We previously posted about Justice Tracey’s recent Federal Court decision where the designer of “White Sands” swimwear was fined $25,000 for public comments which ‘questioned’ whether Seafolly copied White Sands’ designs. The fine was in relation to misleading or deceptive conduct, however, the public nature of comments back and forth meant that one party sued for defamation, the other for the tort of injurious falsehood.
Did you say torte? Yum…
Don’t get too excited. That was tort, not torte. Let’s look at the tort of injurious falsehood first. Seafolly, as a corporation with more than ten employees, was unable to bring a defamation claim in Australia. However, it sought to rely on the tort of injurious falsehood, which companies here are treating as an alternative route to the same result. In order to prove the tort of injurious falsehood, Seafolly needed to establish that:
Ms Madden had: •made a false statement concerning Seafolly’s goods or business;
- published that statement to a third person;
- acted maliciously; and
- Seafolly had suffered actual damage.
In dismissing the claim, Tracey J held that in circumstances where Ms Madden must have known that her statements would be damaging to Seafolly’s commercial reputation (and where she posted too hastily without sufficiently checking her facts, and persisted despite being warned that her allegations lacked foundation), she had acted maliciously.
Importantly though, because Seafolly could not make out actual damage, the cause of action could not be established. In other words, unlike in, say, defamation law, where a natural person can recover damages for hurt feelings, Seafolly needed to demonstrate it had suffered economic harm by reason of the conduct to satisfy the claim, which it was unable to do.
Even when all companies could sue for defamation (the situation prior to the introduction of the Uniform Defamation Code), they were unable to recover damages for hurt feelings. This result is not surprising because, of course, companies do not have ‘feelings’ capable of being ‘hurt’. However, unlike for the tort of injurious falsehood, under defamation law, the need to prove loss is not required to satisfy the claim itself. With the tort, ‘no actual damage’ means you fail at the first hurdle. Under defamation law, a permitted corporate plaintiff may ‘win’ (and so, for example, be entitled to injunctive relief) but not receive any compensation if actual damage cannot be proved.
So how did defamation come into it?
Turning now to the defamation aspect, Ms Madden cross-claimed against Seafolly for defamation, on the basis of two press releases issued by Seafolly suggesting that her statements has “been made maliciously to injure Seafolly…”
While Tracey J held that the statements were defamatory, in that they would have clearly conveyed to an ordinary and reasonable reader the imputation that Ms Madden had knowingly made false claims and acted in a malicious way in order to harm Seafolly’s commercial interests, he held that Seafolly was entitled to rely on two defences.
The first was the defence of justification – Tracey J held that Seafolly’s statement was substantially true (because he had already found that Ms Madden acted in a malicious way). The second was the defence of qualified privilege – Ms Madden’s publications gave rise to a privileged occasion which entitled Seafolly to rebut the accusation of copying, and Tracey J held that it did so in a relevant and proportionate way.
Some take-outs from this interesting aspect of the case are as follows:
- if you are thinking of making public comments (whether on social media or otherwise) which may damage a company’s commercial reputation – be careful! ‘Maliciousness’ may be made out relatively easily. When we get angry, we can become reckless, and the ease with which one can vent on social media offers no excuse once the matter finds its way into a court room;
- if you want to bring an action for injurious falsehood – make sure you can prove actual damage; and
- if you do accuse someone for copying (or another accusation which could be commercially damaging), be warned that this may give rise to an occasion of privilege under which the ‘accused’ person can rebut the accusation in a proportionate way, which may or may not include statements about you!