     As a direct consequence of the said publications, the [appellant] lost its consultancy to McDonald's Australia Limited in respect of its proposed development at Wallsend;

    (b)      As a direct consequence of the said publications, the [appellant] has lost all future consultancy work for McDonald's Australia Limited;

    (c)      As a further direct consequence of the said publications, the [appellant] has suffered a general loss in business and custom, which will duly be particularised;

    (d)      By reason of the [respondent's] malice, the [appellant] claims aggravated and exemplary damages." (emphasis added)

33. The appellant claimed damages of $250,000 plus costs and interest.  The respondent, by statement of defence, denied all of the elements of the statement of claim.

34. A number of points may be made. First, it is apparent from par 2 of the statement of claim that the action was framed in injurious falsehood, rather than defamation. By reason of s 46(3)(a) of the Defamation Act 1974 (NSW), exemplary damages are not recoverable in an action for defamation[5].  Secondly, by par 3 of the statement of claim, the injurious falsehood is said to be that the letter falsely attributes statements to Mr Christopher McNaughton which he had never made.  It was not alleged, despite what was asserted in oral argument before this Court, that the letter imputed that the appellant was an incompetent negotiator, or in any other way impugned the appellant.  Thirdly, it is alleged that the letter was published to Councillor Manning and republished by Councillor Manning to members of the Council and the General Manager of the Council.  It is not alleged in the statement of claim that the letter was republished either to The Newcastle Herald or to Mrs Richards.

    [5]See Carson v John Fairfax & Sons Ltd (1993) 178 CLR 44 at 65.

    At trial

35. However, it appears that the trial was conducted on the footing that the parties did not consider the issues to be constrained by the pleadings.  The conduct of the trial departed from the pleadings in a number of respects.

36. The respondent conceded that the letter was false, that he had composed the letter in the manner set out previously and that he had sent the letter by facsimile to Councillor Manning.  The appellant reduced its claim for damages so as to include only the first and the last of the four heads set out above.  That is to say, the appellant only claimed damages for the loss of the McDonald's retainer in respect of the proposed development.  This loss was alleged to be in the amount of $38,000.  The appellant also claimed exemplary damages.

37. It was the appellant's case at trial that the respondent intended to cause the appellant injury, that this constituted the required degree of malice and that the loss of the McDonald's contract was the natural and probable consequence of the malicious publication of the letter.

38. The trial judge held that the appellant had to establish three elements to succeed:  (i) the publication of false written statements concerning the appellant or its property calculated to induce others not to deal with the appellant; (ii) actual economic loss; and (iii) that the offensive statement was false and made with intent to cause injury without lawful justification.

39. Although his Honour noted that the respondent had conceded that the letter was false, he did not accept that the letter was meant as a joke and held that it was "calculated to injure the [appellant] in its business".  The trial judge further held that the publication was malicious.  However, in his view, the "major hurdle" for the appellant to overcome concerned the respondent's liability for repetition of the material by others.  In this respect, his Honour found that the republication of the letter to the members of the ALP caucus, to the General Manager of the Council, to other councillors and to the police was the natural and probable result of the original publication.  However, his Honour held that there was no identifiable actual loss in respect of the original publication and subsequent republication.

40. The trial judge then turned to consider the newspaper article published in The Newcastle Herald on 11 May 1996.  His Honour held that the letter was only intended to have impact upon a small number of people and that the "republication" in The Newcastle Herald was therefore not the natural and probable result of the respondent sending the letter to Councillor Manning.  His Honour further held:

    "If it were not the case that the chain of publication and republication had been broken as the Court has found the [respondent] would be entitled to succeed because of the very significant departure in sense and substance from the original publication and the article in the newspaper."

41. This was because the newspaper article carried "a much more direct and forceful sting than the original publication".  His Honour held that the newspaper report went:

    "beyond simply recasting the terms of the letter [and was] totally different [in] style and [communicated] a much stronger message than the facsimile."

42. The trial judge found that there was "insufficient material available" for any reliable conclusion to be reached as to how the letter or its contents became known to The Newcastle Herald.

43. It should be noted that the trial judge thought there was some causal connection between the publication of the newspaper article and the loss of the McDonald's contract.  His Honour held that:

    "[i]t is very clear that as a result of [Mrs Richards'] learning of the letter through the newspaper article that the [appellant] lost its contract with McDonald's."

44. His Honour observed that, when giving evidence, Mrs Richards had made it clear that:

    "[s]he was confident of the honesty of those she dealt with in the [appellant] company but the incident appeared to her to contaminate the application and affect it in ways which she could not predict.  Naturally neither she nor her company [wanted] to be associated with anything that could cause a doubt with residents and create a perception that the company would be associated with anything that was not straightforward and honest."

45. The trial judge entered a verdict in favour of the respondent on the basis that the publication in the newspaper was not the natural and probable result of the original publication.  However, his Honour went on to assess the actual damage suffered by the appellant as a result of the publication of the newspaper article.  His Honour held that, although there was "a certain artificiality in the damages claimed", the amount was nevertheless "reasonable actual compensation for the loss of a significant contract to the business".  His Honour rejected the appellant's claim in respect of exemplary damages.

    The Court of Appeal

46. In the Court of Appeal, the appellant submitted that the trial judge had erred in deciding that the loss of the McDonald's contract was not the natural and probable consequence of the respondent's conduct.  In support of this submission the appellant contended that the trial judge had misapplied what was called the "grapevine effect".  The appellant further submitted that the loss of the McDonald's contract was the result which the respondent intended.  In this respect, the appellant relied upon the finding by the trial judge that the respondent had "intended to injure the Appellant ... in its efforts to persuade the [Council] to approve the development application made on behalf of its client McDonald's".

47. Heydon JA, with whom Stein JA and Foster AJA agreed, rejected the appellant's submissions and dismissed the appeal.  His Honour rejected the appellant's submissions respecting intention; he concluded that there was "a disconformity between the damage supposedly intended and the damage actually found to have been suffered", and that there was no finding that the appellant suffered any injury of the kind intended by the respondent.

48. Heydon JA also rejected the appellant's alternative submissions respecting "natural and probable result".  The appellant had submitted that Mrs Richards may have learned of the letter by the "grapevine effect" and, therefore, the loss of the McDonald's contract was the natural and probable result.  Heydon JA rejected this submission on the basis of lack of evidence.  His Honour was also of the view that the background circumstances of the case were against the submission because the recipients of the letter were "bound by obligations of confidentiality or they were affected by self-interest making confidentiality desirable".

49. His Honour further held that the trial judge's conclusion that the newspaper article was significantly different in sense and substance from the original publication survived the appellant's criticisms:

    "In essence the trial judge's conclusion was that what the letter did was to ridicule its supposed author as an inept and bumbling lobbyist.  By ridiculing the lobbyist who was seeking to bring about a rezoning, the author of the letter was attempting to influence the Australian Labor Party caucus against the cause urged by the lobbyist.  That is, it was a 'crude attempt to influence members of the caucus in responding unfavourably to the [rezoning] application.'  The newspaper article, on the other hand, is not to be read in that way:  whether or not the letter can be treated as successful ridicule, omission from the newspaper article of all the elements that made the impugned letter a form of ridicule has the result that the article contained starker allegations."

50. Finally, Heydon JA dealt with a notice of contention filed by the respondent, which asserted that the trial judge had erred in finding that the appellant had suffered actual loss.  The respondent submitted that the trial judge's quantification of the damage carried an erroneous assumption that work under the McDonald's contract would have continued at the same level as in the past.  Heydon JA accepted this submission and held that:

    "there was no evidence on how much work remained to be done and how much the [appellant] might have charged for it.  Thus the trial judge's conclusion that $38,000 was 'reasonable actual compensation' was wrong, and the correct finding would have been that there was no proved actual loss."

51. It should be noted that before the Court of Appeal the appellant abandoned its claim in respect of exemplary damages.

    In this Court

52. The elements of the action for injurious falsehood usually are expressed in terms which derive from Bowen LJ's judgment in Ratcliffe v Evans[6], to which further reference will be made.  Thus, generally, it is said that an action for injurious falsehood has four elements[7]:  (1) a false statement of or concerning the plaintiff's goods or business; (2) publication of that statement by the defendant to a third person; (3) malice on the part of the defendant; and (4) proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement.

    [6][1892] 2 QB 524 at 527-528.

