In States where the Codes apply to civil defamation (Queensland and Tasmania) there are eight occasions where the protection of qualified privilege is available. At least two of them are likely to be present in communications by creditors during insolvency administrations. They both concern the act of giving information - one in response to a request and the other voluntarily - to a person who has a legitimate interest in receiving it:

(a)    "The publication is made in good faith by a person in answer to an inquiry made of the person making the publication relating to some subject as to which the person by whom or on whose behalf the inquiry is made has, or is believed on reasonable grounds, by the person making the publication to have, an interest in knowing the truth".

(b)    "The publication is made in good faith by a person for the purpose of giving information to the person to whom it Š is made with respect to some subject as to which that person has or is believed, on reasonable grounds, by the person making the publication to have, such an interest in knowing the truth as to make his conduct in making the publication reasonable under the circumstances".

The phrase "good faith" has a special definition, consisting of four components:

♦    relevance;

♦    no excessive publication;

♦    no ill will or improper motive; and

♦    no belief that the matter is untrue.

Since the absence or breach of any one of these components will remove a statement from the protective umbrella of qualified privilege, an understanding of them is essential. To this end brief explanations are given below. Reference should also be made to the notes on malice (see xxxx), since the difference between a test of "malice" and one of absence of "good faith" is largely theoretical: the same evidence would normally satisfy, or fail to satisfy, either test.

♦    "Relevance" means the statement must have a connection with the matters the existence of which may excuse the bona fide publication of defamatory material.

♦    To avoid "excessive publication" the manner and extent of the publication must not exceed what is reasonably sufficient for the occasion.

♦    If an untrue defamatory statement is published solely because the publisher holds a grudge or has a prejudice against the victim, or wants to inflict harm for its own sake, or wants to exploit the occasion for his or her own ends, it may be said that he or she is "actuated by ill-will towards the person defamed or by some other improper motive". Such a finding defeats qualified privilege.

♦    So too, under this definition of "good faith", does a finding that an untrue defamatory statement was published by a person who knew or believed that it was untrue.

13.3.15    Qualified privilege and malice in NSW

New South Wales observes the common law relating to qualified privilege and malice (see xxxx), but has modified areas which are regarded as harsh. The relevant areas are:

A.    Duty or interest by the publisher

"Where ... publication is made in circumstances in which there would be a defence of qualified privilege for that publication if (the recipient) bore some character, and the publisher believes, at the time of the communication, on reasonable grounds, that (the recipient) bears that character, there is a defence of qualified privilege for that publication".

B.    Corresponding interest or duty by the recipient

Under common law the publisher is deprived of qualified privilege if the recipient of a publication does not have a corresponding interest in receiving (or a duty to receive) the defamatory statement; even a mistaken, though reasonable, belief that the recipient has the requisite interest or duty is no excuse (see xxxx). However the legislation in NSW introduces the concept of "apparent interest". Privilege is not lost where the recipient had an apparent interest in receiving information on the subject. So where the publisher acts reasonably and carefully to ascertain interest he or she is not deprived of privilege if it subsequently transpires that the recipient had no interest.

The relevant legislation may be paraphrased as follows:

Where -

(a) the recipient has an interest in having information on some subject; or

(c) the matter is published to the recipient in the course of giving to him information on that subject; and

(d) the conduct of the publisher in publishing the matter is reasonable in the circumstances;

there is a defence of qualified privilege for that publication.

This provision corresponds in substance with that contained in the Codes (see xxxx).

C.    Excessive publication

In NSW the common law rule that qualified privilege is lost if the method of publication exceeds the reasonable needs of the occasion (see xxxx) is relaxed. Referring to a "multiple publication" - i.e. publication of the same or like matter or of copies of any matter to two or more recipients - the NSW legislation grants qualified privilege where: 

(a) the matter is published on an occasion of qualified privilege and is relevant to that occasion; and

(b) "the extent of publication is reasonable having regard to the matter published and to the occasion of qualified privilege".

It seems these laws also modify the common law on publication to "outsiders" (see xxxx) and, to a lesser extent, publications arising out of meetings (see xxxx). This would appear to be the combined result of relaxing the test as to the recipient's actual character or interest and protecting a multiple publication where not all of the recipients have the required character or interest but the extent of publication is "reasonable".

13.3.16    Practical illustration

Having summarised the relevant parts of the law it might now be helpful to introduce a few defamatory statements and speculate about whether and under what circumstances and in which States and Territories the statements would be protected by the doctrines of truth, truth and public interest/benefit and qualified privilege. The statements used are the type that a creditor of an insolvent company might contemplate making to other creditors, to the company's administrator and/or to the appropriate authorities (i.e. the police and the Australian Securities Commission).

