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Is Facebook a business liability?The benefits of social networking for business have been widely debated, in particular the use of Facebook in the workplace. However, there are many legal issues that need to be explored from privacy and protection to liability regarding your company website and links.

Earlier this year the High Court of Justice in England awarded a total of £22,000 damages to a businessman and his company in respect of a defamatory Facebook group and a fake Facebook profile created by a former friend and business partner.

Deputy Judge Richard Parks QC found that on 20 June 2007, Grant Raphael created a Facebook group called “Has Mathew Firsht lied to you”, and posted comments including “Mathew Firsht the managing director of Applause Store owes us a lot of money and has constantly lied about when he will pay us. We are sick of his pathetic excuses, has he lied to you? Does he owe you money?”.

His Honour also found that on 19 June 2007 Raphael created a fake Facebook profile in the name of Firsht. The fake profile made public both true and false personal details of Firsht, including his supposed sexual preferences, his relationship status, his political and religious beliefs and his date of birth. The contents of the group page were held to be defamatory of Firsht and his business, and they were awarded a total of £20,000 damages for the defamation claims: £15,000 for Firsht and £5,000 for his company.

In respect of the fake profile, His Honour said that “damages in cases of misuse of private information are awarded to compensate the claimant for hurt feelings and distress caused by the misuse of their information”. Having already awarded Firsht and his company £20,000 for the defamatory “Has Mathew Firsht lied to you” group, His Honour awarded a further £2,000 for the disclosure of the personal information on the fake profile.

The decision reaffirms that those seeking to publish defamatory and/or private matter on the internet will not escape scrutiny in the UK and are just as likely to be held accountable as conventional publishers.

Several English cases have established a cause of action for the unlawful publication of private information: JK Rowling, Princess Caroline of Monaco, Naomi Campbell, and more recently Max Mosley have all successfully sued over photos and articles detailing aspects of their private lives. But would Mr Firsht and his company have been as successful had they sued in Australia?

Certainly, an individual in Firsht’s circumstances could have sued for defamation. Since the recent enactment of uniform defamation laws in Australia however, a company cannot sue for defamation unless it has less than 10 employees, or operates not-for-profit.

Many commentators criticise this aspect of the law for disabling companies from suing to protect their reputation, however others welcome the fact that companies can no longer use their financial resources to silence negative publicity through the use of ‘gag writs’.

All companies can still sue and recover damages using the common law action of injurious falsehood, but in order to succeed the company must prove, among other things, that it suffered a financial loss as a result of the relevant publication, which is often very difficult from an evidentiary perspective.

Section 52 of the Federal Trade Practices Act, which prohibits “misleading or deceptive conduct”, can sometimes be useful to protect a company’s reputation, however the media is essentially exempt from any such action in their reporting and publications, and the requirement that the impugned conduct be in “trade or commerce” makes it difficult to successfully maintain an action in other cases.
Accordingly, it is unlikely that a company with more than 10 employees or one operating for profit could successfully sue for defamation in Australia in respect of comments made on Facebook, or indeed for any publication whatever.
Breach of privacy
In respect of damages for the publication of private information, Australian law does not yet fully recognise an individual’s right to privacy. However, such a right may well be legislated in the next few years.

Just a few months after the Mathew Firsht case, the Australian Law Reform Commission (ALRC) published Media Briefing Note 10: “A statutory cause of action for serious invasions of privacy: getting the balance right”.

In it, the ALRC recommends the creation of a statutory cause of action for a “serious invasion of privacy”, including where:

  • there has been an interference with an individual’s home or family life;
  • an individual has been subjected to unauthorised surveillance;
  • an individual’s correspondence or private communication has been interfered with; or
  • sensitive facts about an individual’s private life have been disclosed.

If such a statutory cause of action is created in Australia, then it is conceivable that a person whose personal details are published (on Facebook or elsewhere) without their permission could maintain an action for breach of privacy. Whether any publication would constitute a “serious breach of privacy” and therefore entitle a person to damages pursuant to the proposed ALRC reforms, will of course depend upon the precise wording of the legislation and its interpretation in the Australian courts.

Liability of companies operating websites
Mathew Firsht sued only the individual who authored the offending material published on Facebook.

But what about Facebook itself? Could it have been sued? And could a company in Australia be sued over material appearing on its website but authored by others? What about material that your company’s website provides links to? Like most areas of the law, there are no clear-cut answers.

In one case, Kaplan v Go Daddy, a disgruntled motorist established a website called “hunterholdensucks.com”. He admitted he was responsible for the website but denied he was responsible for the offensive and arguably defamatory comments posted on it. The court ordered the website be removed, and suggested that simply by maintaining a site, and inviting negative comments, the operator of the site opens itself up to liability for what is posted.

Similarly, in certain circumstances a company might also face liability for material appearing on sites which they ‘link’ to. The century-old case of Hird v Wood held that a person drawing to the attention of passers-by a defamatory sign constituted communication of defamatory material by that person. By analogy, it is possible that a company publishing or communicating material through the use of hyperlinks (i.e. by drawing peoples’ attention to defamatory content on an external site) might also face liability.

Moreover, in a recent Federal Court of Australia decision, Cooper v Universal Music Australia Pty Ltd, the defendant was held liable for providing a link on its website to material which was in breach of the plaintiff’s copyright.

Defamation laws do, however, afford some protection to “subordinate” or “secondary” distributors” for what is known as “innocent dissemination”, however the nuances of the defence are complex, and not capable of full explanation in this article.

Similarly, the Federal Broadcasting Services Act protects internet content hosts where they were not aware of the nature of the content. However if the host is notified of a defamatory post, which is not removed, liability for defamation damages may lie with the host as well as the author.

If you have any doubts about legal issues facing your company and its website for utilising social networking sites, contact your legal advisor.

David Hope is a partner and Christien Corns a lawyer for Middletons (www.middletons.com.au), a national commercial law firm working out of offices in Sydney and Melbourne.

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David Hope and Christien Corns

David Hope and Christien Corns

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