Developments in damages for Australian defamation claims

For insurers, the most impactful element of defamation law reforms is the clarification of the cap for damages for non-economic loss. In a timely judgment, the NSW District Court provides a useful analysis of two issues that remain unsettled, despite the reforms, in relation to damages in defamation claims.

The two issues discussed in Gibson DCJ’s judgment in Matthews v Pigram [2020] NSWDC 526 were:

  1. whether an award for aggravated damages forms part of the cap or can be additional to it. This remains relevant for all publications made until the reforms commence; and
  2. how to properly assess quantum in light of judicial commentary that recent awards have been unduly high, particularly in NSW.

This article provides an overview of the law of damages in defamation, as well as the reforms in this area and an update on when these reforms are to commence (and what this means for the issue of damages), before turning to the analysis of the above two important issues in Pigram.

1. Types of damages

There are three types of damages available in defamation proceedings:

General damages (non-economic loss):

These are damages to compensate the intangible loss suffered to the plaintiff’s reputation. The three purposes of general damages are:

  • consolation for the personal distress and hurt caused to the plaintiff by the publication;
  • reparation for the harm done to the plaintiff's personal and (if relevant) business reputation; and
  • vindication of the plaintiff's reputation.

As stated by the High Court in Carson v John Fairfax & Sons Ltd [1993] HCA 31:

“The first two purposes are frequently considered together and constitute consolation for the wrong done to the [plaintiff]. Vindication looks to the attitude of others to the [plaintiff]: the sum awarded must be at least the minimum necessary to signal to the public the vindication of the [plaintiff]'s reputation.”

Special damages (economic loss)

These are damages to compensate the actual financial loss suffered as a result of the damage to the plaintiff’s reputation. Most commonly, this is loss of business or employment opportunities.

Aggravated damages

These are damages for aggravating conduct which is improper, unjustifiable or lacking in bona fides.

2. Reforms

On 27 July 2020, the Council of Attorneys-General (CAG) (the Attorneys-General of each state and territory) approved amendments to Australia's uniform defamation law. New South Wales was the first to pass the reforms into law, with the Defamation Amendment Act 2020 (Amendment Act) passing Parliament on 6 August 2020 and receiving assent on 11 August 2020. However, the Act is to commence by proclamation, which is yet to occur.

Insofar as damages are concerned, the reforms clarify the operation of the cap on non-economic damages, so that it is clear that the cap cannot be exceeded simply because aggravated damages are awarded. That is, the capped amount is only to be awarded in the most extreme case (which is to be assessed on a scale of severity) and if a separate award of aggravated damages is made, it must be done so separately, and not mixed with the award for general damages (effectively nullifying the cap). The prescribed cap, which is adjusted annually, is currently $421,000.

This overturns recent decisions, including in the Geoffrey Rush and Rebel Wilson cases, which found that if aggravated damages are warranted, the cap on non-economic loss does not apply. In his second reading speech to Parliament, New South Wales Attorney-General Mark Speakman stated that these decisions are “contrary to the original policy intent.”

The Explanatory Memorandum to the Act states that:

“the purpose behind specifying a maximum amount for non-economic loss was to ensure a level of parity with the award of other damages (for example, for personal injury) while still providing for appropriate compensation for this intangible loss.”

The cap for non-economic loss in personal injury claims is currently $658,000.

The cap does not apply to special damages, which in the case of the lost work opportunities suffered by Rush and Wilson, were in the millions (though in the case of Rebel Wilson, the $3.9m special damages award was overturned on appeal, leaving her with a general damages award of $600,000- in excess of the cap).

3. Commencement update

The CAG has indicated that all jurisdictions have agreed to enact the provisions into their own legislation as soon as possible, but New South Wales is the only jurisdiction to do so to date.

On 31 August 2020, Mr Speakman stated his intention to wait for a “critical mass” to be ready prior to commencement, but that he would not necessarily wait for complete uniformity.

The Amendment Act only applies to defamatory matters published after commencement of the Amendment Act, so the current law will apply to ongoing matters before the courts and any defamatory publications made up to the date of proclamation.

So what happens to the operation of the cap prior to the commencement of the Amendment Act?

4. Operation of the cap

In Pigram, Gibson DCJ noted there had been judicial criticism of Bauer Media Pty Ltd v Wilson (No 2) (2018) 56 VR 674 (the Rebel Wilson Case - Bauer), but concluded the Court was bound to follow Bauer for the time being. That is, the Court would allow the cap to be exceeded in appropriate circumstances if aggravated damages were awarded (despite the Amendment Act and Parliament’s clear intention signalled in the reform process).

