Who can sue for defamation: individuals, small businesses, corporations and others

Defamation protects reputation, and only those with a reputation the law recognises can sue to protect it. For individuals the position is simple. For companies, government bodies, estates and people who cannot conduct their own affairs, the uniform Defamation Acts and the common law impose limits that need to be understood before any step is taken. These rules matter equally to publishers assessing a complaint, because a claim brought by a plaintiff without standing can be dismissed without any examination of what was said. Section references are to the Defamation Act 2005 (NSW) unless otherwise stated.

Living individuals

Any living natural person can sue for defamation. There is no requirement of citizenship, residence or age, and no requirement that the person be well known. A sole trader who is defamed in relation to their business sues as an individual, and the restrictions on corporate plaintiffs do not apply to them. Reputation for this purpose comprehends all aspects of a person’s standing in the community, including their business and professional standing, so a person in business can sue over an attack on the way they conduct it.¹

A person who is not named may still sue if the publication identifies them to people who know them. The principles are explained in the article on identification. A person who is identified only as part of a large or indeterminate group ordinarily cannot sue, whereas members of a small, defined group may be able to.

Corporations: the excluded corporation test

Section 9 provides that a corporation has no cause of action for defamation unless it was an excluded corporation at the time of publication.² A corporation is an excluded corporation if either the objects for which it is formed do not include obtaining financial gain for its members or corporators, or it has fewer than 10 employees and is not an associated entity of another corporation, and in either case the corporation is not a public body.³

Several details in that definition are important.

The not for profit limb looks at the objects for which the corporation was formed, so an incorporated association, charity or company limited by guarantee whose constitution excludes financial gain for members can sue regardless of how many people it employs.

The small business limb requires fewer than 10 employees. Part time employees are counted as an appropriate fraction of a full time equivalent,⁴ so a company with 12 people each working two days a week may still qualify (12 people at two fifths of full time is 4.8 full time equivalents, below the threshold of 10). Since the 2021 amendments, “employee” has been defined to include any individual, whether or not an independent contractor, who is engaged in the day to day operations of the corporation other than as a volunteer and is subject to its control and direction.⁵ Before that definition was inserted, the NSW Court of Appeal in Born Brands Pty Ltd v Nine Network Australia Pty Ltd read the provision as referring to persons with a contract of employment, and held that a company whose only employees were its two director shareholders had standing.⁶ The statutory definition now sweeps in contractors who work in the business under its direction, so the headcount can be higher than the payroll suggests.

The associated entity exclusion means that a small company which is part of a larger group cannot sue. “Associated entity” takes its meaning from s 50AAA of the Corporations Act 2001 (Cth), which covers related bodies corporate, and entities connected by control or by significant influence, as defined in that section.⁷ A subsidiary with three staff and a parent company with 300 is not an excluded corporation. Western Australia, which has not adopted the 2021 amendments, still uses the original wording: a corporation qualifies there if it employs fewer than 10 persons and is not related to another corporation within the meaning of s 50 of the Corporations Act.⁸

The status of the corporation is assessed at the time of publication. A company that later grows past the threshold does not lose a cause of action that had already accrued, and a company that later shrinks does not gain one.

Serious financial loss

Where an excluded corporation does have standing, it must still satisfy the serious harm element, and for a corporation the Act adds a requirement. Harm to the reputation of an excluded corporation is not serious harm unless it has caused, or is likely to cause, the corporation serious financial loss.⁹ A corporation therefore needs evidence of actual or probable financial consequences, such as lost customers, cancelled contracts or a downturn attributable to the publication. The concerns notice must also inform the publisher of the financial loss the corporation considers to be serious financial loss.¹⁰ Western Australia has no serious harm element, so an excluded corporation there need only prove the common law elements.

Directors, owners and employees

The restriction on corporate plaintiffs does not affect any cause of action that an individual associated with the corporation has in relation to the publication of defamatory matter about the individual, even if the same matter also defames the corporation.¹¹ In practice this is how many business disputes reach court. A statement that a company is dishonest will often be understood, by readers who know the business, as a statement about the people who run it, especially where the business is small or closely identified with its principals. Whether an individual is identified is decided on the ordinary principles, and an individual who sues must prove that the publication was about them and that it caused or is likely to cause serious harm to their own reputation, not the company’s.

The converse also applies. A publication that criticises a company’s product or service does not necessarily reflect on any individual, and a director who sues over such a publication may fail on identification or on defamatory meaning.

