A recent decision of the New South Wales Supreme Court has confirmed that settlement offers induced by misrepresentation or fraud will not be effective as a contract, and put plaintiffs and defendants alike on notice to scrutinise Concerns Notices and their representations very closely (Vass v Nationwide News Pty Ltd  NSWSC 1704).
Picture this: an artist, a buyer, a tabloid, and a defamation claim
In August 2014, Damien Vass purchased an art piece from Archibald Prize-winning artist Del Kathryn Barton. Ms Barton's work was a pentaptych: a single work of art with five separate panels. Although the artwork was physically divisible, Ms Barton wished to keep it together to retain its artistic integrity.
A condition of the sale was that Mr Vass not sell any individual panel of the work separately; if he subsequently sold on the entire piece, a corresponding obligation also was to be imposed upon the purchaser.
In about March 2015, Ms Barton became aware that an individual may have purchased a single panel of the art piece from Mr Vass. Ms Barton's solicitors wrote to Mr Vass, demanding information regarding the possible sale; Mr Vass denied he had ever agreed to the terms of sale regarding the maintenance of the art piece.
Shortly afterwards, following an anonymous tip-off about the dispute, the Sunday Telegraph published an article, "Painter has art attack after buyer 'ruins' work", which quoted significant portions of Ms Barton's solicitors' letter to Mr Vass.
Mr Vass' solicitors subsequently sent a "Concerns Notice" under the Defamation Act to Nationwide News (NWN), the publisher of the Sunday Telegraph, stating that:
- it was never a term of the agreement to purchase Ms Barton's work that it be kept in one piece;
- in any event, Mr Vass did sell it in one piece – all five panels – to the same purchaser; and
- the Sunday Telegraph's article wrongly imputed, amongst other things, that Mr Vass had vandalised and destroyed Ms Barton's work, and breached contract by selling one of the five panels individually.
In response NWN made an offer of amends in which it agreed to take the article down from its website, to publish an apology in the terms sought by Mr Vass, and to pay Mr Vass’ reasonable expenses. It required a deed of release, which was to contain a warranty from Mr Vass that the imputations in the article were false. The offer remained “open to be accepted until the commencement of the trial, unless withdrawn in writing”. Mr Vass rejected this offer since it offered no financial compensation.
Mr Vass commenced defamation proceedings against NWN in April 2016. In the interim, NWM removed the article from its website to limit any damages claim.
Proving the truth of a defamatory meaning: the onus on publishers
Having published the impugned article, NWN bore the burden of proving it was factually accurate or otherwise defendable. Internal correspondence within NWN, tendered during the trial, revealed NWN's awareness that it could not prove its claim that Mr Vass had sold an individual panel of the artwork, that Mr Vass was "adamant" that he had in fact sold all five panels together, and it was therefore likely to be liable in defamation.
In the course of the proceedings, Mr Vass made a formal offer of compromise seeking $149,001 in damages. NWN then withdrew its original offer of amends and advanced a "renewed offer" with substantially the same terms, plus an offer to pay $50,000 in damages. Mr Vass did not accept the offer; in response he produced a signed and witnessed formal sale agreement for the entire work (the full five panels) from Mr Vass for $463,000.
NWN still defended the claim with a plea of justification, on the basis that any imputations arising from the article were true, and issued a subpoena to the alleged purchaser of the single panel. On the same day that the subpoena was answerable, Mr Vass reversed his position on settlement and purported to accept the renewed settlement offer.
In light of fresh evidence that had subsequently arisen, NWN refused to proceed with the settlement, resulting in further litigation. Ultimately the proceedings were heard by Justice Parker, who had to consider if then returned to the Common Law Division. After NWN failed to comply with the terms of its offer, the proceedings came before Justice Parker for this decision.
Fraudulent misrepresentation's impact on settlement negotiations
Following an extensive trial, including cross-examination of multiple witnesses including Mr Vass, the court ultimately determined that Mr Vass had in fact broken up the work, individually sold a piece, and that his denial of the imputations contained in the NWN publication, as set out in the Concerns Notice and thereafter, was fraudulent.
The Court found that the settlement offer made by NWN, and purportedly accepted by Mr Vass, had been induced by Mr Vass' fraudulent misrepresentation. Accordingly, the settlement could be rescinded as it was vitiated by fraud on the part of Mr Vass. It also noted (although did not ultimately have to decide the point) that an agreement to compromise a legal claim, where the party making the claim (in this case, Mr Vass) has no genuine belief in its validity, would not be effective as a contract since giving up a known false claim is not valid consideration.
The Court added that even if a binding settlement had arisen it would not order specific performance (including requiring NWN to publish the apology contemplated by the settlement offer) because Mr Vass had unclean hands and it would involve the court "misleading the public about a matter of public interest".
Be wary of issuing spurious concerns notices
The 2021 amendments to the Uniform Defamation Acts have placed significantly greater importance on the role of Concerns Notices. Plaintiffs now wishing to pursue actions in defamation cannot commence proceedings without first issuing a Concerns Notice to the alleged publisher, in the form detailed at section 12A of the Acts. This includes the Notice precisely specifying what defamatory imputations will be relied upon in the proposed proceeding, resulting in plaintiffs potentially being held strictly to the content of their concerns notice even after proceedings have commenced.
Care must be taken to ensure that the Concerns Notice is accurate as the decision in Vass will have application to any party who seeks to make amends in reliance upon false statements in the Notice, or who offers or accepts a settlement offer in the course of proceedings where those offers are induced by fraudulent misrepresentations.
Noting the decision in Vass, plaintiffs should ensure that:
- only legitimate Concerns Notices are issued. Tactically false notices can have serious ramifications and expose a person to an allegation of fraud. Spurious concerns notices, or notices containing allegations which the plaintiff does not genuinely believe, may have significant costs consequences at a later date; and
- any Concerns Notice issued to a publisher needs to be carefully constructed, noting that it may limit what arguments can later be run at trial. Given their importance to a plaintiff's future pleaded case, it will be wise to involve experienced defamation lawyers/counsel in the drafting of the Notice.
Likewise, publishers should closely review the contents of Concerns Notices, and be alert to any discrepancies between those notices and a plaintiff's subsequent pleaded case. Additionally, where a publisher only has the word of the plaintiff that the alleged imputations are untrue and no proof to counter that (inducing them to settle rather than put the issue to the test), it would be prudent to include a warranty from the plaintiff in any deed of settlement that the imputations alleged in the publication were false.