FEDERAL COURT OF AUSTRALIA
Seafolly Pty Ltd v Madden (No 4) [2014] FCA 980
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IN THE FEDERAL COURT OF AUSTRALIA |
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SEAFOLLY PTY LTD ACN 001 537 748 Applicant/Cross-Respondent | |
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AND: |
Respondent/Cross-Claimant |
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. The applicant/cross-respondent pay the respondent/cross-claimant damages in the sum of $40,000 pursuant to s 82(1) of the Trade Practices Act 1974 (Cth) for damage suffered by the respondent/cross-claimant caused by the conduct of the applicant/cross-respondent.
2. The parties confer and, on or before 26 September 2014, advise the trial judge’s associate of whether they wish to make oral or written submissions relating to all outstanding costs issues.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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VICTORIA DISTRICT REGISTRY |
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GENERAL DIVISION |
VID 764 of 2010 |
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BETWEEN: |
SEAFOLLY PTY LTD ACN 001 537 748 Applicant/Cross-Respondent |
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AND: |
LEAH MADDEN Respondent/Cross-Claimant |
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JUDGE: |
TRACEY J |
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DATE: |
12 september 2014 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
1 In Seafolly Pty Ltd v Madden (2012) 297 ALR 337 I dealt with a series of claims and counter-claims made against each other by the present parties. One of the claims made by Ms Madden was that Seafolly Pty Ltd (“Seafolly”) had contravened s 52 of the former Trade Practices Act 1974 (Cth) (“the Act”) by publishing and causing to be republished two press releases. In those press releases Seafolly accused Ms Madden of maliciously making false claims against it in order to damage the company. I rejected this claim.
2 On appeal, a Full Court held that Seafolly had, indeed, contravened s 52 of the Act. It declared that:
“4. The applicant/cross-respondent (Seafolly), in trade or commerce, engaged in conduct that was misleading and deceptive and was likely to mislead or deceive in contravention of s 52 of the Act, by publishing and causing to be republished:
4.1 on and after 2 September 2010 a press release headed “Seafolly vows to take legal action over claims made by White Sands Swimwear” containing the words set out in [19] of the reasons for judgment published on 29 November 2012 (the Reasons);
4.2 between 8 and 13 September 2010 a press release headed “Seafolly Australia confirms legal action against White Sands Swimwear” containing the words set out in [31] of the Reasons;
and thereby representing that:
4.3 the respondent (Ms Madden) had knowingly made false claims that her competitor, Seafolly, has copied some of her swimwear, with the malicious intention of damaging Seafolly;
4.4 Ms Madden made false claims of copying by Seafolly which were recklessly indifferent to the truth of such allegations and did so with the malicious intent of damaging Seafolly;
when, in fact, Ms Madden believed in the truth of what she published.”
3 The press releases which the Full Court found to have contravened s 52 of the Act, were issued following publication, by Ms Madden, of allegations that Seafolly had copied her designs and had sent an employee to photograph garments which had been designed by Ms Madden so that the garments might be copied.
4 The first press release was issued on 2 September 2010. It was sent to two publications, Pedestrian TV and Ragtrader. It read, in part:
“Earlier today Seafolly became aware that Leah Madden of White Sands Swimwear has made allegations on her facebook page that Seafolly has copied 7 of her swimwear designs. Ms Madden has posted on her facebook page reproductions of photographs from Seafolly’s catalogue showing the Seafolly garments which she claims are copies of swimwear garments designed by White Sands Swimwear. Seafolly has also become aware that Ms Madden has sent emails to media outlets attaching Seafolly’s photographs together with photographs of the White Sands Swimwear garments making these allegations of copying.
