Proposed defamation reforms set to strip small business of existing rights

By Martin Bennett

9 January 2020

The Parliament and Attorneys General of Australia are in discussions set to amend existing defamation laws. One of the amendments proposed will, if implemented, strip small businesses of an existing right.

The law prevents large corporations from suing for defamation, and has done for many years. However, under the current law, small companies with less than 10 employees or which operate for charitable purposes are permitted to sue for defamation – for damage to their reputation. The proposed reforms are set to place a significant limitation on small businesses’ right to sue for defamation.

When a person (or small business) brings a claim for defamation, the law presumes damage to their reputation. The claimant does not have to prove damage to their reputation, or specific economic loss caused by the defamatory publication.

The proposed reforms introduce a new and onerous requirement, not previously seen in Australian law. A small business (with fewer than 10 employees, or that operates for charitable purposes) will not be permitted to sue for defamation unless it can show that the defamatory publication caused, or is likely to cause, “serious financial loss”.

The proposed introduction of the requirement for ‘serious financial loss’ for small businesses equates to the abolition of a principle of law that has existed for decades – that defamation is actionable, and damage to reputation is compensable, without proof of specific economic loss.

Damages for defamation under the present law serve 3 functions – to act as a consolation to the claimant for the distress they have suffered as a result of the defamation, to repair the harm to the claimant’s reputation and to vindicate their reputation. The proposed reforms will do away with small businesses’ entitlement to be compensated in this manner for defamatory publications unless they can point to actual, or likely, financial losses that the Court considers ‘serious’.

Some commentators suggest that no company should be permitted to sue for defamation, irrespective of its size or purpose. Consider however the father and son butcher shop, or the husband and wife mortgage brokers, who operate in a company structure. If a disgruntled customer or client smears their Facebook page with a false allegation to the effect it has a dangerous infectious disease or that they ‘can’t be trusted’, why shouldn’t they be able to vindicate the company’s reputation without proving specific, and ‘serious’, financial losses associated with the defamation?

The government is calling for comments and submissions on the proposed reforms now. Submissions close on 24 January 2020. If you are concerned by the prospect of small businesses losing an existing right to protect their reputations, we encourage you to deliver your comments and submissions in writing to:

Review of Model Defamation Provisions

c/o Policy, Reform and Legislation

NSW Department of Communities and Justice

GPO Box 31 SYDNEY NSW 2001

or by sending an email to defamationreview@justice.nsw.gov.au.

Further information regarding the proposed reforms can be found at www.justice.nsw.gov.au.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.