    [7]See Balkin and Davis, Law of Torts, 2nd ed (1996) at 676.  For other variations, see Gatley on Libel and Slander, 9th ed (1998) at 489; Salmond on the Law of Torts, 10th ed (1945), §151 at 588; Heydon, Economic Torts, 2nd ed (1978) at 81; Prosser and Keeton on Torts, 5th ed (1984), §128 at 967‑973.

53. The issues of law which arise in the present appeal largely turn upon the identification of the sufficiency of a connection between elements (2) and (4) of those listed above, namely the publication by the respondent and the actual damage suffered as a result thereof.  These issues thus provide an example of the situation to which Hayne J referred in Henville v Walker[8] where questions of remoteness of damage in tort can be seen in terms of causation.  Another, and as McHugh J emphasised in the same case[9], distinct use of the term "remoteness" is to conclude "that the loss or damage was not reasonably foreseeable even in a general way by the contravener".

    [8](2001) 75 ALJR 1410 at 1437 [166]; 182 ALR 37 at 75.

    [9](2001) 75 ALJR 1410 at 1434 [136]; 182 ALR 37 at 70.

54. In Smith New Court Securities Ltd v Scrimgeour Vickers[10], Lord Steyn referred to "causation, remoteness and mitigation" as three limiting principles which, even in cases of deceit, keep the liability of wrongdoers "within practical and sensible limits"[11]; but, by "remoteness", here his Lordship meant to identify a loss which was "a direct consequence of the fraudulently induced transaction"[12].

    [10][1997] AC 254.

    [11][1997] AC 254 at 284.

    [12][1997] AC 254 at 285.

55. In this Court, the appellant submits that "reasonable foreseeability" has no role to play in respect of the tort of injurious falsehood.  The contention is that it is sufficient to establish that the respondent intended by the publication to cause damage to the appellant and that damage eventuated.  This appears to be the adoption of a "but for" criterion for the necessary causation, with no reference to any other connecting factor.  In the alternative, the appellant submits that the expression "natural and probable result" means no more than that the damage was "reasonably foreseeable" and that the loss of the McDonald's contract was "plainly" reasonably foreseeable.  This appears to be a proposition based not on notions of causation so much as upon a limiting factor imposed by law and generally identified by the term "remoteness".

56. It should be noted that in oral argument before this Court the appellant sought to renew its submission, which had been abandoned in the Court of Appeal, respecting exemplary damages.  The Court denied the appellant leave to argue that point.

    The tort of injurious falsehood

57. The tort of "injurious falsehood" (a term coined by Salmond) has its origins in actions for "slander of title"[13].  This involved aspersions cast upon the plaintiff's ownership of land which resulted in the plaintiff being unable to lease or sell the land.  Despite the use of the term "slander" and its "unfortunate"[14] association with the law of defamation, "slander of title" appears to have been recognised as an action on the case for the special damage resulting from the defendant's interference[15].  The action was slowly enlarged in the nineteenth century, until the position was reached in 1892 where, in Ratcliffe v Evans[16], the modern foundation of the tort, Bowen LJ could say[17]:

    "[t]hat an action will lie for written or oral falsehoods, not actionable per se nor even defamatory, where they are maliciously published, where they are calculated in the ordinary course of things to produce, and where they do produce, actual damage, is established law.  Such an action is not one of libel or of slander, but an action on the case for damage wilfully and intentionally done without just occasion or excuse, analogous to an action for slander of title."

    This passage was taken to be an accurate statement of the law respecting injurious falsehood by this Court in Hall-Gibbs Mercantile Agency Ltd v Dun[18] and later in Sungravure Pty Ltd v Middle East Airlines Airliban SAL[19].

    [13]Morison, "The New Law of Verbal Injury", (1959) 3 Sydney Law Review 4 at 6‑11.

    [14]Prosser and Keeton on Torts, 5th ed (1984), §128 at 963.

    [15]Prosser, "Injurious Falsehood:  The Basis of Liability", (1959) 59 Columbia Law Review 425 at 425.

    [16][1892] 2 QB 524.

    [17][1892] 2 QB 524 at 527-528.

    [18](1910) 12 CLR 84 at 92, 95, 102.

    [19](1975) 134 CLR 1 at 13, 16, 21‑22.

58. Whilst the same factual matrix may found actions in both defamation and injurious falsehood[20], there are important distinctions between them.  In Joyce v Sengupta, Sir Donald Nicholls V‑C said[21]:

    "The remedy provided by the law for words which injure a person's reputation is defamation.  Words may also injure a person without damaging his reputation.  An example would be a claim that the seller of goods or land is not the true owner.  Another example would be a false assertion that a person has closed down his business.  Such claims would not necessarily damage the reputation of those concerned.  The remedy provided for this is malicious falsehood, sometimes called injurious falsehood or trade libel.  This cause of action embraces particular types of malicious falsehood such as slander of title and slander of goods, but it is not confined to those headings."

    It is for the plaintiff in injurious falsehood to establish falsity, malice and special damage, burdens not imposed upon the plaintiff by defamation.  On the other hand, the inhibition upon the use of the injunction to restrain further publication of defamatory material does not apply to injurious falsehood; a rationale for the distinction is said to be that the latter tort protects proprietary and commercial rather than personal interests[22].

    [20]Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 694, 733; Joyce v Sengupta [1993] 1 WLR 337 at 341; [1993] 1 All ER 897 at 901.

    [21][1993] 1 WLR 337 at 341; [1993] 1 All ER 897 at 901.

    [22]Swimsure (Laboratories) Pty Ltd v McDonald [1979] 2 NSWLR 796; Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 694.

59. The action for injurious falsehood is in many respects more closely allied to deceit than it is to defamation.  This was recognised by Sir John Salmond, who said[23]:

    "The wrong of deceit consists, as we have seen, in false statements made to the plaintiff himself whereby he is induced to act to his own loss.  The wrong of injurious falsehood, on the other hand, consists in false statements made to other persons concerning the plaintiff whereby he suffers loss through the action of those others.  The one consists in misrepresentations made to the plaintiff, the other in misrepresentations made concerning him." (original emphasis)

    [23]Salmond on the Law of Torts, 10th ed (1945), §151 at 588.

    Elements of the action

60. Reference already has been made to the four elements in the action.  It is unnecessary to determine here whether the tort is broad enough to include any damaging falsehood which interferes with "prospective advantage, even of a non‑commercial nature", as Fleming would have it[24], so that the confinement of the first element to "the goods or business" of the plaintiff is too narrowly expressed.  The publication here concerned the conduct of the business or profession of the appellant.

    [24]The Law of Torts, 9th ed (1998) at 778.

61. It has been said that it is the requirement in the third element of malice set out above that causes the most difficulties for courts in resolving cases of injurious falsehood[25].  In this case, the trial judge was of the view that malice is established either by showing the existence of some indirect, dishonest or improper motive, or by showing an intent to injure without just cause or excuse.  The trial judge concluded that "on this test the publication and republication to the limited number of people identified in this judgment (that is before publication of The Newcastle Herald article) was malicious".  The trial judge's finding of malice was not the subject of any challenge before the Court of Appeal or before this Court.  The subject of malice may therefore be put to one side, and it is unnecessary to consider the view of the English Court of Appeal that the criteria for malice in injurious falsehood are the same as at common law for libel and slander[26].

    [25]Prosser, "Injurious Falsehood:  The Basis of Liability", (1959) 59 Columbia Law Review 425; Newark, "Malice in Actions on the Case for Words", (1944) 60 Law Quarterly Review 366.

    [26]Spring v Guardian Assurance plc [1993] 2 All ER 273 at 288; revd on other grounds [1995] 2 AC 296.

62. Reference has already been made in these reasons to the conceptual shifts in the primary and secondary submissions by the appellant.  It is convenient to turn to the appellant's first submission indicated above and in doing so to consider whether the notion of "reasonable foreseeability" is an appropriate device for limiting the responsibility of the wrongdoer where the action is one of injurious falsehood.

    Reasonable foreseeability

63. In Gould v Vaggelas, Gibbs CJ observed[27]:

    "It is unnecessary for present purposes to consider whether damages for deceit can be recovered even if they were not reasonably foreseeable, and I would leave open that important question."

    [27](1984) 157 CLR 215 at 224.