Seafolly denies these claims and says that they are completely false and without foundation and says the claims have been made maliciously to injure Seafolly. Seafolly will be taking immediate action to cause Ms Madden to withdraw these allegations. Seafolly notes that many of the designs which Ms Madden claims Seafolly has copied were released into the marketplace by Seafolly before White Sands Swimwear released its relevant swimwear garment. Seafolly also says that the other designs which Seafolly is alleged to have copied were substantially progressed in development prior to White Sands Swimwear releasing it (sic) relevant swimwear garments into the marketplace.” (Emphasis added).
5 The second press release was issued at some times between 8 and 13 September 2010. It was sent to journalists from Pedestrian TV, The Age and the Gold Coast Bulletin. It contained the following passages:
“On Thursday 2 September 2010 Seafolly became aware that Ms Madden made allegations on her facebook page that Seafolly copied 8 of her swimwear designs. Ms Madden claimed that Seafolly copied these designs after a buyer from Sunburn (a company partly owned by Seafolly) attended a White Sands Fashion Show in May 2010 and saw the White Sands swimwear on display. Ms Madden posted on her facebook page (without Seafolly’s consent) reproductions of photographs from Seafolly’s catalogue showing the Seafolly garments next to White Sands garments. In addition, Seafolly has become aware that Ms Madden sent emails to media outlets attaching these photographic comparisons and making false allegations of copying.
Seafolly denies these claims and says that they are completely false and without foundation. Seafolly says that these claims have been made maliciously to injure Seafolly and its business. Five of the designs which Ms Madden claims Seafolly has copied were released into the market place by Seafolly in March 2010. One of the designs was released into the marketplace by Seafolly in March 2009. The remaining two designs which Seafolly is alleged to have copied were substantially progressed in development prior to White Sands Swimwear showing these swimwear products to the market. White Sands Swimwear held their fashion parade in May 2010 and as the Seafolly garments alleged to be copies of the White Sands Swimwear garments were either already released to market or nearly completely designed, it is impossible that Seafolly copied the White Sands Swimwear that was on display during this parade.
To clarify further media reports, a Sunburn swimwear buyer attended the White Sands RAFW parade in May 2010. Sunburn is a multi-brand swimwear chain that is partly owned by Seafolly. The Sunburn buyer attended many swimwear brand showings during this time with the intention to purchase product for the Sunburn stores in 2010. Ms Madden was aware that Sunburn is partly owned by Seafolly. During the viewing of the range in May 2010 photographs were taken on a blackberry device by the Sunburn buyer. Taking photographs by buyers is standard practice for the use of referencing when placing orders. These photos were not downloaded. Any allegations that the Sunburn buyer showed photographs of the White Sands garments to employees at Seafolly is totally false. (Emphasis added).
On 6 September 2010, Seafolly issued proceedings against Ms Madden in the Federal Court of Australia claiming that she has infringed Seafoly’s (sic) copyright rights, committed breaches of the Fair Trading Act 1989 (Qld) and committed the tort of injurious falsehood. Seafolly made an application seeking an interlocutory injunction restraining Ms Madden’s conduct as complained of by Seafolly. Ms Madden has now provided undertakings to the Court on a without admissions basis agreeing to cease the conduct complained of by Seafolly until trial or further order. The proceeding has now been listed for mediation.” (Emphasis added).
6 Parts of these press releases (including the allegation that Ms Madden’s claims had been made maliciously to injure Seafolly) were quoted in a number of publications including trade publications. It will be convenient, in these reasons, to refer to the italicised passages as either “the allegation(s)” or the “representation(s)”.
7 The Full Court remitted Ms Madden’s cross-claim to me for determination of the damages which might be payable to Ms Madden arising from Seafolly’s contraventions of s 52 and of the related costs issues.
8 Both parties filed written submissions relating to the remitted issue. Neither sought an oral hearing. Both sought an opportunity to address on costs after I had determined the damages issue.
9 Whilst acknowledging the unavoidable imprecision which necessarily attends the quantification of damages in such cases, Ms Madden submitted that any award should not be less than $70,000 – a figure upheld recently by the Victorian Court of Appeal in a defamation case: see Lower Murray Urban and Rural Water Corporation v Di Masi [2014] VSCA 104.
