'Corporations' Right to Sue for Defamation: An Australian Perspective' by David Rolph in 22
Entertainment Law Review (2011) 195-200
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As the United Kingdom undergoes defamation law reform, it might be useful to consider recent Australian developments. Across Australia, since 2006, corporations have had the right to sue for defamation severely curtailed. After five years of operation, it is possible to make an assessment of the advantages and disadvantages of this reform. This article analyses recent cases in which corporations have been forced to rely on alternative causes of action, which previously would have been dealt with as defamation claims. It argues that the reform is sound as a matter of principle and policy but that the particular form of the legislative provision requires refinement. In addition, this article points out that there have been unintended and undesirable consequences to this reform.
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One obvious and anticipated effect has been that corporations have been compelled to rely on alternative causes of action available to them, usually without the success that they might have received had they been able to sue for defamation.
A clear example is Bond v Barry (2007) 83 IPR 490; [2007] FCA 1484. In this case, high-profile entrepreneur, Alan Bond, and Lesotho Diamond Corporation plc commenced proceedings in the Federal Court of Australia against freelance journalist, Paul Barry, newspaper editor, Neil Breen, and two tabloid newspapers, The Sunday Telegraph and The Sunday Times, alleging misleading or deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) s 52. They claimed that an article written by Barry and published by the newspapers falsely alleged, inter alia, that Bond had effectively taken over Lesotho Diamond, to the exclusion of other directors and shareholders, and was extracting the maximum personal benefits he could from the company. The respondents applied to have the proceedings summarily dismissed on the basis that they had a complete defence as ‘prescribed information providers’. Under trade practices legislation in Australia, there are specific defences to misleading or deceptive conduct. The range of defamation defences are not incorporated into that legislation. The 'prescribed information provider' defence is a broad, but not absolute, protection, allowing media organisations to avoid liability for misleading or deceptive conduct, where the media outlet is engaged in its core business of newsgathering and journalism. At first instance, French J (as his Honour then was) acceded to the respondents’ application and his decision was upheld on appeal to the Full Federal Court.
The availability of this defence reinforces the forensic disadvantages a corporation confronts in using misleading or deceptive conduct as an alternative to defamation. Prior to the national, uniform defamation laws, this case would have been pleaded as a straightforward claim for defamation.
Another case in which a corporation was left without a remedy, which it would have had prior to the introduction of the restrictions on the right of corporations to sue for defamation, is AMI Australia Holdings Pty Ltd v John Fairfax Publications Pty Ltd [2010] NSWSC 1395. AMI provides goods and services relating to the treatment of erectile dysfunction and premature ejaculation. Its most prominent product is a nasal spray which it claims addresses these conditions. AMI principally sells its treatments through telephone consultations. Dr Rita Almothy worked for AMI but became increasingly concerned about its practices. Whilst working for AMI, she signed an agreement which contained a clause prohibiting her disclosure, use or reproduction of any confidential information acquired during the course of her employment. After she left AMI, Dr Almothy met with two journalists from The Sydney Morning Herald newspaper and provided them with patient consultation notes and other documents she had retained. The journalists drafted articles based on the material provided by Dr Almothy and, prior to publication, sought comment from AMI. Having been put on notice about the intended publication, AMI obtained an interim injunction Unable to sue for defamation, AMI brought proceedings against Fairfax for breach of confidence and injurious falsehood. Brereton J found that the proposed articles conveyed five false imputation, to the effect that AMI paid commissions to doctors to get them to keep consultations brief and to increase the volume of patients treated;that AMI threatened or reprimanded doctors who mentioned too many side effects of its products and services to patients; that AMI made claims about its products and services which were unsupported by scientific evidence; that AMI allowed customer service operators and nurses, rather than doctors, to provide medical advice to, and to write prescriptions for, customers; and that AMI employed doctors who were under supervision from the New South Wales Medical Board. However, his Honour was not satisfied that AMI had proven that the journalists were actuated by malice. Thus, AMI’s claim for injurious falsehood failed. Brereton J touched upon, but did not resolve, the difficult issue of whether false information can be confidential.