64. It was subsequently said by Mason, Wilson and Dawson JJ in Gates v City Mutual Life Assurance Society Ltd[28] that in an action for deceit a plaintiff is entitled "to all the consequential loss directly flowing from his reliance on the representation, at least if the loss is foreseeable" (footnotes omitted).  This has been interpreted in the Federal Court as meaning that a defendant will be liable only for those losses which might reasonably have been foreseen as flowing from the deceit[29].  The contrary view appears to be the law in England.  In Doyle v Olby (Ironmongers) Ltd, Lord Denning MR said[30]:

    "In contract, the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties.  In fraud, they are not so limited.  The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement … 

    [I]t does not lie in the mouth of the fraudulent person to say that [the damage] could not reasonably have been foreseen."

    This passage was approved by the House of Lords in Smith New Court Securities Ltd v Scrimgeour Vickers[31].

    [28](1986) 160 CLR 1 at 12.

    [29]Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76 at 92. See also Balkin and Davis, Law of Torts, 2nd ed (1996) at 678.

    [30][1969] 2 QB 158 at 167. The passage was cited with apparent approval by this Court in South Australia v Johnson (1982) 42 ALR 161 at 170, and was referred to by Gibbs CJ in Gouldv Vaggelas (1984) 157 CLR 215 at 223 and by McHugh J in Henville v Walker (2001) 75 ALJR 1410 at 1433 [133]; 182 ALR 37 at 69.

    [31][1997] AC 254 at 265, 281.

65. What was said by this Court in Gould and Gates should not be taken as deciding that reasonable foreseeability is a requirement for the recovery of damages in an action for deceit.  For the reasons that follow the question left open in those cases should now be answered, in line with Doyle and Smith, so as to deny the applicability of reasonable foreseeability as a means of limiting liability in the tort of injurious falsehood.

66. It should be observed that the development of the concept of "reasonable foreseeability" responded to the difficulties in supplying a boundary to the damage for which the defendant should be liable in actions for negligence[32] and nuisance[33].  Prior to the expansion of the law of negligence with its notion of reasonable foreseeability, the law with respect to intentional torts had developed satisfactory means of limiting a defendant's liability, without the need to resort to that notion.

    [32]Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty [1967] 1 AC 617; Wyong Shire Council v Shirt (1980) 146 CLR 40.

    [33]Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] AC 388.

67. In the early cases respecting intentional torts the action would be left to the jury where there was sufficient evidence to support a finding of "intention" on the part of the defendant.  In the absence of direct testimony taken from the defendant, the other evidence might show that the consequence was the "necessary consequence"[34] of the defendant's conduct.

    [34]Ward v Weeks (1830) 7 Bing 211 at 215 [131 ER 81 at 83].

68. It is in this setting that the issue in Ratcliffe v Evans was raised.  The judgment of the English Court of Appeal (Lord Esher MR, Bowen and Fry LJJ) was delivered by Bowen LJ.  His Lordship began his consideration by referring to the term "special damage", saying[35]:

    "The term 'special damage' has also been used in actions on the case brought for a public nuisance, such as the obstruction of a river or a highway, to denote that actual and particular loss which the plaintiff must allege and prove that he has sustained beyond what is sustained by the general public, if his action is to be supported, such particular loss being, as is obvious, the cause of action[36].  In this judgment we shall endeavour to avoid a term which, intelligible enough in particular contexts, tends, when successively employed in more than one context and with regard to different subject-matter, to encourage confusion in thought.  The question to be decided does not depend on words, but is one of substance."

    He continued[37]:

    "In an action like the present, brought for a malicious falsehood intentionally published in a newspaper about the plaintiff's business – a falsehood which is not actionable as a personal libel, and which is not defamatory in itself – is evidence to shew that a general loss of business has been the direct and natural result admissible in evidence, and, if uncontradicted, sufficient to maintain the action?" (emphasis added)

    The conclusion Bowen LJ reached was[38]:

    "The nature and circumstances of the publication of the falsehood may accordingly require the admission of evidence of general loss of business as the natural and direct result produced, and perhaps intended to be produced." (emphasis added)

    [35][1892] 2 QB 524 at 528‑529.

    [36]See Iveson v Moore (1699) 1 Ld Raym 486 [91 ER 1224]; Rose v Groves (1843) 5 Man & G 613 [134 ER 705].

    [37][1892] 2 QB 524 at 529.

    [38][1892] 2 QB 524 at 533.

69. In the course of his consideration, Bowen LJ referred to the authorities in slander cases for the proposition that[39]:

    "[v]erbal defamatory statements may, indeed, be intended to be repeated, or may be uttered under such circumstances that their repetition follows in the ordinary course of things from their original utterance.  Except in such cases, the law does not allow the plaintiff to recover damages which flow, not from the original slander, but from its unauthorized repetition".  (footnotes omitted)

    [39][1892] 2 QB 524 at 530. This passage was applied by the New South Wales Full Court in George v Blow (1899) 20 NSWR (L) 395 at 400.

70. The authorities included the decision of the Court of Common Pleas in Ward v Weeks[40].  That case concerned an oral statement by the defendant of the plaintiff that "[h]e is a rogue and a swindler:  I know enough about him to hang him"[41].  The plaintiff's case was that, as a result, one John Bryer, who was going to sell goods to the plaintiff on credit, refused and declined so to do.  The defendant complained that the special damage resulted not from the statement he made but from that by Bryer.  Tindal CJ discharged an order nisi for a new trial, saying[42]:

    "The substance of the Plaintiff's allegation is, that by reason of the Defendant's false representations to divers persons, one John Bryer refused to trust the Plaintiff.  Now the evidence necessary to support this allegation would have been, either that John Bryer was present and heard the Defendant make the representation to some person, or, at the very least, that when the Defendant made such representations he directed them to be communicated to Bryer.  But neither of these suppositions exist in fact; on the contrary, the evidence was, that the words were addressed to one Edward Bryce, and that Bryce, at a subsequent time and place, and without any authority from the Defendant, repeated the representation to Bryer, the repetition of which words, and not the original statement, occasioned the Plaintiff's damage.

    Every man must be taken to be answerable for the necessary consequences of his own wrongful acts:  but such a spontaneous and unauthorized communication cannot be considered as the necessary consequence of the original uttering of the words."  (emphasis added)

    [40](1830) 7 Bing 211 [131 ER 81].

    [41](1830) 7 Bing 211 at 214 [131 ER 81 at 83].

    [42](1830) 7 Bing 211 at 215 [131 ER 81 at 83].

71. In the interval between Ward v Weeks and Ratcliffe v Evans, the former case was applied by the New South Wales Full Court in Russell v Robinson[43].  This was an action in the nature of slander of title.  One of the grounds of allowing a demurrer was that the special damage complained of was too remote because it followed the repetition of the malicious falsehood by a third party, the local telegraph master at Yass who, believing in the truth of what the defendant had told him, relayed the news to Sydney.  Stephen CJ said[44]:

    "It is a startling proposition that the defendant should be liable, because he said that the plaintiff's tannery was burnt down or washed away.  Assuming that there is no cause of action, unless the damage alleged is the damage which would naturally flow from the words complained of, I think no such damage is here alleged.  It appears that the defendant went to the telegraph station, and said that the plaintiff's tannery had been swept away.  In my opinion, the plaintiff has no cause of action against the defendant on account of this."

    [43](1865) 4 SCR 37.

    [44](1865) 4 SCR 37 at 42.

72. Whilst the statements by Bowen LJ and Tindal CJ may have been concerned with questions of an evidentiary inference, in more modern times (and as Stephen CJ had seen it), they represent a general limitation on the extent of damage for which a defendant will be held liable.

73. The point of significance is that, whatever may be its origins, an action in injurious falsehood requires either that the defendant intended to cause the harm or that the harm be the "natural and probable result" of the publication of the false statement[45].  Where it is established by evidence that the defendant intended to cause the harm that eventuated, and provided the other elements of the tort are satisfied, the defendant will generally be held liable for that harm.  Evidence may also be given from which the court may infer the requisite intention.  Thus, it is said as a general rule that a man is presumed to intend the natural consequences of his acts[46].  As Pollock said[47]:

    "The wrong‑doer cannot call on us to perform a nice discrimination of that which is willed by him from that which is only consequential on the strictly wilful wrong."

    This is illustrated in Ratcliffe v Evans[48], where Bowen LJ equated "damage wilfully and intentionally done" with the making of false statements where "they are calculated in the ordinary course of things to produce, and where they do produce, actual damage".

    [45]Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed (1923) at 212.