10 Seafolly contended that Ms Madden was not entitled to any damages or, alternatively, that any award should be nominal or in a modest sum.
THE PLEADED CROSS-CLAIM
11 Seafolly’s primary contention was based on Ms Madden’s cross-claim and associated particulars. As particularised, Ms Madden’s claim for damages for Seafolly’s breach of s 52 was limited to damage caused to her White Sands business which was said to amount to $120,000. Although she sought general damages for damage to reputation and associated distress in relation to a defamation claim, no such damages were sought in respect of the cause of action based on ss 52 and 82 of the Act.
12 Ms Madden acknowledged this apparent deficiency in her pleaded case. She pointed out, however, that the same monetary amount had been sought by way of damages in respect of both her defamation and s 52 claims. She also asserted, correctly, in my view, that the trial had been conducted on the basis that she was seeking damages in respect to the reputational damage incurred by her as a result of the issuing of the press releases. Ms Madden had given unchallenged but general evidence relating to the effect of the allegations in the press releases on her personally. Seafolly’s defence was that the allegations were true. The issue of damage to Ms Madden personally was thus litigated at trial. I would, therefore, grant the leave sought by Ms Madden to amend her particulars such that reputational damage is included amongst the particulars of damage arising from the contravention of s 52 as well as in relation to her defamation claim: cf Maloney v Commissioner for Railways (1978) 18 ALR 147 at 151-2; Introvigne v Commonwealth (1980) 32 ALR 251 at 260.
THE ASSESSMENT OF DAMAGES – RELEVANT CONSIDERATIONS
13 A person who suffered loss and damage as a result of a contravention of s 52 of the Act was afforded a cause of action under s 82(1). Relevantly, it provided that:
“…a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of … Part V … may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.”
Section 52 appeared in Part V of the Act. In her cross-claim Ms Madden sought damages under s 82 for the loss and damage suffered by her as a result of the publication of the allegations.
14 Substantially the same allegation was made in both press releases. It was, as I understand the submissions, common ground that a single award of damages was appropriate to cover both publications should an entitlement to damages be established.
15 Ms Madden contended that the following considerations were relevant to the assessment of damages:
The serious nature of the allegation;
The extent of its publication;
The damage occasioned by what was referred to as the “grapevine effect”;
The size and positioning of Seafolly in the marketplace;
The effect of the allegation on Ms Madden’s business;
The gravity of the impact of the allegation on Ms Madden personally; and
The aggravation occasioned by Seafolly’s evidence at trial and its failure to offer an apology.
The serious nature of the allegation
16 It was not disputed that the allegations were serious in nature. As I said in my original judgment (at 369) the allegation “impugned both the veracity and motivation of Ms Madden.”
17 The Full Court held that the ordinary reasonable reader of the press releases would have understood the word “malicious” to convey the following dictionary meanings:
“malicious” – “characterised by malice, full of hate, addicted to sentiments or acts of ill will”; and
“malice” – “the intention or desire to do evil or cause injury to another person”; and “desire to inflict injury or suffering on another”.
See: Madden v Seafolly Pty Ltd [2014] FCAFC 30 at [126].
18 Seafolly sought, however, to mitigate the gravity of the allegations by pointing out that they occupied a single one line sentence in otherwise lengthy press releases. That may be. I, nevertheless, treat the allegations as being no less serious than if they had stood alone or had formed part of much shorter press releases. They remain a significant reflection on Ms Madden’s character and conduct. It is, however, not irrelevant in assessing damages to bear in mind that the releases contained a series of other statements which were critical of Ms Madden and were found to be justified. This is a matter to which I will return.
