Many businesses suffer terribly because of unfair public criticism about their products or services, particularly in our digital age, where damning online reviews may be shared hundreds or even thousands of times over a very short period of time.

The tort (civil claim) of injurious falsehood provides a way for businesses to take back the power in such a situation, in which they seek a retraction, an apology, and/or even in some instances compensation from the party that unfairly criticised their business or product. Injunctions can also be awarded in some instances to stop ongoing damage from occurring.

The Difference between Defamation and Injurious Falsehood

Defamation claims are limited to individuals, charities, and small businesses (less than 10 employees), and tend to focus on the integrity of a person. Claims under the tort of injurious falsehood focus on the commercial reputation of a business, and there is no cap on the size of businesses who can bring such a claim. The time limits are also much more flexible for injurious claims, whereas usually Defamation claims have to be commenced in court within 12 months. Injurious falsehood claims have a slightly higher bar of proof than defamation, because the plaintiff must show that the maker of the statement intended to harm them, and that actual commercial damage has been caused or is very likely to be caused as a result.

Requirements to make a claim

Just as with defamation, the party wanting to take action needs to be able to provide detailed evidence about what was said or published that was damaging to the company’s reputation. If the statement was made on a digital platform, the claimant should make sure they take a screen shot of the offending statement. If it is something that is stated on video footage, then a copy of this should be preserved. If it is something said, such as at a public meeting, a transcript of the words, as best as can be remembered, should be prepared, with witnesses confirming that this is indeed what was said.

People are entitled to express a personal opinion about a product or service. What is necessary to make a claim against them is that the statement is not made as an honest comment, but rather is deliberately exaggerated or overstated with the intention of doing actual damage to the business. This aspect of intention to damage is often referred to as “malice”. In some cases, it is sufficient that the person who made the statement was reckless as to the truth of what they were saying, or that they showed a complete lack of regard for the damage it might do to the business.

If a statement is made that is so absurd that no reasonable person is likely to believe it, then that would probably not satisfy this type of claim because no damage would result.

Factors to determine damages

The larger the circulation of the false statement, the greater the potential damages claim. In these cases, the courts are very interested to hear evidence of the impact of the grapevine effect, where the story is circulated far and wide through re-posting and re-tweeting.

Courts will want to know the actual market of the business, and the extent to which that market has been affected or influenced by the statement. The larger the business and the larger the market, the greater the potential claim.

Practical Steps and Attempts to reconcile

Reputation management is the art of controlling a news story to achieve the best possible outcome. In circumstances where the reputation of a business is under a cloud, taking strategic action to contain the damage is very important. Ignoring damaging criticism of your business is a recipe for disaster.

We have extensive experience in helping businesses take charge of these situations. Often this involves demanding social media hosts removing damaging content, because once the digital host is on notice, but choose not to act, they may be liable as well. Making peace with the complainant by going above and beyond may help some complainers to change their tune, whilst in some other situations, a strongly worded letter to the individual will also be very helpful, as often when these people understand the potential legal hot water they are in, they back track very quickly. Your market, your consumers, also need to hear your side of the story, and we can assist you in finding the right way to reach your audience. If you are looking for a Sydney Lawyer who has experience with Injurious Falsehood, or for further information in relation to any Injurious Falsehood issues, please do not hesitate to contact any member of our Disputes Team.