    [46]R v Harvey (1823) 2 B & C 257 at 264 [107 ER 379 at 382]; Quinn v Leathem [1901] AC 495 at 537. See also Pollock, The Law of Torts, 12th ed (1923) at 33.  The use of the principle of presumed intention in criminal law was disapproved by this Court in a number of decisions: see Stapleton v The Queen (1952) 86 CLR 358 at 365; Smyth v The Queen (1957) 98 CLR 163; Parker v The Queen (1963) 111 CLR 610 at 632-633 per Dixon CJ (with whom the other members of the Court agreed on this issue). However, these do not affect the utility of the principle in respect of the law of tort.

    [47]Pollock, The Law of Torts, 12th ed (1923) at 34.  This was the last edition for which Pollock was solely responsible.

    [48][1892] 2 QB 524 at 527.

74. Where the damage that was caused was different in kind or extent from that which was found to be intended by the defendant, issues may arise as to the extent to which the defendant should be held liable.  Pollock pointed out[49]:

    "We have to consider the relation of that which the wrong‑doer intends to the events which in fact are brought to pass by his deed; a relation which is not constant, nor always evident.  A man strikes at another with his fist or a stick, and the blow takes effect as he meant it to do.  Here the connexion of act and consequence is plain enough, and the wrongful actor is liable for the resulting hurt.  But the consequence may be more than was intended, or different.  And it may be different either in respect of the event, or of the person affected."

    [49]Pollock, The Law of Torts, 12th ed (1923) at 32.

75. The relation between the damage intended and the damage suffered may be assessed differently according to whether the damage claimed is physical damage or economic loss.  At least in the context of injurious falsehood, the question of whether there is a sufficient relation between the damage "intended" and the damage suffered will generally depend upon whether the damage suffered was the "natural and probable result" of the false statement.

76. It is in this context that the cases on injurious falsehood use expressions such as "direct and natural result"[50] and "natural and probable consequence"[51].  Cognate expressions have been used to describe the general measure of damages in respect of the related torts of deceit[52], inducement of breach of contract[53], and conspiracy[54].  Thus in Goldsoll v Goldman[55], a case concerning inducement of breach of contract, the measure of damage was expressed in terms of damage that resulted "in the ordinary course of business".

    [50]Ratcliffe v Evans [1892] 2 QB 524 at 529.

    [51]Joyce v Motor Surveys Ltd [1948] Ch 252 at 256.

    [52]Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 at 167 where the expression used by Lord Denning MR was "damages directly flowing"; Smith New Court Securities Ltd v Scrimgeour Vickers [1997] AC 254 at 264‑265 per Lord Browne-Wilkinson, 282, 285 per Lord Steyn.

    [53]Goldsoll v Goldman [1914] 2 Ch 603 at 615.

    [54]Quinn v Leathem [1901] AC 495 at 498.

    [55][1914] 2 Ch 603 at 615.

77. There are more fundamental considerations which tell against the imposition of a limitation on damage based upon the notion of reasonable foreseeability where intention is an element of the tort.  In Smith New Court Securities Ltd v Scrimgeour Vickers[56], Lord Mustill spoke of "the irrelevance of foreseeability" in a case of fraud.  In the same case, Lord Steyn referred to the policy of the law "of imposing more extensive liability on intentional wrongdoers than on merely careless defendants"[57].

    [56][1997] AC 254 at 269.

    [57][1997] AC 254 at 280.

78. The tort of injurious falsehood is, in the words of Bowen LJ, "an action on the case for damage wilfully and intentionally done"[58].  It is difficult to see why a person who "wilfully and intentionally" causes damage to the plaintiff by maliciously publishing a false statement should be able to escape liability on the basis that a "reasonable person" would not have foreseen the damage.  Such a person is manifestly not a reasonable person.  Thus it was said by the High Court of Ontario that[59] "[t]he limitation devices of foresight and remoteness are not applicable to intentional torts, as they are in negligence law".  To like effect, in Smith New Court Securities Ltd v Scrimgeour Vickers, Lord Steyn stated[60]:

    "[I]t is a rational and defensible strategy to impose wider liability on an intentional wrongdoer.  As Hart and Honoré, Causation in the Law[61] observed, an innocent plaintiff may, not without reason, call on a morally reprehensible defendant to pay the whole of the loss he caused.  The exclusion of heads of loss in the law of negligence, which reflects considerations of legal policy, does not necessarily avail the intentional wrongdoer."

    [58]Ratcliffe v Evans [1892] 2 QB 524 at 527.

    [59]Allan v New Mount Sinai Hospital (1980) 109 DLR (3d) 634 at 643.

    [60][1997] AC 254 at 279.

    [61]2nd ed (1985) at 304.

79. It follows that there is no justification for importing notions found in the law of negligence and nuisance respecting foreseeability into the law of injurious falsehood.  It may be, as was said in a New Zealand case, that "consequences that are direct and natural are generally foreseeable"[62].  However, for the reasons set out above, the notion of reasonable foreseeability is not appropriate in cases of injurious falsehood.

    [62]Mayfair Ltd v Pears [1987] 1 NZLR 459 at 463 per McMullin J.

80. The appellant is correct in its submission that reasonable foreseeability is not a part of an action for injurious falsehood.  However, this success does not assist the appellant's case.  This is because the appellant cannot establish that the respondent "intended" the injury suffered by the appellant.  Neither can the appellant establish "presumed intention" by showing that the injury suffered was "the natural and probable result" of the respondent's conduct.  I turn to consider why this is so.

    Intention

81. The appellant, in effect, submits that the trial judge found that the respondent intended to injure the appellant in its business and therefore the respondent is liable for the injury to the appellant's business which occurred – the loss of the McDonald's contract.  This submission misunderstands the role of intention in a case such as the present.  That role is that, where the other elements of the tort are made out, a finding that the defendant intended the consequences which came to pass will be sufficient to support an award of damages against the defendant in respect of that consequence.  Thus, in Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (No 2)[63], Brooking J observed that, in that case, it was not surprising that questions of remoteness of damage did not arise because:

    "it is clear that the damage which each plaintiff suffered was intended by each of the defendants and the intention to injure the plaintiff disposes of any question of remoteness of damage".

    This is what is meant by the following passage from Harper, James and Gray, The Law of Torts[64], upon which the appellant relies:

    "If the harm was intentionally caused by the defendant, there is no difficulty about the problem of legal causation, since all intended consequences are legal or proximate." (footnote omitted)

    It will not necessarily be sufficient that the wrongdoer intended damage different in kind from that which occurred.  Where there is a finding that the wrongdoer "intended" a certain consequence, the issue of whether the wrongdoer should be liable for a consequence different in kind will depend largely upon the considerations identified by Pollock[65] and referred to above.  That is to say, it will depend upon the relation of that which the wrongdoer intended to the consequences which actually resulted.  This relation will generally be assessed by asking whether the damage was the "direct and natural result" of the publication of the falsehood.

    [63][1991] 2 VR 636 at 649.

    [64]2nd ed (1986), vol 2, §6.1 at 270.

    [65]Pollock, The Law of Torts, 12th ed (1923) at 32.

82. The respondent submits that there is no finding, or evidence with which to support a finding, that the respondent intended to injure the appellant by the loss of the McDonald's contract or in any other way to injure it financially.  This submission should be accepted.  The finding made by the trial judge is identified in the following passage:

    "[T]he 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 supporting the rezoning ...

    In the Court's opinion the hoax letter was calculated to ridicule the [appellant] and injure it in its effort to persuade the council in favour of approving the development application.  An additional factor is the timing of the communication which was immediately before a caucus meeting to debate the ALP attitude to the application which was to come before the council within a couple of days.  In this way it was calculated to injure the [appellant] in its business."  (emphasis added)

83. It is apparent that the trial judge understood the letter to be directed towards persuading the ALP caucus to reject the rezoning application.  This was seen by the trial judge as an attempt to injure the appellant in its business, that business being the obtaining of approval in respect of the rezoning application.  There was no evidence that the McDonald's contract was cancelled because of the Council's rejection of the rezoning application.  There was also no evidence to support any contention that the publication of the letter affected the Council's decision to reject the rezoning application.  The appellant does not suggest the contrary.

84. As Heydon JA correctly observed, there is a disconformity between the damage intended and the damage suffered.  It follows that the respondent did not "intend" the harm that actually occurred.  This is so whether the trial judge used the term "intend" in the manner that Heydon JA thought likely, that is to say, as meaning no more than it was objectively likely that the harm would result, or whether it was used in the sense of subjective intent to injure.

85. The respondent cannot be held liable for the loss of the McDonald's contract on the basis that he had intended that result.  It remains to determine whether, nevertheless, the respondent is liable for that loss because it was the "natural and probable result" of the original publication of the letter.