The extent of its publication
19 Seafolly’s first press release was first published in full on the Daily Pedestrian website on 2 September 2010 at 7.17 pm. The posting was entitled “White Sands Swimwear Calls Seafolly Plagiarists”. It had first appeared at 4.53 pm on that day to report Ms Madden’s claims. The first press release was also reproduced on 24 March 2011 in a publication called “The Vine” and, on the same day, in a publication called “Business Insider”. This release was partially republished, under the heading “Exclusive Seafolly v White Sands: Swim labels at arms”, on the Ragtrader website on 2 September 2010.
20 On about 8 September 2010 the second press release was partially republished on the Ragtrader website in an article headed “Seafolly takes action against White Sands”. This second press release was also partially republished in The Age and Sydney Morning Herald newspapers on 13 September 2010 in an article under the by-line of Ben Butler. The article was headed “Seafolly in court to clear its name.” This article did not republish the allegations. It contained a passage to the effect that one of Seafolly’s claims in the proceeding was that Ms Madden’s e-mails “constituted the tort of injurious falsehood, where false statements are made with malice.” This passage is plainly based on the final paragraph of the second press release: see above at [5]. In that paragraph Seafolly outlines the causes of action on which it was relying in its case against Ms Madden. One of those causes of action was the tort of injurious falsehood. An element of that cause of action is that there was malice on the part of the respondent: see Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at 404 (Gummow J). No mention of this element was made in the press release. These newspaper articles may, therefore, be put to one side for present purposes.
21 The on-line publications remained accessible on the internet until the date of the trial.
22 The article on the Daily Pedestrian website attracted, 1,867 unique views and 2,049 page views between 2 September 2010 and 16 November 2011. The publisher was unable to discriminate between views which had occurred prior to 7.17 pm on 2 September and those which occurred thereafter. I infer that the bulk of the views occurred after 7.17 pm and before 16 November 2011 and that viewers would have had access to the full text of Seafolly’s first press release.
23 The partial republication of the press release on the Ragtrader website on 2 September 2010 attracted 655 unique visitors and 742 unique page views.
24 The Ragtrader article entitled “Seafolly takes action against White Sands” which was posted on 8 September 2010 and incorporated part of the second press release attracted 492 unique page views and 531 page views.
25 In argument Ms Madden sought to rely on additional publications which were not referred to in her cross-claim. I have not taken these into account.
26 The publishers to whom the press releases were directed produced material which circulated in the fashion industry. They were, I infer, chosen by Seafolly in the expectation that the releases would be quoted and widely disseminated to those with an interest in the industry. They formed part of a defensive strategy on the part of Seafolly which was designed to mitigate any harm done by the earlier publication of Ms Madden’s allegations of copying.
The “grapevine effect”
27 The “grapevine” or “lurking place” effects of defamatory statements focus attention on the risk of false allegations resurfacing at some future date and the need for a victim, at the later time, to be able to point to an adequate award of damages as a means of stifling any suggestion that the allegation might have had substance.
28 The term “the grapevine effect” appears to have originated as a shorthand description by a trial judge of the manner in which a person’s reputation might be undermined within a professional group by the repetition and discussion by colleagues of allegations of dishonesty or untrustworthiness: see Crampton v Nugawela (1996) 41 NSWLR 176 at 193.
29 The reference to a “lurking place” is derived from the speech of Lord Hailsham LC in Cassell and Co Limited v Broome [1972] AC 1027 at 1071 where His Lordship said that:
“In actions of defamations and in any other actions where damages for loss of reputation are involved, the principle of restitutio in integrum has necessarily an even more highly subjective element. Such actions involve a money award which may put the plaintiff in a purely financial sense in a much stronger position than he was before the wrong. Not merely can he recover the estimated sum of his past and future losses, but, in the case the libel, driven underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by a jury sufficient to convince a bystander of the baselessness of the charge.”
30 Ms Madden submitted that the press releases had been sent to journalists and then republished on internet sites. Their presence on the internet made it more likely that they would continue to circulate in the public domain. It was, therefore, possible that the allegations might resurface at some time in the future. If that happened Ms Madden should, she said, be in a position to minimise further damage to her reputation by being able to point to a significant award of damages.
