In the northwest of Victoria sits the orange-picking town of Mildura on the Murray River. To get there from Melbourne usually involves a 6-hour drive or a small flight on a plane with a flip-top lid. But it was there in Mildura where Justice Stephen Kaye and a jury of six heard a defamation trial that ran for 22 days and traversed the many great and wondrous issues that defamation trials can throw up.  Judgment was given on 9 November 2012 ([2012] VSC 535).

The case related to the operation of the First Mildura Irrigation Trust (FMIT), an icon of Mildura society. The four plaintiffs, Jim Belbin, Frank Di Masi, Don Marciano and Nancy Prevedello, were members of the Board of the FMIT and in August 2008, the Minister for Water, Tim Holding MP, made a decision under the Water Act that the defendant, the Lower Murray Urban and Rural Water Corporation (the Corporation) would take over the functions of the FMIT.

For more than 100 years, the FMIT played a central role in the foundation and development of Mildura and its surrounds. Two Canadian brothers had entered into an agreement with the government in the late nineteenth century to establish an irrigation colony on the Murray River and the FMIT then provided irrigation services in the Mildura area for 110 years.

Before it was closed, FMIT had proposed to upgrade the Mildura South Channel, which would cost it $4.7m. It obtained that money from the government and in April 2007, the FMIT Board resolved to draw down all of it. Shortly after that, $4.2m was invested with an investment broker and later, it became apparent that the investment broker had invested $1.5m in a bunch of “collateralized debt obligations” that were adversely affected the American Global Financial Crisis, ie. the toxic debts that are spoken of in hushed tones.

The Minister found out and wrote to FMIT asking what had happened with

Frank Di Masi, plaintiff no.2

these investments. In May 2008, the Minister appointed an auditor to investigate FMIT’s affairs and that auditor found that FMIT’s viability was at risk. Ultimately, in August 2008, the Minister made the decision that the Corporation take over.

The Minister’s decision was met by local outrage. There were protests and placards and so the Minister wrote a letter justifying the decision. The letter was sent to FMIT’s former customers and it did not hold back.

Among other things, the letter said this:

“My decision was based in part on the fact that the FMIT Board members broke the law by investing $2.2 million of Victorian government money without Treasury approval…  The Government loaned this money to FMIT to invest in upgrading local irrigation infrastructure, for the lasting benefit of its members. Instead, the FMIT Board invested the money in the United States sub-prime mortgage market, where it lost $2m of its value.

This was a serious breach of trust with local irrigators… It also reflected an entrenched disregard for the governance and financial processes required of all water authorities to ensure that public money – your money – is being used appropriately.”

Tim Holding MP

The Corporation then published the letter on its website under the heading “Integration of FMIT”.The plaintiffs each sued the Corporation for this republication of the letter on the website.

There were other allegations made in the letter and although none of the plaintiffs were named, they ultimately each relied on 3 imputations:

  1. The plaintiff broke the law by investing $2.2 million of Victorian Government money without Treasury approval;
  2. The plaintiff acted irresponsibly and outside the law by investing money loaned from the Victorian Government in the United States sub-prime mortgage market;
  3. The plaintiff approved secret last minute adjustments to senior management contracts in the event of the First Mildura Irrigation Trust being taken over.

The Corporation ran defences of fair report of a public document, qualified privilege under s.30 of the Defamation Act and also qualified privilege at common law. It alleged it had a duty to publish the Minister’s explanation. The plaintiffs then claimed the Corporation was actuated by malice.

A whole range of issues were fought up to and at the trial. After the lengthy trial, and several interlocutory decisions along the way, the jury’s verdicts for the 4 cases were essentially that:

–          the article had been downloaded and read by 4 people in Victoria, of which 2 understood that the article referred to each of the plaintiffs; and

–          the Corporation was actuated by malice in publishing the letter.

Then the 3 main issues remaining for Justice Kaye were:

  • the defence of publication of a fair copy of a public document;
  • the statutory defence of qualified privilege; and
  • the issue of damages.

The first question of these was whether the Minister’s letter was a public document within s.28 of the Act. That came down to whether the letter was “issued” by the Government and His Honour concluded it was not. It was not a formal document, but was simply an explanation of a decision [93].It was not for the public, but simply for a number of FMIT customers. So no defence for publication of a fair copy of a public document. It was not a public document.

On to qualified privilege, firstly under s.30 of the Act. Did the recipients have an interest in receiving the letter? Was the letter published in the course of giving that information, and was the Corporation’s conduct reasonable?

The defendant

His Honour noted that the concept of “interest” under the Act is significantly wider than the common law qualified privilege defence [145], and held that the recipients, including a sister of one of the plaintiffs, had such an interest on that basis. Further, the publication was published in the course of giving the information, and so the real question was whether the Corporation’s conduct was reasonable.

His Honour concluded that he could not infer anything from the jury’s answers and held that he could consider the subjective intent of the Corporation [160]. In all, His Honour concluded that the Corporation’s conduct wasnot reasonable [182]-[193].

Crucially, by August 2009, the Corporation was aware that the $1.5 m placed with the investment broker had been recovered, so the allegation that $2m had been lost, was false. His Honour also stated that he was not confined to just looking at the time the article was uploaded by the Corporation, when considering the question of reasonableness. The article had been left on the website for at least 18 months, well after the Corporation was fully aware of the true circumstances.

So no s.30 qualified privilege defence, and there could be no common law qualified privilege defence because the jury answered that the Corporation was actuated by malice.

On to damages. There was evidence that only 4 people read the article and none of them thought any less of the plaintiffs. But His Honour held that there was evidence of the “grapevine effect” [216]-[219], and especially in this rural community. There was evidence that nearly everyone in Mildura knew of the allegations in the letter.

The Corporation then claimed that under cross-examination, evidence had been given by some of the plaintiffs that evidenced the truth of some of the allegations, namely that the plaintiffs broke the law, when making the $2.2 m investment.

His Honour then had to deal with whether a defendant could adduce evidence of the truth of the allegations, even if no truth defence was pleaded. It was claimed that this could go to the mitigation of damages. It poses an interesting question for defendants. There had been no Australian case on this to date, and referring to an English authority, His Honour concluded that a defendant could adduce this evidence for that purpose [313].  But it appears that there is a catch. If the defendant does this and loses, it can probably expect to go down for aggravated damages in the process, as the defendant did here.

Anyway, there was evidence that each of the four plaintiffs held a high reputation in the Mildura community before the publication and His Honour concluded that any shortcomings in their actions while on the FMIT Board were far less than the seriousness of the imputations leveled against them. They won aggravated damages (although how much was not specified), largely because of the Corporation’s abandonment of the truth defence at the start of the trial and also the Corporation’s conduct of the defence (ie. the cross-examination and statements made by the Corporation’s Counsel in opening about proving the truth of the allegations).

So the plaintiffs suffered substantial damage. Mr Belbin, Mr Di Masi and Mr Marciano each won Aus$70,000, while Mrs Prevedello, who was not even on the FMIT Board at the time of the conduct complained of, won Aus$85,000.

This post originally appeared on the Defamation Watch Blog and is reproduced with permission and thanks