    Natural and probable result

86. The trial judge, as noted above, found that the loss of the McDonald's contract was not the "natural and probable result" of the respondent's conduct.  His Honour considered the following factors to be relevant:

    "The original communication was from one person to another.  Its republication thereafter was limited to a very small number of people who were, on the face of it, addressees or had an interest in the contents.  By 'interest' is meant a legitimate interest not mere curiosity.  The thrust of the letter is to have immediate impact on the recipient and perhaps a small number of other people.  Its content is not such that leads the Court to think that by a grapevine effect it would be disseminated more broadly ...  Whilst the Court does not accept that it was meant as a joke it does appear to be in house and for the attention of a small number of people."

    The conclusion respecting republication may be compared with that reached by Tindal CJ in Ward v Weeks[66] in the passage set out earlier in these reasons.

    [66](1830) 7 Bing 211 at 214 [131 ER 81 at 83]. See also Russell v Robinson (1865) 4 SCR 37.

87. The appellant attacked this conclusion primarily upon the basis that the trial judge misunderstood the "grapevine effect".  The appellant submitted, as it did in the Court of Appeal, that McDonald's were bound to find out about the impugned letter "as sure as night followed day, once [it] got into the public domain".

88. The expression "grapevine effect" has been used as a metaphor to help explain the basis on which general damages may be recovered in defamation actions[67]; the idea sought to be conveyed by the metaphor was expressed by Lord Atkin in Ley v Hamilton as follows[68]:

    "It is precisely because the 'real' damage cannot be ascertained and established that the damages are at large.  It is impossible to track the scandal, to know what quarters the poison may reach:  it is impossible to weigh at all closely the compensation which will recompense a man or a woman for the insult offered or the pain of a false accusation."

    [67]For example in Nugawela v Crampton, unreported, Supreme Court of New South Wales (Levine J), 31 January 1996.

    [68](1935) 153 LT 384 at 386; cf Coyne v Citizen Finance Ltd (1991) 172 CLR 211 at 220; Carson v John Fairfax & Sons Ltd (1993) 178 CLR 44 at 60‑64.

89. The "grapevine effect" may provide the means by which a court may conclude that a given result was "natural and probable".  However, this will depend upon a variety of factors, such as the nature of the false statement and the circumstances in which it was published.  The "grapevine effect" does not operate in all cases so as to establish that any republication is the "natural and probable" result of the original publication.  This was what was meant by Heydon JA, when his Honour referred to the appellant's submissions being put "as though the grapevine effect was some doctrine of the law, or phenomenon of life, operating independently of evidence".  As Heydon JA correctly identified, the appellant can point to no evidence that the "grapevine effect" operated in this case.

90. The appellant faces a further difficulty in that the trial judge found that the newspaper article was a "very significant departure in sense and substance from the original publication".  This finding was challenged unsuccessfully in the Court of Appeal.  As Heydon JA correctly observed:

    "In essence the trial judge's conclusion was that what the letter did was to ridicule its supposed author as an inept and bumbling lobbyist.  By ridiculing the lobbyist who was seeking to bring about a rezoning, the author of the letter was attempting to influence the Australian Labor Party caucus against the cause urged by the lobbyist.  That is, it was 'a crude attempt to influence members of the caucus in responding unfavourably to the [rezoning] application.'  The newspaper article, on the other hand, is not to be read in that way: whether or not the letter can be treated as successful ridicule, omission from the newspaper article of all the elements that made the impugned letter a form of ridicule has the result that the article contained starker allegations."

91. It could not be said that the publication of the newspaper article, in terms which omitted "all the elements that made the impugned letter a form of ridicule", was a natural and probable result of the original publication.

92. The appellant seeks to counter this by submitting that Mrs Richards gained knowledge of the letter from sources other than the newspaper article.  The appellant submits that Heydon JA erred in holding that "there was no evidence that Mrs Richards had knowledge gained from any other sources".  The appellant asserts that Mrs Richards in fact gained her knowledge of the letter from the following sources:  (i) newspaper articles, other than the newspaper article referred to by the trial judge; (ii) a telephone conversation between Mr Christopher McNaughton and Mrs Richards; (iii) the letter from Mr Christopher McNaughton to Mrs Richards dated 9 July 1996; (iv) a Council meeting in late May 1996, which Mrs Richards attended; and (v) a Council media release dated 11 July 1996, stating that the Council would take no further action.

93. The difficulty faced by the appellant in this respect is that at trial no evidence was led in order to establish that Mrs Richards found out more about the letter from a source other than the newspaper article.  The following passage from examination in chief is sufficient to illustrate the point:

    "QWell now if you look at the article headed 'Bogus letter offered free fast food', that's the article in the Newcastle Herald, it mentions a bogus letter, it mentions McDonald's, it mentions the forged letter and it mentions offering council a free supply of items from McDonald's menu, what effect did that article when you saw it, have on you?

    ...

    AWell 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 we 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." (emphasis added)

94. The trial judge held that "as a result of learning of the letter through the newspaper article [the appellant] lost its contract with McDonald's".  His Honour continued:  "[t]he letter itself was not shown to Mrs Richards so she based her recommendation of the company on the newspaper article".  In light of these findings and the manner in which the case for the appellant was conducted at trial, Heydon JA was correct to reject any suggestion that Mrs Richards obtained knowledge of the letter from sources other than the newspaper article.

95. That conclusion makes it unnecessary to determine a further aspect of the applicable principles of causation, but the matter should be dealt with.  Reference has been made earlier in these reasons to the finding by the primary judge that Mrs Richards took the position she did, not because she doubted the honesty of those with whom she dealt in the appellant company, but because McDonald's did not wish to be seen to be associated with anything "that could cause a doubt with residents".  This presents the question whether, in an action for injurious falsehood, the plaintiff must establish that the persons, publication to whom by the defendant the plaintiff claims, believed the falsehood.

96. The better view is that expressed in Comment d to §632 of the Restatement of Torts[69], the Reporter for which was Professor Prosser[70].  In the comment upon the proposition that the publication of an injurious falsehood is a legal cause of pecuniary loss if "it is a substantial factor in bringing about the loss", it is said of slander of title cases:

    "It is enough that the publication of the disparaging matter is a substantial factor in determining his decision not to make the purchase or lease.  A prospective purchaser of land or chattels may be prevented from buying them because of the cloud that the disparaging matter has cast upon the vendor's title.  Indeed, he may know the vendor's title to be valid, and yet may decide not to buy because of the possible necessity of litigation to establish its validity, or because of the impossibility or difficulty of obtaining insurance against its invalidity.  So, too, he may be deterred from purchasing the property merely because he fears that if he purchases it, the widespread dissemination of the disparaging matter, which throws doubt upon the title of the vendor or the quality of the subject matter of the sale, may make it difficult for him to resell it if the need arises for him to do so."

    The position taken by McDonald's in the present case is consistent with this reasoning.  The point is further developed in Illustration 2 to Comment d, a slander of title example given as follows:

    "A, a jobber, has been a constant buyer of large quantities of B's product which in the past he has had no difficulty in reselling to wholesalers and retailers.  C, a competitor of B, has launched an advertising campaign in which he has not only compared B's product unfavorably with his own, but has also stated that it has certain specific characteristics that make it undesirable for the purposes of which it is sold.  In consequence A finds great difficulty in reselling B's product at a profit.  Although he knows that B's product does not have the defects stated by C, A refuses to buy a further supply of B's product.  C's disparaging advertisement is a substantial factor in preventing A from making the purchase."

    Thus the fact that McDonald's knew, from the newspaper article, that the letter had not in fact been written by Mr Christopher McNaughton is not of itself fatal to the appellant's claim for injurious falsehood.  That claim fails on the other grounds identified in these reasons.

    [69]2d, vol 3, Ch 28 (1977).

    [70]See also Harper, James and Gray, The Law of Torts, 2nd ed (1986), vol 2, §6.1.

    Conclusion

97. Both the trial judge and Heydon JA correctly held that the loss of the McDonald's contract was not the "natural and probable result" of the original publication of the letter.  It is unnecessary to consider whether Heydon JA was correct in reversing the trial judge's conclusion that actual loss in the amount of $38,000 had been established.

98. The appeal should be dismissed with costs.

99. KIRBY J.   This appeal[71] concerns injurious falsehood.  According to Professor Sawer, this is a "rare and anomalous tort"[72].  It has rarely been considered by this Court[73] or by other Australian appellate courts[74].  In part, this is doubtless because, unaltered by statute[75], the cause of action obliges a plaintiff to prove "each and every" one of its restrictive elements[76].  In part, it is because facts giving rise to the tort will often lend themselves to proceedings in defamation where the elements to be proved are less restrictive and the damages may be greater[77].  In part, it may be because trade practices legislation, where it applies, affords causes of action of broader ambit and with wider remedies[78].  However, in these proceedings, the only cause of action relied on was injurious falsehood. 

    [71]From the New South Wales Court of Appeal:  Palmer Bruyn & Parker Pty Ltd v Parsons [2000] Aust Torts Reports ¶81‑562.

    [72]Sawer, "Second Thoughts on Defamation", Nation, 20 December 1958 at 6 cited Morison, "The New Law of Verbal Injury", (1959) 3 Sydney Law Review 4 at 12.

    [73]cf Hall-Gibbs Mercantile Agency Ltd v Dun (1910) 12 CLR 84; Sungravure Pty Ltd v Middle East Airlines Airliban SAL (1975) 134 CLR 1.

    [74]cf Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 692, 711, 733.

    [75]As was done in England by the Defamation Act 1952 (UK), s 3.  The Defamation Act 1958 (NSW) effected change but this was repealed in 1974. In other States, the tort has been modifed by legislation: Defamation Act 1889 (Q), s 4; Defamation Act 1957 (Tas), s 5 (re-enacting s 4 of the Defamation Act 1895 (Tas)):  noted Balkin and Davis, Law of Torts, 2nd ed (1996) at 677.

    [76]Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed (1923) at 208 (Art 60).

    [77]cf Swimsure (Laboratories) Pty Ltd v McDonald [1979] 2 NSWLR 796 at 799; Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 694; Trindade and Cane, The Law of Torts in Australia, 3rd ed (1999) at 184‑185.

    [78]Balkin and Davis, Law of Torts, 2nd ed (1996) at 677.

    The facts and the findings of the primary judge

100. The facts of this case, giving rise to the claim for injurious falsehood, are set out in other reasons[79].  The contents of the offending letter, composed and handwritten by Cr Keith Parsons ("the respondent") on the letterhead of Palmer Bruyn & Parker Pty Ltd ("the appellant"), and sent to Cr John Manning of the Australian Labor Party ("ALP") caucus of the Newcastle City Council ("the Council"), are set out in full in those reasons[80].  So too are the contents of a newspaper report, referring to the "bogus" letter[81].  Suffice it to say that the appellant argued that the termination of its retainer to act for McDonald's Australia Limited ("McDonald's") in relation to a rezoning application before the Council for a proposed restaurant development, was "a direct consequence of the said publications".

     [79]See reasons of Gummow J at [18]-[28]; reasons of Callinan J at [168]-[189].

     [80]See reasons of Gummow J at [22]; reasons of Callinan J at [173].

     [81]See reasons of Gummow J at [26]; reasons of Callinan J at [180].

101. The primary judge (Taylor DCJ) found against the appellant on the basis that it was the newspaper report, rather than the letter, that had caused the termination of the appellant's retainer[82].  Although noting the concession that "the letter was a hoax and contained false statements" and finding that "the publication and republication to the limited number of people identified in this judgment (that is before publication of the Newcastle Herald article) was malicious" the primary judge rejected the contention that republication of the letter in the newspaper report was "the natural and probable result of the [respondent's] sending a facsimile to Mr Manning".  He found that "because of the very significant departure in sense and substance" of the newspaper report from the original letter, the "chain of publication and republication had been broken".  If publication were treated as confined to the small group of persons to whom it was natural and probable that the letter would be sent, there would have been no actual loss to the appellant even if, as the primary judge found, the "hoax letter was calculated to ridicule the [appellant] and injure it in its effort to persuade the Council in favour of approving the development application".

     [82]Palmer Bruyn & Parker v Parsons unreported, District Court of New South Wales, 26 June 1998 at 9‑10 per Taylor DCJ.

102. Against the possibility that the case might go further (as it did) the primary judge resolved a contested issue concerning damages.  Evidence was received from Mr Peter Coughlan, a chartered accountant who had access to the appellant's financial records, concerning the net profit which the appellant had made from the retainer, whilst it lasted.  Mr Coughlan calculated the estimated loss occasioned by the termination based upon the assumption that, otherwise, the appellant would have remained involved in the application on behalf of McDonald's for a further two and a quarter years.  Whilst expressing some criticism of the appellant's failure to prove more accurately what McDonald's would have expected to take place if the retainer had not been severed, and whilst perceiving "a certain artificiality in the damages claimed" the primary judge accepted $38,000 as "reasonable actual compensation" for the loss of a significant contract to the business.  He rejected the claim for punitive damages.  The latter was not pressed on appeal.  An attempt to revive it in this Court was rejected.

     The appeal to the Court of Appeal

103. The appellant appealed to the Court of Appeal of the Supreme Court of New South Wales.  That Court unanimously dismissed the appeal.  The reasons of the Court were given by Heydon JA, with whom Stein JA and Foster AJA agreed.  His Honour noted the disparities in judicial reasoning[83] and in academic texts[84], concerning the test for causation in the context of the tort of injurious falsehood.  However, he concluded that it was unnecessary to clarify the correct test because "on any of them the [appellant's] case fails on the facts"[85].

     [83]Referring to Haddan v Lott (1854) 15 CB 411 at 426, 429 [139 ER 484 at 491, 492]; Ratcliffe v Evans [1892] 2 QB 524 at 527, 529; Ajello v Worsley [1898] 1 Ch 274 at 281; George v Blow (1899) 20 NSWR (L) 395 at 399; The Royal Baking Powder Co v Wright, Crossley & Co (1900) 18 RPC 95 at 99; Kaye v Robertson [1991] FSR 62 at 67; (1990) 19 IPR 147 at 152. See [2000] Aust Torts Reports ¶81-562 at 63,783-63,784 [45].

     [84]Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed (1923) at 208 (Art 60); Harper, James and Gray, The Law of Torts, 2nd ed (1986), vol 2 at §6.1 (270).

     [85][2000] Aust Torts Reports ¶81-562 at 63,784 [46].

197. A third possible test, which was propounded by Vaisey J in London Ferro-Concrete Co Ltd v Justicz, would also have been satisfied[164]:

     "It has been said in this class of case that malice may be implied from mischief-making where the object and purpose of the mischief-maker is not only to interfere with the person whose goods or work he is disparaging, but also at the same time to secure a benefit for himself.  I consider this to be such a case."

     The respondent was certainly a mischief-maker at the very least.  The benefit sought by the respondent could readily be characterised as the disparagement of the application by McDonald's so that it would be rejected, a result of political benefit and value at least to the respondent, and, incidentally, of inevitable harm to the appellant for reasons which I will state later.

     [164](1951) 68 RPC 65 at 68.

198. The primary judge's finding of the dual purposes of the letter, both to ridicule the appellant and injure it in its effort to persuade the council to approve the development application, was therefore reasonably founded on evidence.  Even though not all of the words contained in the letter could be taken literally, they still had a very real capacity (which was realised) to ridicule and harm the appellant.  Whether a reader treated the letter as humorous or not, it was still false and injurious. Heydon JA did not doubt that the letter had one serious intent at least[165]:

     "Some treated the letter as a joke: for example, the Council eventually resolved that it had 'clear humorous intent'.  But the trial judge concluded it was not a joke, and neither party complains about that.  In essence the trial judge's conclusion is that what the letter did was to ridicule its supposed author as an inept and bumbling lobbyist.  By ridiculing the lobbyist who was seeking to bring about a rezoning, the author of the letter was attempting to influence the Australian Labor Party caucus against the cause urged by the lobbyist.  That is, it was 'a crude attempt to influence members of the caucus in responding unfavourably to the [rezoning] application.'"

     I do not, however, agree with his Honour that no one could seriously treat the letter as an offer of a bribe.  Why otherwise was it regarded as a matter of such concern by Councillor Manning that he would immediately pass it on to others as he did?  Why otherwise would it have been debated as a matter of some seriousness at the caucus meeting at which, as to its origins, the respondent stayed silent?

     [165][2000] Aust Torts Reports ¶81-562 at 63,783 [43].

199. Mrs Richards was not nearly so dismissive of the possibility of bribery as appears from the evidence that she gave in cross-examination:

     "Q       No one ever suggested to you that it was a genuine letter did they?

     A        No that's true.

     Q        That never crossed your mind did it?

     A        Well of course it – it crossed my – it did cross my mind that somebody else might have done something that – have offered something as an inducement, I mean although it says it's a bogus letter I couldn't be sure of it if I hadn't seen it or if there – people are talking about bribes.  I mean a lot of people talk about McDonald's coercing people to make decisions and that's not true, I worked with them for 16 years but –

     Q        Yes but we're talking about this letter now, not McDonald's life in general, do you understand?

     HIS HONOUR:         I think it was a fair response to your question.

     COUNSEL:               I'm sorry.

     HIS HONOUR:         It was a fair response to your question.

     Q        You didn't believe that this was a true letter did you? A genuine letter did you?

     A        I didn't know if the consultant might have done it or not, might have made an offer.

     Q        Which consultant did you have in mind?

     A        Palmer, Bruyn and Parker. It says that Palmer, Bruyn and Parker offered a councillor – the letter was suggesting that we offer product.

     Q        Yes?

     A        Or offer something.

     Q        Yes?

     A        It caused me to doubt.

     Q        Doubt what?

     A        I didn't know whether they were – whether they [were] genuine – I – I didn't know. It's implying that McDonald's would offer a bribe virtually.

     Q        Well it's not at all is it? You knew McDonald's hadn't offered any bribe at all didn't you?

     A        But a consultant might offer something believing that they could talk us into it until I had – I had gone to Palmer, Bruyn and Parker because I believed that they were a respected firm. But if something goes out on their letterhead well I don't – I don't know if they thought that they might be able to suggest something to us.  I hadn't offered anything through Palmer, Bruyn and Parker.

     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 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?"

200. I would also respectfully disagree in two respects with the second point made by Heydon JA, that is as to disconformity between the damage supposedly intended and the damage actually found to have been suffered, which I take to be another way of saying that the causation of the loss found by the primary judge had not been made out.  Heydon JA pointed to the absence of a finding that the appellant suffered injury in its efforts to persuade the Council to approve the rezoning application by reason of the respondent's conduct.  As a result of the false letter (accepting as I do that the termination of the appellant's services flowed from it) the appellant's opportunity to persuade the Council to approve the application was lost because, henceforth, it would not even be acting for McDonald's in the matter of the application.  In that sense, the letter had two consequences:  it caused the appellant to lose its contract with McDonald's and it destroyed the appellant's chances of pursuing the application in any way at all on behalf of McDonald's.  It was not correct, therefore, as Heydon JA said, that "the loss of the McDonald's contract had nothing to do with that process".  It is, in my opinion, inescapable that the respondent intended, whether by way of, what he might seek later to describe as a hoax, to injure the appellant in its professional capacity, while acting in connexion with an application to which the respondent was opposed.  That intention was clearly effective to the extent that I have indicated.  It follows from what I have said that the appellant did sustain actual damage by reason of the malicious publication of the false matter.  In any event, it hardly lies in the mouth of any purveyor of injurious falsehoods to rely on exquisite refinements of categories of harm once the purveyor of a falsehood puts it into circulation.  Nor should it be thought that simply because the falsehood might, to some, seem funny, it cannot be damaging. 

201. Both in the Court of Appeal and in this Court the appellant contended that as the trial judge had found that it was a natural and probable result of the forged letter that it would be republished to various persons connected with the Council, the appellant, its solicitor and the police, the trial judge erred in failing to find that the respondent was responsible for the republication of the letter to Mrs Richards.  Against that the trial judge had found that the appellant's loss of its contract with McDonald's was the result of a recommendation by Mrs Richards on reading the article from The Newcastle Herald of 11 May 1996.

202. Heydon JA in the Court of Appeal answered the appellant's submission that the loss of the retainer was a natural and probable consequence of its compilation and publication to various people by reference to the limited number of people who saw it and various implied and express bases of confidentiality upon which they received it[166]:

     "As to councillors, the history is as follows.  Two faxes of 24 March were received in the General Manager's office.  The first was sent by Mr Manning to Mr Grant, General Manager.  It enclosed the impugned letter and said it 'needs to be discussed with Greg Heys [the Lord Mayor] first thing – for possible legal advice.'  This is suggestive of a goal of confidentiality.  That would have been reinforced by the plaintiff's letter of 26 March 1996, received on 27 March 1996, denying authorship of the fax.  It was forwarded to all councillors on 27 March 1996.  On 2 May 1996 the Lord Mayor raised the question of confidentiality.  He was advised of very limited circulation within the staff (the General Manager and two others) and advised that since the plaintiff had referred the matter to the police it was inappropriate to refer it to the Council.  At the Urban Development Committee of the Council meeting on 21 May 1996 it was recommended that a report be received from the General Manager on the impugned letter.  That report was provided on 9 July 1996 on a confidential basis; and it may be inferred that equal confidentiality prevailed on 21 May 1996.  An inference also flows from the fact that though Mrs Richards said that she attended a 'council meeting … at the end of May', which may well have been the 21 May 1996 meeting, she gave no evidence of what happened at it.  This suggests that nothing happened of which she obtained knowledge, and is consistent with confidentiality having been preserved at the 21 May 1996 meeting.  In the course of preparing his report, Mr Grant sought legal advice from Sparke Helmore on 20 June 1996 and received it on 27 June 1996.  That legal advice was one reason why the Council considered Mr Grant's report in confidential session on 9 July 1996.  At that meeting the Council resolved that confidentiality should remain in place until a public statement was issued (which it was on 12 July 1996):  this confirms that Council's policy all along had been to preserve confidentiality.  It only referred the matter to the Independent Commission Against Corruption because it received legal advice to do so.

     The only other persons aware of the impugned letter were the plaintiff and its solicitors, Hunt & Hunt.  The latter were under an obvious duty to preserve confidentiality, and there is nothing to suggest that that duty was not performed.  On the whole the plaintiff's interests would have been best served by preserving confidentiality, and it evidently did so.  It did not approach McDonald's on the matter until after the Newcastle Herald article of 11 May 1996."

     [166][2000] Aust Torts Reports ¶81-562 at 63,780-63,781 [35]-[36].

203. His Honour then rejected the submission that Mrs Richards learned about the letter because of the "grapevine effect" since, he said, there was no evidence that she did and because the background was against it.

204. But the appellant also advanced both in the Court of Appeal and in this Court an argument that the article itself was a natural and probable result of the bogus letter, and, in that sense, the chain of causation, the links being the sending of the letter, its circulation to a larger number of people, the discussion of it in the newspaper and the termination of the retainer, was not broken.  Heydon JA in rejecting this argument accepted observations about it that had been made by the primary judge as follows[167]:

     [167][2000] Aust Torts Reports ¶81-562 at 63,782-63,783 [40].

     "So far as the sense and substance of the reporting in the Newcastle Herald is concerned it is certainly stripped of all the – to use the defendant's phrase 'over the top' and 'Ludicrous' references and carries a much more direct and forceful sting than the original publication.  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'.  This is not meant to be a criticism of the Newcastle Herald because after all it is not known to this Court what information was made available to it before the report appeared in the newspaper.

     …

     The sense of the original publication is to influence the minds of the expected recipients concerning an immediate political issue before the council.  The original publication could not be taken to be a bribe or inducement but rather as a crude attempt to influence members of the caucus in responding unfavourably to the application.  This is particularly so as the plaintiff had obvious difficulty in being given the opportunity to advocate the benefits of the application to at least some members of the caucus.  In raising offers of a free supply of items as a bribe or inducement in a forged letter in the article the sense is much broader and deeper."

     Heydon JA added these comments[168]:

     "The ludicrous references referred to by the trial judge include linguistic usages such as 'gonna' (twice) and 'youse'.  Some people speak, but very few write, in that fashion.  Some people swear while speaking, but very few in writing.  It is ludicrous to suppose that Mr John McNaughton's wife would play the accordion at a Golden Arches birthday party.  It is also ludicrous to say that a person connected with the Australian Labor Party like Mr John McNaughton would have as a friend an Independent like the Reverend Nile.  It is also ludicrous to suggest that the Federal leader of the Australian Labor Party, or for that matter the Labor Premier of New South Wales, would listen to someone seeking to affect the outcome of a Council decision concerning rezoning of a restaurant at Wallsend.

     The plaintiff's argument was that the Newcastle Herald article truthfully stated that the impugned letter offered Councillors a free supply of items from McDonald's menus, that the trial judge's different characterisation of the two documents was 'a semantic exercise', and there was little if any difference between the imputations conveyed by the two."