31 It is to be borne in mind that the damages presently being sought relate to allegations which were found to constitute misrepresentations for the purposes of s 52 of the Act. While principles which have been developed for the purposes of assessing damages for defamation may provide some significant guidance in cases brought under s 82, because of certain analogies between the two causes of action, they cannot be regarded as prescriptive: see Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407. A case such as the present serves as a good example of the need for caution in seeking to adapt common law principles for assessing damages in the context of s 82. The primary purpose of s 52 is not to provide vindication for damage to reputation. Whilst the “loss or damage” which was compensable under s 82 of the Act was not confined to economic loss and extended to injury (see s 4K) the purpose of the section was remedial. It was concerned with compensation for the actual losses associated with the publication of misrepresentations. The section does not provide for compensation for the risk of future loss: see Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 525-7. It is not permissible to factor in a premium which supplements the assessment of actual damage in order to guard against the possibility of future republication of the misrepresentation. Such an event may never occur. If it does, and it causes loss or damage, the applicant’s remedy is to commence a further proceeding under the Act.
The Size and Positioning of Seafolly in the Marketplace
32 It was common ground that Seafolly was a well-established and reputable business in the fashion industry.
33 Ms Madden contended that Seafolly’s standing in the industry would have ensured that great credence was given by readers of its press releases to the allegation that she had acted maliciously.
34 I accept that readers of the press releases and the publications to which they gave rise would have understood that the allegations were serious and would not have lightly been made by such a reputable organisation as Seafolly.
The Impact on Ms Madden and her Business
35 Ms Madden contended that no distinction should be drawn between the commercial impact of the representations on her and on her business (White Sands). She was the sole shareholder and owner of the White Sands business and any adverse economic impact, caused by the allegations, would be felt by both.
36 At the time at which the allegations were published, the White Sands business was in its infancy and was vulnerable to adverse publicity. The success of Ms Madden’s business venture depended, so it was said, on her reputation for honesty and integrity. Any undermining of that reputation had the potential to damage the business.
37 Ms Madden complained that, after the allegations had been made, a significant number of her customers ceased to place orders and that she apprehended that some of them would never deal with her again because of the damage done to her reputation.
38 Ms Madden further contended that Seafolly could have done all that was necessary to refute her allegations without opting to brand them as malicious.
39 Ms Madden accepted that she bore the onus of establishing that loss and damage had been caused to her by publication of Seafolly’s claim that she had acted maliciously in order to damage it. At trial she acknowledged that she was not in a position to establish any quantifiable special damage. No accounting or other expert evidence was called to establish such damage.
40 Ms Madden did, however, press a claim for general damages to her business interests. She was the public face of the White Sands’ business and the undermining of her reputation inevitably had adverse consequences for the business.
41 As particularised Ms Madden’s claim for $120,000 in general damages “for general loss of business” was founded on a bald comparison between the value of orders placed for White Sands’ garments in 2010 and 2011 on the basis that the impact of the misrepresentations would continue for at least three years.
42 Ms Madden sought to support her claim, under this head, by reference to certain confidential exhibits which dealt with fluctuations in orders and sales. Ms Madden pointed to figures which suggested that orders for White Sands’ garments for delivery for the summer of 2011/12 had declined significantly when compared with the two previous years. She also pointed to the failure of a number of stockists to re-order for that season.
43 The confidential commercial information on which Ms Madden relies is not to be considered in isolation. It must be appreciated in the context of the development of her White Sands business. The White Sands brand cannot be regarded as well established in the marketplace. Its first range was marketed during the summer of 2009/10, that is the season immediately before the publication of the press releases in September 2010. At the time of publication the business was trading at a loss and had not returned a profit.
