Case Law, Australia: DHR International Inc v Challis, No injurious falsehood injunction against blog – Brigit Morris

30 10 2015

dhr_international_02On 23 October 2015, Justice Richard White in the New South Wales Supreme Court dismissed an application by a global executive recruitment firm, DHR International, for injunctive relief to remove anonymous blog posts allegedly made by a former employee of a DHR subsidiary.

The company claimed the posts contained false and misleading statements about its business practices. DHR brought the claim in the tort of injurious falsehood, as well as under s 18 of the Australian Consumer Law for misleading and deceptive conduct.

In dismissing the application in DHR International, Inc a company incorporated in Delaware in the United States of America v Challis [2015] NSWSC 1567, White J found that the plaintiff failed to show that the statements in the blog were false, ‘or at least materially false’ – a key element of the tort of injurious falsehood.

Background

The plaintiff, DHR International, is a global executive recruitment agency. The defendant, Darren Challis, was the chief executive officer of an Australian subsidiary of DHR from April 2010 to September 2012. He held a minority shareholding in the Australian subsidiary, DH International Pty Ltd. The subsidiary went into liquidation in 2013. Reports by administrators at the time found that the company had significant outstanding debts to unsecured creditors and owed money in employee entitlements.

At a similar time, Mr Challis was asked to step down as Managing Director of the Australian subsidiary. Mr Challis claimed to be owed AUD$252,422 in unpaid commissions, superannuation, annual leave and other entitlements by DHR.

Anonymous posts that were highly critical of DHR appeared on a blog from 2014. Although there is no direct evidence that Mr Challis was the author of these posts, White J found that there is a ‘strong prima facie case’ that could be established at a trial, that the posts can be attributed to Mr Challis [para 3].

Allegations of injurious falsehood 

The blog posts accused DHR of ‘lying, of lacking ethics, of being dishonest, of being comprised of a bunch of individuals who are unscrupulous, of being a house of cards, and so on’ [7]. The extent of the posts are too varied and too numerous to be canvassed here in any detail. In fact a solicitor for the plaintiff produced a 446 page exhibit summarising the claims made on the blog against DHR [18].

There were two substantial criticisms leveled against DHR on the blog, both of which DHR contended were false.

  1.  Wall of shame: The first criticism was a list of former DHR consultants who had allegedly quit the firm in protest of its poor treatment of consultants. This list was referred to as the ‘Wall of Shame’. One blog post asked;

can we build a list of DHR International consultants who have been the subject of a DHR International press release, been listed on then removed from the DHR web site, have sued or been sued by DHR, or have DHR in their LinkedIn profile?

Well, we can. And guess what? We have been able to identify a staggering 506 consultants (and increasing) who have left DHR International over recent years, often within a year of joining [8].

On 25 June 2015, another post referred explicitly to a ‘wall of shame’:

What a great wall of shame. Which clients would be stupid enough to engage this firm or these individuals? [15].

In his deposition, David Hoffman, Chairman of the board of DHR International, claimed that the company and its employees experienced ‘harm caused by the allegations that consultations are ‘churned through’ by the company.

  1.  CTPartners: The second significant claim made on the blog concerned the DHR’s acquisition of a portion of a smaller recruitment firm, CTPartners. The blog posts claimed that DHR found ‘it difficult to retain CTPartner consultants’. For instance, a post cited by Mr Hoffman from 9 October 2015 stated

Update October 9, 2015: more consultants have left DHR London, and a reliable source has told us that only two of the CTPartners transfers are left: Alex Bennett and Laurence Vallaeys. As a second source said, ‘It is great timing. What makes this particularly amusing and well timed by the CT guys is Geoff Hoffmann was due to come over next week to give the ra-ra speech in the new combined offices around how successful the integration has been!! Will he still do so?

DHR claimed that these (and other) false blog posts had had a deleterious effect on the company’s capacity to work effectively and to retain clients and staff. White J found that ‘there is evidence that numerous potential candidates declined to joined DHR because of the negative statements about it in the blog’ [16].

Findings

In dismissing the application for injunctive relief, White J explained that DHR had only attempted to demonstrate that

“a small number of the statements published in the blog critical of it are false. An injunction requiring the defendant to remove the blog could not be sustained on the ground that it sought an injunction to restrain the repetition of injurious falsehoods” [38].

White J held that ‘the plaintiff’s evidence does not show a serious question to be tried that the claims in the blog which descend to some particularity are false, or at least materially false. That being so it would not be appropriate to require the defendant to remove the blog. Nor would it be appropriate to grant the second form of injunction sought’ [44]. The judge also found that the plaintiff had failed to provide sufficient evidence that the publications were made in trade or commerce within the meaning of s 18 of the Australian Consumer Law.

White J found that there was ‘prima facie evidence that allegedly false statements in the blog were published by the defendant, that they concern the plaintiff or its business, that they are calculated in the ordinary course of things to produce actual damage, and that such damage would be willfully and intentionally caused by the defendant’s publication’ [34]. However, the judge found that the plaintiff’s evidence ‘did not show any material falsity in what was stated in the blog’ [34]:

What is lacking is evidence that the statements published in the blog are materially false. The only evidence adduced by DHR directed towards the falsity of specific allegations in the blog related to the allegations of “churn”.

White J went on to stress that it does not follow from this conclusion that the statements in the blog should be accepted as true:

Rather, the evidence adduced by the plaintiff on the application for an interlocutory injunction has not shown that there is a serious question to be tried that the statements in the blog are materially false. The plaintiff has not sought a limited injunction to restrain the defendant from publishing statements concerning the rate of “churn” of its consultants. Instead it has sought a mandatory injunction to require the defendant to remove the blogs. The blogs contain many allegations about the defendant’s conduct which, on this application, DHR has not attempted to show are false [35].

Comment

This case is of note due to the use of the tort of injurious falsehood as a quasi-defamation action. In Australia, claims for injurious falsehood will sometimes be made in addition to, or in lieu of defamation actions, where the plaintiff seeks injunctive relief. This is despite the high threshold for injurious falsehood claims, requiring a plaintiff to prove all of the following elements;

In this case, White J held that the first element, falsity or ‘material falsity’, was not established [44].

White J suggested that several of the claims were defamatory against Mr Hoffman, however he was not a party in this matter [19]. Nor did DHR attempt to sue Mr Challis for defamation. While corporations do not have a right to sue in defamation in NSW, DHR could have submitted that it was an ‘excluded corporation’ for the purpose of accessing the exception to this rule in s 9(2) of the Defamation Act 2005 (NSW). Section 9 provides

(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 corporates, or

(b) it employs fewer than 10 persons and is not related to another corporation,

and the corporation is not a public body.

It is not clear whether the plaintiffs would have succeeded in obtaining injunctive relief if they had pursued an action in defamation. It would seem though that the court would have entertained this possibility, given White J’s reference to the ‘excluded corporation’ provisions in the Defamation Act and to the defamatory statements made against Mr Hoffman.

Brigit Morris was a legal officer at the Australian Law Reform Commission. She is currently a Masters student at King’s College London.

 


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31 10 2015
Michael Jones

Brigit, you may wish to correct your article where you say, “At a similar time, Mr Challis was asked to step down as Managing Director of the Australian subsidiary”.

According to a detailed summary at http://unofficial-dhr-international.blogspot.co.uk/2015/10/dhr-international-in-australia-story.html,
Challis was terminated without cause in September 2012. David Hoffmann, the Chairman and owner of DHR International only appointed voluntary administrators in June 2013.

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