     No one, Heydon JA concluded, could seriously treat the letter as offering a bribe.

     [168][2000] Aust Torts Reports ¶81-562 at 63,783 [41]-[42].

205. With respect, the assumption that the chain of causation will be broken unless the "sting" intended is identical with or substantially similar to the sting conveyed is not correctly based.  Once a falsehood, disguised as this one was, and given the trappings of an authentic provenance by the apparently genuine letterhead and signature, is put into circulation, that someone will give it credence (in whole or in part) and recycle it, or describe it not inaccurately, is not only possible, but, also in my opinion, probable, as occurred in the case of The Newcastle Herald.  It would be naïve, with respect, to think otherwise.

206. The article was, in substance, correct anyway.  There was a bogus letter.  It was sent to Labor councillors at the time to which the article referred and concerned the application made by McDonald's.  Approval was being sought by the appellant whose managing partner was a former Labor Lord Mayor of Newcastle.  The letter did in terms offer the councillors of the Labor caucus food sold by McDonald's.  The proprietor of the newspaper is not to be criticised for a degree of reticence in naming public figures mentioned in the letter or in not repeating the infelicities of language of its author.  If the publisher had not exercised some restraint, the publisher may have laid itself open to other proceedings or criticisms.  It was not obligatory for the editor to make a comment upon or a judgment about the true purpose of the letter or to repeat it in full, or to dismiss it as a well-intended joke.  It was not necessary that the article be in the same style as the letter.  I do not even consider that the article conveys a very much stronger message than the letter.  That it may have been a hoax does not deprive it of the character of a forgery as this term is used in ordinary parlance.  It was, at the very least, as the article describes it, a bogus letter.  People might not generally write in the fashion employed by the appellant but some may do so, on occasions, for a variety of reasons, including for emphasis or to convey a common touch.  And, because parts of the letter might strain credulity does not mean that other parts of it should not be taken seriously.

207. In my opinion, the appellant's argument that the chain of causation remained unbroken should be accepted.  It would certainly satisfy a "but for" test which has not necessarily been discarded for all purposes[169], although the making of value judgments involving questions of degree and human experience will generally be the means by which causation will be determined.  The letter was on its face a letter of the appellant.  It dealt with a controversial and newsworthy matter.  It was sent in circumstances in which its further circulation was very likely, as in fact soon occurred.  Because it was controversial and came to the notice of a number of people engaged in public life, and despite requests for secrecy, it could only have been a matter of time before its contents would come to the notice of the media.  To expect that after the letter came into the hands of a number of politicians from different parties and local government officials, it would remain confidential and would not be a matter of public interest and discussion is, in my respectful opinion, to take far too benign a view of political and human nature.  It did not attract legal professional privilege nor any other privilege.  The newspaper was entitled to, and did describe and discuss it in a not inaccurate, but understandably guarded way.  There is no reason why, on appeal, the conclusion that I have reached is not open, because, as Heydon JA points out (in taking a different view of causation from mine) it does not turn on questions of credit or impression.  The damage sustained therefore was the natural and probable consequence of the respondent's injurious falsehoods about the appellant.

     [169]March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506.

208. Although, as actually happened, people, including Councillor Manning and the editor of The Newcastle Herald and others who received a copy of the facsimile, were prepared to treat the letter seriously, and did so, let it be accepted for present purposes, as Heydon JA did, that it was "over the top" and contained "ludicrous" references.  Those features do not exculpate the respondent.  The falsehood was that the appellant would sign and send on its letterhead a letter, in respect of a professional task it was performing, that was crude, ribald and unprofessional, if, to some, ludicrous.  Such a letter could only be damaging to its putative author.  Let me also assume that the real author had a purpose, as the trial judge considered to be the case, "to influence the minds of the expected recipients concerning an immediate political issue before the council".  If the true author did not also have as another purpose the infliction of some damage upon the appellant, then why did the respondent choose the stolen signature and letterhead of the appellant as his means of effecting his alleged object of influencing the Council?  There were all sorts of ways in which the respondent might advocate his views other than by directly and dishonestly involving the appellant.  It is clear that the respondent must have had, as one of his objects, disparagement of the appellant, whether or not he also wanted to play a vulgar joke and damage McDonald's application.  It does not matter, therefore, whether the letter is to be regarded as serious in whole or in part, or ludicrous; it still was intentionally false and injurious to the appellant.  Indeed, the respondent almost admitted as much when he told an investigating police officer that "[the appellant's lobbying] was grossly improper … I believed he shouldn't have done that, now, that's basically the background to me sending the fax".

209. Before turning to the question of damages, there is one other matter in the reasons of Heydon JA with which I should deal.  One reason for his Honour's rejection of the appellant's submission that the letter caused the loss of the retainer, was that Mrs Richards' evidence to that effect was elicited by "egregiously leading" questions.  It is true that the relevant answer was given to a leading question.  But it, unlike other questions asked of Mrs Richards, was not the subject of any objection.  She answered the question very emphatically by saying "absolutely".  It was not suggested by the respondent in cross-examination that if Mrs Richards had seen the actual letter (and not merely the newspaper article) she would not have terminated the appellant's retainer.  That the answer may have been given to a leading question is of no significance.

210. The last matter requiring consideration is the respondent's notice of contention that the appellant should recover only nominal damages were it to succeed on liability.  The evidence of damages certainly lacked precision but it was not confined to evidence from the appellant's accountant only.  Mr Parker on behalf of the appellant gave the following evidence:

     "QNow you'd had the McDonald's account for about a year at that time?

     AIn broad terms yes. I'm not exactly sure of the actual timing but –

     QAnd the fees you received from McDonald's per week were how much gross?

     AI would have thought in the order of $1,500 a week.

     Q        A week?

     A        Yes.

     Q        That would be gross of course?

     A        That's our fees yes.

     Q        And they would be subject to taxation?

     A        Yes."

211. Mrs Richards, as I have pointed out, gave evidence that but for the letter McDonald's would have employed the appellant not only on the project with which this case is concerned but others as well.  This project was, she said, "a big project".

212. Mr Coughlan was the accountant who was called for the appellant to prove loss.  In that capacity, he had "handle[d] the books and records and the like" for the appellants.  His evidence-in-chief was contained largely in a written report tendered in evidence.  He stated the basis of his calculation as follows:

     "Our request has been to quantify the economic loss of the Plaintiff.  This loss is based on the reduction in the Plaintiff's flow of income from instructions directed elsewhere in the subsequent 12 months caused by the actions of the Defendant.

     The loss has been determined by considering the Plaintiff's percentage of total survey work required by McDonald's Australia Limited for the Hunter area for the period 2/8/95 to 24/3/96.  This percentage has been applied to the total estimated work required by McDonald's Australia Limited in the Hunter area for the twelve month period following 24/3/96.  Estimated work has been calculated based on work performed for McDonald's in the Hunter area in the preceding 12 months."

     On that basis, the estimated net annual economic loss was $17,235.00.

213. Mr Coughlan was criticised for making assumptions.  In substance, the only assumption that he made was that work for McDonald's would be undertaken and paid for at the same level as it had been in the past year before the retainer was terminated.  On one view that was a conservative assumption, particularly in light of Mrs Richards' evidence with respect to the provision of additional work.  He was an accountant who was well acquainted with the appellant's affairs and accounts, and entitled to express a financial opinion.  I cannot therefore accept, as Heydon JA does, that there was no proved actual loss.  Forthwith, and in consequence of the cancellation of the retainer, some actual loss must have occurred.  The evidence to which I have referred did provide a basis for an assessment of compensation.  The respondent's submission that actual damages "for the purposes of injurious falsehood really means 'special damages'" should be rejected.  It will almost always be impossible to prove a precise measure of damage when a business is injured. 

214. Perhaps damage in the amount assessed, that is two and a quarter years of fees for two and a quarter years loss of work on the project, was not fully proved.  The respondent, however, did not seek any order in the alternative, that damages be reassessed.  In these unusual circumstances, and given that some actual damage was definitely suffered and for the additional reasons stated by Kirby J[170] with respect to this issue, I would not make any order disturbing the primary judge's assessment.

     [170]Reasons of Kirby J at [138]-[141].

     Orders

215. I would therefore allow the appeal, order that judgment for the appellant in the sum of $38,000.00 be entered, and order that the respondent pay the appellant's costs, including those of the trial and the appeal to the Court of Appeal of New South Wales.