Deceased persons

A person, including a personal representative of a deceased person, cannot assert, continue or enforce a cause of action for defamation in relation to the publication of defamatory matter about a deceased person, whether published before or after death, or in relation to defamatory matter published by a person who has since died.¹² The cause of action does not survive for or against an estate. If a plaintiff dies during proceedings, the claim ends, although the court may still determine costs if it considers it in the interests of justice to do so.¹³

Family members cannot sue on behalf of a deceased relative, and cannot sue in their own right unless the publication also conveys defamatory imputations about them personally. Tasmania, which for many years lacked this provision, has had a s 10 in the same terms since 12 November 2021.¹⁴

Government and public bodies

The definition of excluded corporation excludes a public body, so a public body cannot sue for defamation whatever its size or objects.³ “Public body” means a local government body or other governmental or public authority constituted by or under a law of any country.¹⁵ The statutory exclusion reflects the common law. In Derbyshire County Council v Times Newspapers Ltd, the House of Lords held that it is of the highest public importance that a democratically elected governmental body, or indeed any governmental body, should be open to uninhibited public criticism, and that it is contrary to the public interest for organs of government, whether central or local, to be able to sue for libel.¹⁶ The NSW Court of Appeal adopted that approach in Ballina Shire Council v Ringland, holding that a popularly elected council had no right to sue for defamation, and applied it again to a statutory land council in New South Wales Aboriginal Land Council v Jones. Gleeson CJ explained that an elected governmental institution cannot claim a right to a reputation as a governing body, because such a claim is incompatible with the very process to which the body owes its existence.¹⁷

The exclusion applies to the body, not to the people within it. Individual councillors, mayors, ministers, public servants and police officers may each sue over publications that personally identify and defame them, and the Derbyshire reasoning expressly recognised that defamatory matter about a local authority is likely to reflect on individual councillors or officers who may sue at their own instance.¹⁸ A government body that suffers financial loss from a deliberate falsehood may have a claim in injurious falsehood, which requires proof of falsity, malice and actual loss.

Minors and people under a legal incapacity

A child or a person who lacks capacity to manage their affairs has the same right to sue as anyone else, but must conduct the proceedings through a litigation guardian. In Queensland, a person under a legal incapacity may start or defend a proceeding only by the person’s litigation guardian, and a litigation guardian who is not a solicitor may act only by a solicitor.¹⁹ Equivalent rules apply in every jurisdiction, under names such as tutor or next friend in some older rules. The litigation guardian is usually a parent or close family member and is personally exposed to an adverse costs order, which is a serious consideration in defamation litigation.

Limitation periods need particular attention. The ordinary limitation period for defamation is one year from publication,²⁰ extendable by up to 56 days if a concerns notice is given late in the period,²¹ and the court may extend the period to no more than three years from publication if satisfied that it is just and reasonable to allow the action to proceed.²² Limitation statutes generally contain provisions postponing time while a person is under a disability. Whether those provisions apply to the one year defamation period is unsettled: we have not located a decision on the point, and no one acting for a child or protected person should assume that time is not running.

Bankrupts

Bankruptcy does not take away a defamation claim. Under the Bankruptcy Act 1966 (Cth), property divisible among creditors does not include any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt, or any damages recovered for such a wrong,²³ and a bankrupt may continue in their own name an action commenced before bankruptcy in respect of a personal wrong.²⁴ A defamation claim, being a claim for a wrong done to the person, is generally treated as falling within these provisions, so that the claim and any damages remain with the bankrupt rather than the trustee. A defendant facing a bankrupt plaintiff should, however, consider security for costs.

Partnerships, associations and trusts

A partnership is not a legal person, so a defamed firm sues through its partners, each of whom must be identified by the publication. An unincorporated association, such as a club or community group that has not incorporated, has no legal personality and cannot sue in its own name; its members may sue if the publication identifies them individually, subject to the limits on group defamation. A trust cannot sue, but a trustee company may, subject to the excluded corporation test, and the individual trustees or beneficiaries may sue if identified.

Alternatives for those who cannot sue

A corporation with 10 or more employees, an associated entity of a larger corporation and a public body cannot sue in defamation, but they are not without remedy. Two alternatives are commonly considered.

Injurious falsehood is a common law tort available to any person, including a large corporation or a government body. It requires the plaintiff to prove that the defendant published a false statement about the plaintiff or its goods or business, that the defendant acted with malice, and that the plaintiff suffered actual financial loss as a result. Those requirements are considerably more demanding than defamation, where falsity is presumed and damage to reputation rather than financial loss is the gist of the action.

A claim for misleading or deceptive conduct under s 18 of the Australian Consumer Law is available where the publication was made in trade or commerce.²⁵ Statements by a competitor about a rival’s products, or by a disgruntled commercial counterparty, may qualify. Publications by media organisations in the course of their business of providing information are generally excluded by s 19 unless they are advertisements or promote the publisher’s own goods or services,²⁶ so this route is of limited use against news reporting but may be available against commercial publishers and online reviewers acting in trade or commerce.

Both alternatives are discussed in separate articles. Neither offers the presumptions that make defamation attractive to plaintiffs, and both require careful assessment of the evidence before proceedings are threatened.

Getting advice

Standing is the first question in any defamation matter and can be decisive. A company considering a claim needs to establish, with evidence, that it was an excluded corporation at the time of publication and that it can prove serious financial loss. A publisher who receives a concerns notice from a company should check the same things before responding on the merits. Individuals associated with a business, estates, litigation guardians and bankrupts each face particular rules. Harris Defamation Lawyers advises plaintiffs and defendants across Australia on whether a claim can be brought and by whom.