However, his Honour was able to dismiss the claim for breach of confidence on the basis that the journalists did not know or ought not to have that the information contained in the imputations was provided in breach of confidence He drew a distinction between the information contained in the imputations and the documents. In relation to the latter, Brereton J found that the journalists knew or ought to have known that the documents were being provided to them in breach of confidence.
Thus, his Honour ordered the delivery up of the documents but otherwise dismissed the proceedings. The Sydney Morning Herald was thus able to publish the articles with impunity. Given Brereton J’s findings, AMI would have had a viable cause of action in defamation. In the absence of a right to sue for defamation, AMI was left without any effective protection of its interest against publication.
In some cases courts have prevented corporations from seeking to subvert the restrictions on corporations’ right to sue for defamation. For instance, in AAMAC Warehousing & Transport Pty Ltd v Fairfax Media Publications Pty Ltd [2009] NSWSC 970, AAMAC obtained an ex parte injunction restraining The Sydney Morning Herald from publishing allegations that its waterfront business was knowingly involved or affiliated with gangland or criminal activities and that it knowingly provided the services of prostitutes on Sydney harbour cruises. The injunctive relief was sought on the basis of injurious falsehood and misleading or deceptive conduct under the Fair Trading Act 1987 (NSW) s 42. At a contested hearing, Slattery J set aside the injunction on the basis that the witnesses for AAMAC breached their obligation of utmost good faith in giving evidence at the ex parte injunction.
A witness for AAMAC testified that women from ‘restaurants’ were procured to act as waitresses on the harbour cruises without disclosing that the restaurants in question were topless restaurants or strip clubs and that the waitressing services provided on the harbour cruises were also performed partially orfully naked.
The sales manager of AAMAC also misled the court about his past involvement with a convicted drug smuggler and his own criminal record. His Honour found that these non-disclosures were deliberate. On a fresh application, Slattery J refused to grant an injunction. Again, AAMAC relied upon claims for injurious falsehood and misleading or deceptive conduct. His Honour found that there was no serious question to be tried on the issue of injurious falsehood because there was no arguable case on malice. His Honour found that there was no serious question to be tried on the issue of misleading or deceptive conduct because there was no evidence to suggest that Fairfax was disentitled from relying on the ‘prescribed information provider’ exemption under the Fair Trading Act 1987 (NSW) s 60. Slattery J concluded that AAMAC’s claim was essentially a defamation action, not a claim for either of the pleaded causes of action. As such, AAMAC was not entitled to an injunction. Again, this case demonstrates that companies have been deprived of the high level of reputational protection they previously enjoyed. This may not necessarily be undesirable. As Slattery J noted, what The Sydney Morning Herald proposed to publish in this case clearly related to a matter of public interest, namely corruption on the Sydney docks.
The restriction on the right of corporations to sue for defamation may have had some unintended consequences, as the decision in Beechwood Homes (NSW) Pty Ltd v Camenzuli [2010] NSWSC 521 illustrates. The plaintiff building company sought an injunction to restrain the defendant building consultant, Charles Camenzuli, from posting highly critical material on a website. Camenzuli claimed, inter alia, that Beechwood Homes was a ‘shonky builder’, acted in underhand or dishonest ways and bullied dissatisfied customers. Beechwood Homes framed its claim in injurious falsehood and misleading or deceptive conduct under the Fair Trading Act 1987 (NSW) s 42. Camenzuli resisted the injunction on the basis that Beechwood Homes had impermissibly relied on these causes of action in order to subvert not only the legislative restriction on corporations’ right to sue for defamation but also the restrictive approach to the grant of interlocutory injunctions in defamation cases. Harrison J found that these causes of action were clearly open to Beechwood Homes on the facts and there was no subversion of any principle in it seeking to rely upon them. The restriction on corporations being able to sue for defamation was motivated, in part, by a concern that corporations could and sometimes did use their resources to ‘chill’ speech. Depriving large corporations of the right to sue for defamation and compelling them to rely on other causes of action with more onerous requirements was intended to facilitate freedom of speech. However, these other causes of action do not have the restrictive approach to injunctive relief that defamation does.
In seeking to prevent corporations from ‘chilling’ speech, the national, uniform defamation laws allow corporations to stop speech entirely by reliance on other causes of action. This was not a matter anticipated by law reformers responsible for this change to Australian defamation law. It might be usefully revisited in any future defamation law review or reform.
