Review of the Defamation Act 2005 (NSW) – Will companies have the right to sue?

In June 2018, the New South Wales Government released its review regarding the operation of defamation law in the State. Significant changes are proposed.

Review of the Model Defamation Provisions

Each State and Territory has enacted legislation to implement the Model Defamation Provisions, collectively referred to as the National Uniform Defamation Law. Save for certain exceptions that are beyond the scope of this article, the National Uniform Defamation Law has been substantively adopted in each State and Territory, and in New South Wales has been enacted as the Defamation Act 2005 (NSW) (Defamation Act).

The NSW Government’s review examined the Model Defamation Provisions generally, and the Defamation Act more specifically, to identify areas that the Council of Attorneys-General may wish the Model Defamation Law Working Party to consider. The Model Defamation Law Working Party was established in 2004 by the Standing Committee of Attorneys-General.

Who may sue for defamation?

One critical area that the Government’s review considered was who may bring a cause of action for defamation.

At common law, individuals and corporations were able to sue for defamation. However, under the regime in place with the Defamation Act, a corporation has no cause of action for defamation unless it is an excluded corporation under section 9(2) of the Defamation Act, being:

• a corporation whose objects for formation do not include obtaining financial gain for its members or corporations – i.e. not-for-profit organisations, or
• a corporation which is not a public body, nor related to another corporation, and employs fewer than 10 people.

Allowing corporations to sue for defamation – arguments for and against

Throughout the process of the Government’s review, submissions were received from stakeholders who supported the removal of the exclusions in section 9 of the Defamation Act so that no corporation could sue for defamation. The reasoning behind this position is, generally speaking, to promote freedom of expression and enable scrutiny of public bodies.

In contrast, the New South Wales Bar Association made submissions which were supportive of allowing all corporations to be able to sue for defamation on the basis that corporate reputations are important, and a legitimate interest that needs to be protected.

The rationale for the exclusion of larger corporations from suing under the existing Defamation Act (i.e. keeping the status quo) included that:

• larger corporations, generally speaking, have greater ability to commence proceedings, including in so-called ‘Strategic Litigation Against Public Participation’ proceedings, which may deter publication of material to be released which is in the public interest
• compensation for harm to reputation should only be afforded to natural persons, and
• corporations have other avenues to protect their commercial reputations, including actions under the Competition and Consumer Act 2010 (Cth) and the tort of injurious falsehood.

International perspective

Australia’s current legal position on the ability of corporations to sue for defamation is different to the legal position in many other counties, including other common law jurisdictions.

For example, in the United Kingdom, all corporations are afforded the same rights as natural persons, and are able to sue for defamation under the Defamation Act 2013 (UK) (UK Act). Under the UK Act, the test that corporations and natural persons must meet is that a statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the claimant.

Similarly, in most states of the United States, a corporation can sue for defamation where an untrue ‘actionable statement’ has been made in writing or verbally to a third person, and has caused damage to the corporation.

In Canada, corporations are able to sue for defamation in the same way as natural persons, although there has been some criticism among academics that affording corporations such a right can have a negative effect on the right to free speech.

Finally, in New Zealand, a body corporate may bring a claim for defamation under the Defamation Act 1992 (NZ) where a defamatory publication has caused, or is likely to cause, the body corporate a pecuniary loss.

By contrast, the codes in many civil countries differentiate between the ability of individuals and body corporates to take action for defamatory conduct, although the scope of such actions in those countries is otherwise quite different to the way in which the defamation legislation operates in Australia.

NSW Government’s recommendation

In reaching its recommendation as to whether companies should have the right to sue under the Defamation Act, the Government’s review panel indicated that the current restrictions embodied by section 9 of the Defamation Act remain appropriate. The panel does however recommend that States and Territories further consider the current law, ultimately with a view to either maintaining the current restrictions or amending the Model Defamation Provisions.

As a result, the NSW Government has recommended that the Council of Attorneys-General ask the Model Defamation Law Working Party to review the Model Defamation Provisions equivalent to section 9 to determine whether the capacity of corporations to sue for defamation should be amended.

What does this mean for corporations?

A decision has not yet been made as to whether the Defamation Act will be amended to allow corporations to sue for defamation.

It should be remembered that corporations have various other forms of reputational protection, including actions for the tort of injurious falsehood or indeed misleading or deceptive conduct under the Competition and Consumer Act 2010 (Cth).

The tort of injurious falsehood most closely aligns with the overall purposes of the Defamation Act, with important differences. A claimant corporation would need to demonstrate that:

• there is a false statement of or pertaining to the plaintiff’s goods or business
• the statement was published by the defendant to a third person
• there was malice on the part of the defendant, and
• actual damage was suffered as a consequence.

The different tests for defamation and injurious falsehood are currently on display in proceedings brought by Capilano Honey Ltd (Capilano) against Simon Mulvany, an Australian beekeeper. Essentially, Capilano is suing Mr Mulvany for injurious falsehood, and at the same time Capilano’s CEO, who is joined in the proceeding as the second plaintiff, is suing Mr Mulvany for defamation. Mr Mulvany has made a cross-claim against Capilano for defamation. Three interlocutory decisions have been delivered by McCallum J in the Supreme Court of New South Wales, although the proceeding has since been transferred to the Supreme Court of Victoria. While the substantive issues in the proceeding are yet to be determined, in her Honour’s second decision in the Supreme Court of New South Wales, McCallum J said that she did not consider that a prima face case had been established for satisfying the first element of injurious falsehood because she did not consider statements that Capilano was a ‘bully’ were, in the relevant context, about Capilano’s goods or business.

In terms of the claims for defamation, the proceeding may shed some light on whether joining a natural person as a second plaintiff is a viable ‘work around’ to current restrictions on corporations’ right to bring an action in defamation in their own names.

In the meantime, as we keep an eye on the Capilano story, it will be important for corporations to be aware of the possible legislative amendments arising out of the NSW Government’s review, and continue to watch this space.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.