Defamation of a Business

When can a business be defamed?

Author: Zeinab Farhat, Progressive Legal

In 2006, the National Uniform Defamation Laws (NUDL) came into force across Australia and introduced a standardised system of law as it related to defamation. The NUDL also amended the position regarding the defamation of a business.  

This article will consider: 

1. Can a business be defamed under the NUDL?;  
2. What avenues of redress exist for businesses which have been disparaged but are not “excluded corporations” under the NUDL?; and 
3. Key takeaways.  

The defamation of a business under the NUDL? 

Put simply, the NUDL removes the right of corporations to generally sue for defamation.  

For example, section 9(1) of the Defamation Act 2005 (NSW) (“the Act”) provides that certain corporations do not have a cause of action for defamation. As section 9 notes: 

(1) A corporation has no cause of action for defamation in relation to the publication of defamatory matter about the corporation unless it was an excluded corporation at the time of the publication. 

(2) A corporation is an excluded corporation if— 

(a) the objects for which it is formed do not include obtaining financial gain for its members or corporators, or  

(b) it has fewer than 10 employees and is not an associated entity of another corporation, and the corporation is not a public body. 

(3) In counting employees for the purposes of subsection (2) (b), part-time employees are to be taken into account as an appropriate fraction of a full-time equivalent. 

(5) Subsection (1) does not affect any cause of action for defamation that an individual associated with a corporation has in relation to the publication of defamatory matter about the individual even if the publication of the same matter also defames the corporation. 

(6) In this section–

“corporation” includes any body corporate or corporation constituted by or under a law of any country (including by exercise of a prerogative right), whether or not a public body.

“employee” , in relation to a corporation, includes any individual (whether or not an independent contractor) who is– 

(a) engaged in the day to day operations of the corporation other than as a volunteer, and 

(b) subject to the control and direction of the corporation. 

“public body” means a local government body or other governmental or public authority constituted by or under a law of any country. 

In other words, s 9(1) of the Act provides that a corporation cannot sue for defamation unless it is a “excluded corporation” within the meanings prescribed in s 9(2)(a) or s 9(2)(b).  

Born Brands Pty Ltd v Nine Network Australia Pty Ltd (No. 6) [2013] NSWSC 1651 – Case example – Whether Plaintiff was an excluded corporation?  

In this case, the NSW Supreme Court considered (among other things) whether the Plaintiff (Born Brands) had discharged the onus of establishing that it was an excluded corporation for the purposes of s 9(2)(b) of the Act. 

Adamson J noted, inter alia, that:  

1. Born Brands did not adduce evidence directed establishing, relevantly, that it employed fewer than 10 persons, or, that it is not related to any other corporation at [39]; 
2. Born Brands did not challenge the correctness of Redeemer Baptist School Limited v Glossop [2006] NSWSC 1201 (Redeemer Baptist) and Heartcheck Australia Pty Limited v Channel 7 Sydney Pty Limited [2007] NSWSC 555 (Heartcheck):
   • In Redeemer Baptist, the word “employs” was considered pursuant to s 9(2)(b)’s statutory predecessor to mean “to use the services of a person” or “to make use of a person”. In this case it was also held that “….whether or not the person is paid for the services or is a volunteer, are irrelevant considerations” at [23]. 
   • In Heartcheck it was stated that: “I would be of the same view as Nicholas J in Redeemer Baptist School v Glossop [2006] NSWSC 1201 that the relevant issue is whether or not, as a matter of fact, the number of persons whose services the corporation used in its business were fewer than ten” at [41]. 
   • Born Brands had not provided sufficient evidence in relation to the total number of persons who provided services to Born Brands and that “no evidence was given… that the names mentioned in the evidence comprised the sum total of the persons who provided services to Born Brands… there [was no].. evidence as to the hours per week that each person devoted to Born Brands’ business, whether paid or unpaid” at [46].

What avenues of redress exist for businesses which have been disparaged but are not “excluded corporations” under the NUDL? 

It is important to note, that even if your business is not an excluded corporation so as to provide you with a cause of action under the NUDL for defamation of a business, there are still avenues of redress which may exist in situations where another party has spoken slanderously of you.  

Injurious falsehood 

Injurious falsehood vs defamation  

Where a corporation does not fall within the scope of being an excluded corporation within the meaning prescribed by the NUDL, no statutory impediment exists precluding it from bringing a claim of injurious falsehood. In fact, prior to the introduction of the NUDL, it was often the case that injurious falsehood as a tort was rarely relied upon as a cause of action. However, with the advent of social media, injurious falsehood is growing in prominence.  

Put simply, defamation and injurious falsehood are quite similar in so far as they both relate to an accusation with some form of falsity and harmfulness, and which has been communicated to a third party.  

A key distinction is drawn, however, as injurious falsehood protects a person’s interest in property, products or business. Contrastingly, defamation protects personal reputation.   

Elements of injurious falsehood  

At a general level, the elements of injurious falsehood include: 

1. There was a false statement made of, or concerning the Plaintiff’s goods or business; 
2. The publication was made by the Defendant to a third person;
3. There was some malice on part of the Defendant; and 
4. There was actual damage caused by the publication.  

It is important to note that injurious falsehood is more difficult to prove, particularly with its emphasis on economic loss sustained by the Plaintiff, as opposed to reputational damage. Further, actual damage is distinguishable from potential or future damage.   

Individual can sue 

As section 9(5) of the Act notes, nothing in s 9 affects any cause of action that an individual may have to sue for defamation, even if the publication of the same matter also defames the corporation. As such, if you are an employee or an individual associated with a corporation, you may still be able to sue in your individual capacity for defamation of a business under the NUDL (subject to satisfying the elements of defamation). 

Key Takeaways

Corporations are unable to sue for defamation of a business under the NUDL unless they fall within the ambit of being an excluded corporation. However, corporations may still rely on other forms of redress such as injurious falsehood in order to address disparaging material made against them.  

If you require any advice in relation to responding to any defamatory or slanderous material made against your business, make an enquiry below, or contact our office at 1800 820 083. 

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