This was on the basis that the South Australian Court of Appeal recently affirmed (Aldridge v Johnston [2020] SASCFC 31) the Victorian Court of Appeal’s interpretation in Bauer Media Pty Ltd v Wilson (No 2) (2018) 56 VR 674 (the Rebel Wilson Case - Bauer), “…which means the Bauer interpretation of the cap is the safest way forward for a first instance judge.”

5. Amount of awards

The underlying principles in quantifying general damages in defamation are the purposes outlined above and the requirement that there be an appropriate and rational relationship between the harm sustained by the plaintiff and the amount of damages awarded: s 34 of the Defamation Act 2005 (NSW).

The Court noted the difficulty of applying these principles in practice, in circumstances where:

  • it has been observed in other jurisdictions that defamation damages awards in New South Wales have historically been much higher than elsewhere; and
  • the New South Wales Court of Appeal recently expressed concern about this: KSMC Holdings t/as Hubba Bubba Childcare on Haig v Bowden [2020] NSWCA 28 at [143].

Ultimately, the Court found that the proper method for assessing quantum was to apply analogous cases. His Honour determined that this matter concerned “a brief but acrimonious dispute giving rise to allegations of criminal conduct”, as in the analogous case of Balzola v Passas [2020] NSWSC 896, and applied the assessment rationale used in that matter.

However, the Court took into account an additional factor, namely “the Court of Appeal’s generalised concerns about the size of damages in New South Wales”.

6. Facts of the case

Briefly, Pigram concerned emails sent by the owner of an apartment, who claimed his tenant had complained that the Strata Committee Chairperson, an elderly man, Mr Matthews, had been looking into her window. Without seeking explanation, the owner fired off two emails to the strata committee and strata manager (17 recipients in total, including residents and shop owners in the building where Mr Matthews lives), implying that Mr Matthews was a “Peeping Tom” and that he would report the matter to the police.

In fact, Mr Matthews was carrying out his voluntary duties as Chairperson and inspecting repair to the storm-damaged window, to check the strata manager’s incorrect assertion that it had been repaired. The tenant had not said Mr Matthews was looking into the window but that she was not sure why he was on the common area balcony near her window.

Mr Matthews suffered hurt and embarrassment as a result of the emails, including being turned away from a barbershop in his building and being questioned about his actions by several residents and his employer.

7. Assessment of damages on the facts

The Court applied analogous cases which, on the one hand, concerned serious allegations of a criminal nature, but on the other, had factors suggestive of damages within a very small compass, including:

  • The limited extent of publication;
  • The overlap in content and timing of the emails; and
  • The context of the publications (namely disputes about the strata committee and owners’ corporation activities, which appear to have occurred regularly).

Noting these factors and, importantly, taking into account the Court of Appeal’s comments regarding unduly large damages awards, the Court found the appropriate sum to award was $20,000.

Aggravated damages were not awarded because the defendant’s mere failure to apologise and knowledge of the falsity of the imputations were not sufficient to establish a course of conduct lacking in bona fides or otherwise improper, which prolonged and intensified the hurt experienced by the plaintiff.

8. Conclusion

Pigram provides a useful and timely analysis of how courts at first instance will assess damages for non-economic loss in defamation claims. This comes at a time when reforms overturning the current state of the law are pending, but still some time off commencement (and not applicable to matters published up until that time).

Taking into account superior court authority on what is, for the moment, a relatively unsettled issue, the judgment provides some clarity that courts at first instance:

  1. will continue to follow Bauer, such that an award for aggravated damages in excess of the cap is still available for matters published up to the commencement of the Amendment Act; and
  2. are likely to exercise restraint in assessing quantum.

Insurers can expect, therefore:

  1. to maintain large reserves for high profile defamation disputes in the short term; but
  2. in the longer term, a downward trend on damages awards in defamation claims, not only because of the effective reduction to the cap, but also because of the judicial notice being taken of the spirit of the reforms, which include a more even playing field for defendants in what has, in recent times, been perceived to be a plaintiff-friendly area of law.

Two caveats should be made to this downward pressure though:

  1. for a range of reasons, including the particularity of pleadings in defamation, costs are likely to remain high; in Pigram, for example, costs of approximately $50,000 were awarded for an uncontested claim valued at $20,000; and
  2. the volume of defamation claims is likely to continue to rise, as interaction with technology increases and courts are increasingly prepared to find big technology companies, such as Facebook and Google, liable for others’ publications on their platforms.