44 It is also necessary to have regard to industry practice when making comparisons between sales and volume figures. The evidence established that most retail sales of swimwear occurred immediately before and during the summer season. Orders were typically placed on manufacturers such as Seafolly and White Sands in about April or May with a view to delivery to retailers occurring about October each year. Many of the deliveries made by White Sands in the immediate aftermath of the publication of the press releases would, therefore, have been ordered well before the publication and so the misleading contents would not have impinged on these orders.
45 The confidential material provides some support for Ms Madden’s claim to have lost business in the wake of publication. Eighteen retailers who had placed orders during 2010 did not reorder in 2011. Seven of those who had placed orders in 2010 placed further orders in 2011. They were joined by two new retailers. These figures must be balanced against and compared with those taken from the previous season in which 11 retailers, who had placed orders in 2009, chose not to renew those orders in 2010 or 2011. These decisions by the retailers (at least in respect to their 2010 decisions) could not have been influenced by Seafolly’s allegations against Ms Madden. The lack of consistency in ordering is suggestive of a volatile industry in which White Sands was having difficulty making inroads. White Sands’ sales figures indicated that it was a relatively small player which, typically, attracted small orders from a modest number of retailers which were, no doubt, interested in testing the market’s interest in a new range of swimwear.
46 Ms Madden also offered White Sands’ garments for on-line purchase. Some tentative steps had been taken to establish this market prior to September 2010 but, in the following months, sales increased. These purchases do not seem to have been affected by Seafolly’s misrepresentations. Ms Madden speculated that the increases in December 2010 and January 2011 occurred because it was summer and that she offered swimwear at sale prices during this time.
47 In order to establish her cause of action under s 82 of the Act it was necessary for Ms Madden to show that her White Sands business had suffered loss or damage “by” the publication of Seafolly’s misrepresentations. This required her to make good the claim that customers or potential customers of the White Sands business had been led, by Seafolly’s allegations that she had acted maliciously when making allegations against it, from continuing to do business with White Sands or from placing future orders: cf Wardley Australia at 525.
48 Ms Madden expressed a belief that this was the result of the publication of the two press releases. She did not adduce evidence from any stockist who was said to have withheld orders by reason of having read the releases or reports of them. Nor was any forensic accounting evidence led to identify the nature and amount of any losses sustained by reason of the failure of stockists, who had ordered garments in 2010, to place further orders in 2011.
49 Having regard to the paucity of evidence, the nature of the industry, the position of White Sands in the industry and the absence of any detailed analysis of the White Sands accounts for the relevant period, I am not satisfied that a sufficient connection has been established between the publication of the misrepresentations and the failure of stockists to renew orders in 2011 to justify a finding that the relevant decisions were materially influenced by the misrepresentations.
Hurt and Offence
50 Ms Madden gave evidence that she had been gravely hurt and offended by the allegations made in the press releases. She was concerned about the effect of the allegations within the fashion industry and in her local community.
51 As already noted Ms Madden gave some general evidence relating to the effect on her of the publication of each of the two press releases. She gave this evidence by way of affidavit and the contents were not challenged by Seafolly when she was cross-examined at trial.
52 Ms Madden said that, after the first press release had been published she “felt sick at the thought that [her] unblemished reputation was being damaged by Seafolly’s statements.” She said that she was “extremely stressed” and had lost a lot of sleep because she was worried about the effects of the statements on her reputation. Her stress and loss of sleep was not solely a reaction to the allegation that she had acted maliciously in order to damage Seafolly’s commercial interests. As the following passages disclose Ms Madden’s concern for her reputation and the consequential damage for her business which she apprehended flowed from the whole of the contents of the first press release:
“[165] I feel that people who saw Seafolly’s statements would think I had no reason to compare the garments, because Seafolly did not also explain that Ms McLaren had had a private viewing of White Sands garments months beforehand. I felt that people would think that I was a dishonest and vindictive person and would make up stories with the aim of hurting people. I worry that people will avoid dealing with me as a result of these comments.