The cast

The cast involved in this illustration are:

♦    Browk Pty Ltd ("Browk") the insolvent company;

♦    Mr Govan, a director of the insolvent company;

♦    Mr Wilde, the creditor who wants to make the statement (the would-be publisher);

♦    Mr Steward, the administrator; and

♦    Others, being other creditors attending a meeting of creditors.

The hypothetical statements, each of which is likely to defame Mr Govan

Statement 2:      "Just before Browk collapsed Mr Govan's son started a similar business using stock, equipment and plans he got from Browk free of charge."

Statement 3:      "Mr Govan has also been operating an illegal brothel."

Statement 4:      "Mr Govan cannot pay his personal debts."

These are rather bald statements. In reality Mr Wilde might qualify some or all of them by beginning with words such as "I heard a rumour that ..." or "I was told that ...". However, such words merely soften the tone of the statement. By themselves they do not afford Mr Wilde any protection, because the law holds that anyone who exposes a defamatory statement to a new audience by repeating it should be liable for the damage occasioned thereby (except where a defence is available). So, for example, for the defence of truth to be available, Mr Wilde would have to prove that the central allegation (e.g., in Statement 3, "Mr Govan has also been operating an illegal brothel") is true, not simply that this is what someone told him.

The circumstances and assumptions

Apart from the statements themselves and the motive for making them, a number of factors will have an impact on the protection available to Mr Wilde. First there is the place (State or Territory) where the publication is made. Then there is the character or credentials of the person/s to whom the statements are made. And then there is the question of whether the statements are volunteered or requested.

To simplify this examination it will be assumed that in making each of the statements Mr Wilde will not be actuated by malice (see xxxx) nor acting without good faith (see xxxx), as the case may be.

As to the character or credentials of the recipients, it will be assumed that the statements are to be made at a meeting of creditors, where all "outsiders" have been excluded, and the only persons present are other creditors (or their proxies), the directors (including Mr Govan), Mr Steward (or his nominee) and a person or persons assisting Mr Steward. Some statements might stand a better chance of being protected by qualified privilege if made only to Mr Steward, an officer of the ASC and/or a police officer. Where this appears likely the text includes a comment to that effect.

As the remarks in the preceding paragraph indicate, this discussion will also assume, or assert, that Mr Steward has the credentials of a "proper authority" to whom information about a crime in connection with the company may be reported under the protection of qualified privilege. Unfortunately there appears to be no decided cases on this point. However, the insolvency laws impose on administrators a duty to inquire into and report on the company's activities and/or any apparent offences. And ,in certain circumstances, they also give administrators the right to prosecute offenders. Accordingly it would be unusual, to say the least, if administrators were not regarded as "proper authorities".

The law

To accommodate the diversity of defamation laws throughout Australia the statements are examined under six headings and a chart is provided to show which commentary is relevant in the various States and Territories.

The headings:

A. Truth (common law)

B. Truth and public interest (NSW law)

C. Truth and public benefit (the Code)

D. Qualified privilege - version 1 (common law)

E. Qualified privilege - version 2 (NSW law)

F. Qualified privilege - version 3 (the Codes)

The speculation:

A. Truth (common law)

If Mr Wilde can prove each statement is true he will not be liable. For each statement that is not true he will need to call on the defence of qualified privilege.

B. Truth and public interest (NSW law)

If Mr Wilde can prove each statement is true and on a subject of public interest he will not be liable. Each statement would probably qualify as being of public interest. For each statement that is not both true and of public interest is qualified privilege Mr Wilde will need to look to qualified privilege for protection.

C. Truth and public benefit (the Codes)

The position here is the same as with truth and public interest - see B.

D. Qualified privilege - version 1 (common law)

Statements 1 and 2 are likely to be protected by qualified privilege as being statements made in the furtherance of a legitimate common interest. The creditors would be interested in statement 1, if only because it alerts them to the possibility that they might recover their debts from Mr Govan or the other directors of Browk. They would be interested in statement 2 because the allegation - of fraud on creditors - may be relevant if Mr Govan (or a company of his) subsequently requests credit from them. Also, Mr Steward would be interested in both statements because they draw his attention to possible offences (which he is obliged to inquire into and report to the ASC) and to an opportunity to recover money.

Statement 3 (information about a crime) would be regarded as one which Mr Wilde has a moral or social duty to make, particularly if made in answer to a general inquiry by Mr Steward. Alternatively the statement could be regarded as one made in the protection of a public interest.

But either way, Mr Wilde might not be protected if he made the statement in the presence of any person other than Mr Steward, an officer of the ASC or a police officer. For protection to exist when others were present Mr Wilde would have to show that those others had an legitimate interest in the information. Unless the alleged crime - operating an illegal brothel - relates to the affairs of the company or the credit worthiness of Mr Govan, that interest would probably be absent. Therefore it appears Mr Wilde should not make this statement at the creditors' meeting.

Statement 4 (information as to Mr Govan's personal credit), if made to the creditors, presents a few problems. For example, such statements are usually only protected if made in answer to inquiries by traders or merchants who are dealing with or thinking of dealing with the person. In this case not only is Mr Wilde volunteering the information but also he is giving it to creditors who might not be dealing, or might not be about to deal, with Mr Govan personally.

On the other hand it could be said that in the context - i.e. a gathering of creditors to hear about and discuss the insolvency of Mr Govan's company - information about Mr Govan's personal credit is a matter of common interest. In normal circumstances it would be reasonable for Mr Wilde to assume that amongst the group of creditors at the meeting some would hold personal guarantees given by Mr Govan and that some would be contemplating legal action against him under the "insolvent trading" laws (even if Mr Wilde had not made statement 1).

Accordingly, it appears that statement 4 would be accorded the protection of qualified privilege.

It should also be protected if made only to Mr Steward. Since the information is relevant to Mr Steward's inquiry into Browk's affairs - it may, for example, have an impact on an allegation that Mr Govan has enriched himself at the company's expense - he would have the necessary interest in receiving it.

E. Qualified privilege - version 2 (NSW law)

Statements 1 and 2 are likely to be protected by qualified privilege as being statements made in furtherance of a legitimate common interest. See xxxx for further explanation. Any fear that Mr Wilde might be liable because Mr Steward or the creditors do not actually have the required interest should be removed by the concept of "apparent interest" included in the NSW law.

Statement 3 (information about a crime) would be regarded as one which Mr Wilde has a moral or social duty to make, particularly if made in answer to an inquiry by Mr Steward. Alternatively the Šstatement could be regarded as one made in the protection of a public interest.

In xxxx it was suggested that the statement 3 would not be protected if made to anyone other than Mr Steward, an officer of the ASC or a police officer. The position in NSW would appear to be the same. Although the NSW law is more liberal - protecting conduct by the publisher which is reasonable in the circumstances (see xxxx) - it is difficult to see how making this allegation (operating an illegal brothel) to creditors could be accepted as either communicating to someone with an "apparent interest" or publishing to an extent that is reasonable. Therefore, Mr Wilde should confine this statement to a proper authority.

Because of these more liberal laws, there appears little doubt that statement 4 (information as to Mr Govan's personal credit) would be protected if made to creditors in NSW, where they could be said to have an "apparent interest" in the information.

F. Qualified privilege - version 3 (the Codes)

Statements 1 and 2 are likely to be protected by qualified privilege as being statements made in furtherance of a legitimate common interest. See xxxx for further explanation. Any fear that Mr Wilde might be liable because Mr Steward or the creditors do not actually have the required interest should be removed by the provision in the Codes for "belief, on reasonable grounds, that the person to whom the publication is made has an interest in knowing the truth".

The law in relation to statements 3 and 4 would probably be the same as it is in NSW (see xxxx).

Closing comment on illustration

All the statements in this illustration relate to the financial affairs and business dealings of an insolvent company and its directors. Defamatory statements about personal or private matters have been disregarded because, in the context of an insolvency administration, such statements will seldom be protected.

Take, for example, a statement that so-and-so (who is a director or manager of the insolvent company) was having an extramarital love affair with the foreman's wife. A statement of this kind is normally defamatory. If it is true - and the onus of proof will be on the publisher - it will be protected in Vic, SA, WA and NT. But in other States or Territories it must also be of public interest (or for the public benefit). Needless to say in nine out of ten cases such revelations are not a matter of legitimate public interest.

Which leaves qualified privilege as the next line of defence. But, here again, in the context of an insolvency administration a statement of this sort will rarely qualify as being made in the performance of a moral or social duty or in the protection or furtherance of a legitimate interest on the part of the recipient.

Continued ...
THIS CHAPTER ON DEFAMATION AND QUALIFIED PRIVILEGE CONTINUES ON THE NEXT PAGE WITH AN EXAMINATION OF "COMMENT" AND THE ADMINISTRATOR.