[166] After the First Press Release was published, I have noticed that more people do not return my calls and my emails do not get answered. When I talk to people they do not raise this matter with me and I find this surprising because I know Seafolly’s statements would have been read by lots of people in the Australian fashion industry. I worry that people are thinking that I am dishonest and vindictive and because of this I have lost a lot of confidence in my dealings with business contacts and people generally. Before the First Press Release was published I was very confident with anyone I dealt with. Now when I meet with people, I am less confident as I worry that the person has read or heard about the First Press Release and they think that I am a liar and not to be trusted. This is having a significant negative impact on me personally.
[167] I am most concerned that my stockists and potential stockists will see Seafolly’s statements and not want to deal with me because they think I am a liar and the type of person who would deliberately and maliciously harm people. I am also concerned that retailers who stock Seafolly will decide that they will never also stock White Sands because they would think there was a conflict.
[168] I am also concerned about the effect Seafolly’s statements that I am a liar are having on my children and on me in my personal life. I have two children in school and one in playgroup, and I am worried that other parents will not want to talk to me and will not want their children to be friends with my children because they think that I am a nasty person. I have a daughter completing her final year of school and I am very concerned about the stress Seafolly’s statements are causing her. This makes me anxious and stressed.”
Ms Madden deposed that the publication of the second statement had “compounded the hurt and distress [she] was already feeling.” Seafolly had strengthened its message that she “was a liar and the sort of person who makes things up.”
53 As can be seen from these passages Ms Madden attributed the personal and commercial harm which she claimed to have experienced to the totality of the statements made by Seafolly and contained in the two press releases. The larger part of both releases was directed to the refutation, by Seafolly, of Ms Madden’s allegation that Seafolly had surreptitiously photographed, copied and marketed her designs. These claims were false but, as the Full Court held, Ms Madden believed them to be true. As a result it was misleading for Seafolly to claim that Ms Madden had acted maliciously in making the claims. In her affidavit Ms Madden repeatedly expressed the concern that business and other people of her acquaintance who had read the press releases would consider her to be dishonest and a liar. She herself drew a distinction between that perception and that of a “person who would deliberately and maliciously harm people.” The psychological harm experienced by Ms Madden flowed not just from the allegation that she had acted maliciously to damage Seafolly’s commercial interests. It also arose, to a significant degree, because Seafolly had challenged her false claims that Seafolly had copied her designs.
54 I am, therefore, satisfied that the misrepresentation about which Ms Madden complained was a (but not the only) cause of the hurt and offence which she suffered following publication. This is sufficient to make good her cause of action under s 82: see I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 130. She is entitled to be compensated for the hurt and offence caused by the misrepresentation.
Aggravation
55 It was not disputed that Seafolly had never apologised to Ms Madden or retracted the allegation that she had acted maliciously. Ms Madden also complained that Seafolly’s chief executive had, in evidence, said that she had “made up” her allegations against Seafolly. Whilst aggravated damages may be awarded in some defamation cases in which the perpetrator has taken or failed to take certain action following publication, such considerations do not impinge on the assessment of statutory damages for loss and damage suffered as the result of the publication of a misrepresentation.
ASSESSMENT OF DAMAGES - QUANTIFICATION
56 Having found that, in making the allegations, Seafolly had contravened s 52 and that, as a result, Ms Madden has suffered damage by way of hurt and offence from the misrepresentation, it remains to consider whether and, if so, in what amount, damages should be awarded under s 82 of the Act.
57 It is well established that damages may be awarded under s 82 of the Act for harm to reputation: see Nixon v Slater & Gordon (2000) 175 ALR 15; Cryeng Pty Ltd v Loyola [2011] FCA 956.
58 Damages for loss and damage arising from a contravention of s 52 of the Act must reflect the actual loss or damage suffered by the victim: see Wardley Australia at 526. There is, therefore, no scope for an award of nominal damages. In this case the quantification of Ms Madden’s actual loss and damage is far from easy.
59 As has been seen, the evidence before the Court provides minimal assistance in the assessment of damages. This does not mean that the Court is necessarily relieved of the obligation to make an assessment. As the Full Court said in Enzed Holdings Limited v Wynthea Pty Ltd (1984) 57 ALR 167 at 183:
“The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved … We emphasize, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant.”
60 The difficulties of quantifying loss in such cases was recognised by the Court in a passage, on which both parties relied, in Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 at 525. Wilcox J said that:
“Any assessment of damages for loss of reputation must necessarily be made with a broad brush; as in a defamation case a court can do no more than fix a sum of money which, in the whole of the circumstances, appears to be proportionate to the damage which has been incurred. The greater the reputation, the more vulnerable it is to damage.”
61 Factors which are relevant in making the assessment include “the nature of the statements made by the respondents and …. the manner and extent of their publication”: see Typing Centre of NSW Pty Ltd v Northern Business College Ltd (1989) 13 IPR 627 at 641 (Wilcox J). The allegations made by Seafolly were serious misrepresentations and went beyond that which was necessary in order to defend the company against the equally serious charges of copying made against it by Ms Madden. They were disseminated by a public relations specialist engaged by Seafolly. They were directed to publications circulating in the fashion industry which was the same forum in which Ms Madden had chosen to expose her grievances against Seafolly. As expected the press releases were republished in whole or in part. Each contained the allegations. Each remained on the relevant websites until trial and were read, in whole or in part, by hundreds or thousands of viewers: see above at [22]-[24].
62 The impact of these postings on the readers is difficult to assess. Many of them were “friends” of Ms Madden who, the evidence suggested, continued to support her and, in some cases, actively sought to assist her in prosecuting her mistaken charges against Seafolly. While Ms Madden gave evidence about her apprehensions and worry about the reaction of people involved in the fashion industry and some in her local community to the contents of the press releases, she did not give any evidence of any individual who had read the material (including the misrepresentations) and had, as a result, responded by saying or doing something to her detriment. There was no suggestion, for example, that any of her fellow playgroup or school parents had in any way slighted her following the publication of the press release.
63 Ms Madden has sought to draw parallels between the present proceeding and the Lower Murray Water Corporation case such that her damages should be assessed at no less than the $70,000 which was awarded to the plaintiffs in that case. This contention cannot be accepted. Whilst the misrepresentations, presently under consideration, were more widely disseminated, they were by no means as serious as those made against the plaintiffs in Lower Murray Water Corporation. In that case the trial judge observed ([2012] VSC 535 at [174]) that the relevant allegations and imputations “were grave, and were calculated to cause substantial harm to the reputations and standing of each of the plaintiffs.” The allegations against the plaintiffs included breaking the law by investing over $2 million of taxpayer’s money without Treasury approval, acting irresponsibly and unlawfully by investing money, loaned from the State Government, in the United States sub-prime mortgage market and approving secret, last minute, adjustments to senior management contracts to guard against the consequences of an authority being taken over.
64 When upholding the award of damages, made by the trial judge, the Court of Appeal emphasised that the awards had to be sufficient for the purpose of vindicating the plaintiffs by “nailing the lie[s]” which had been levelled against them: see Lower Murray Urban and Rural Water Corporation v Di Masi [2014] VSCA 104 at [107]. Considerations of this kind do not bear on the assessment of damages under s 82 of the Act following a contravention of s 52.
65 Having regard to all of the matters which have been urged upon me and with which I have dealt with in these reasons, I consider that an award of $40,000 is appropriate and proportionate having regard to the damage sustained by Ms Madden.
OUTSTANDING ISSUE – COSTS
66 I will hear the parties on outstanding costs issues once they have had the opportunity of considering these reasons.
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I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. |
Associate:
