The Full Court of the Federal Court yesterday confirmed that Facebook posts on a swimwear designer’s personal Facebook page, which wrongly asserted that a competitor had “ripped off” her designs were made “in trade or commerce” for the purposes of s 52 of the Trade Practices Act 1974 (Cth) – which, in its modern incarnation is, s 18 of the Australian Consumer Law. The case reference is Madden v Seafolly Pty Ltd  FCAFC 30.
A swimwear designer (Madden) was surprised to see one of her bikinis worn by a well-known model on the cover of a popular Gold Coast magazine. After turning to an inside page, she discovered that the featured garment was, in fact, the product of a competitor (Seafolly). For reasons that will not be fully set out here, Madden formed the mistaken view that Seafolly had copied several of her designs. It is sufficient to say that among these reasons was the fact that a buyer from a retail group part-owned by Seafolly had viewed and taken photographs of some of Madden’s designs several months earlier.
On her personal Facebook page, Madden posted an album of photos under the heading “The most sincere form of flattery?” The front page of this album featured seven photographs of Seafolly garments. (This use was the subject of a copyright claim by Seafolly which is not discussed in this note). Below these photographs was a caption: “Why allowing ‘buyers’ to photograph your collection … can be a bad idea.” This album elicited comments from several of Madden’s 518 Facebook “friends” which indicated they considered Seafolly had copied Madden’s designs. Below these comments were larger photographs of each of the Seafolly designs. The name of one of Madden’s designs, followed by a question mark, was inserted below each of these photographs.
Madden’s personal and business (White Sands) Facebook pages were subsequently updated to include photographs of her own designs next to each of the Seafolly designs. Madden also sent emails to several journalists, a fashion industry publication called “Ragtrader” and two newspapers which attached content in similar form to that described above.
After being alerted to the publication of Madden’s comments in an online fashion-related publication, Seafolly issued a press release in which it denied that it had copied Madden’s designs and accused her of “acting maliciously to injure Seafolly.”
Fashion media interest in the story continued for a few days and further postings were made by Madden on her personal Facebook page and her business’s Facebook page which had 3,535 “friends”.
Seafolly demanded, amongst other things, an apology. Madden’s response was to the effect that neither she nor her company had accused Seafolly of copying. She pointed out that the “comments made or questions posed” on her personal Facebook page were “personal, not for publication, and were removed yesterday.” She did not apologise.
Seafolly issued proceedings seeking injunctive relief, declarations and damages for:
(a) misleading or deceptive conduct; and
(b) injurious falsehood.
Madden cross-claimed for defamation and misleading or deceptive conduct on the basis of the content of the Seafolly press release.
Seafolly’s TPA Claim
Were the representations misleading, deceptive or false?
Seafolly alleged that the various statements appearing on Madden’s personal and company Facebook pages and in the email she had sent falsely represented that Seafolly:
(a) had copied Madden’s swimwear designs;
(b) was not the creator of the Seafolly swimwear designs in the photographs included on the Facebook pages and in the email; and
(c) had used underhanded means to obtain pictures of the White Sands designs and copied those designs to create Seafolly garments.
At trial, Madden did not contend that any of these representations was true. Rather, she argued that the relevant statements could not be fairly understood to carry them. In finding that the language chosen by Madden was intended to and did convey the representations alleged, the judge relied on the responses by readers of the statements on the Facebook pages and on the online publications which indicated the way in which the statements were understood by the intended audience.
The Full Court agreed that the relevant representations were carried by the various statements. It pointed out that “if the primary judge used the articles written by the journalists and the readers’ responses to ascertain what the Facebook postings and email conveyed, he would have been in error. In the end, however, if his Honour made that error, it was of no consequence because he correctly identified the meanings that were conveyed.”
Were they mere expressions of opinion?
Madden contended that the reasonable reader of the Facebook postings and the e-mail would have understood that she was merely expressing her opinion about the similarity of the depicted garments. This contention was rejected for the same reasons as the finding that the statements were false and likely to mislead or deceive.
It was also found that even if readers of the impugned statements would have understood them to be mere statements of opinion, Madden was nevertheless reckless in forming those opinions and the statements were made without caring whether they were true or false. Thus, Madden could not rely on this defence because she had no adequate foundation for her publicly expressed expressed opinion.
On appeal, the Full Court considered that the representations were of fact, not opinion. It considered that each statement “was made on the basis that its truth was known to its maker.” Further, the Full Court said, the inclusion of incorrect dates next to the photographs of the garments, which carried the false impression that the White Sands garments had been designed or released before the respective corresponding Seafolly garments, was fatal to Madden’s reliance on a defence based on expressing an opinion.
Were the representation made in trade or commerce?
Madden was the principal of White Sands, a trade competitor of Seafolly. Her statements were related to the manner in which Seafolly conducted its business and, in particular, alleged that it had engaged in conduct which was improper and which damaged of her own business. By making her statements, the judge considered that Madden had sought to influence the attitudes of customers and potential customers of Seafolly. This was sufficient to conclude that the statements were made in trade or commerce.
The Full Court agreed.
Was there any damage?
Seafolly was unable to show any actual economic loss resulting from Madden’s conduct. It did, however, suffer damage to its reputation for which it was awarded $25,000. This damage was caused by Facebook postings that were accessible to a relatively small number of “friends” for less than two days and by publication of Madden’s assertions in online trade publications. There was no significant publicity in the mainstream press. The allegations were nonetheless regarded as “a serious assault on Seafolly’s business integrity.”
The Full Court reduced the award of damages to $20,000 on account of the primary judge’s erroneous inclusion in his considerations of an email which did not carry one of the relevant representations.
Seafolly’s claim for injurious falsehood
The elements of injurious falsehood are:
(1) a false statement concerning the plaintiff’s goods or business;
(2) publication of that statement by the defendant to a third person;
(3) malice on the part of the defendant;
(4) proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement.
The judge held that the first three elements of the tort had been established but that Seafolly had failed to establish actual damage (i.e. actual pecuniary loss) as a result of Madden’s statements. Indeed, the judge considered that Seafolly’s sales and profitability were “wholly unaffected by what occurred.” As a result this claim was dismissed.
This finding was not the subject of any cross-appeal.
At trial, Madden’s cross-claims for defamation and misleading or deceptive conduct were dismissed. The judge considered that Seafolly’s claim in its press release that Madden’s statements were made maliciously was true. This was a defence to the defamation claim and meant that the TPA claim must fail.
On appeal, the Full Court took the view that the facts as found by the primary judge were insufficient to support his finding that Madden had acted maliciously. Therefore, it said, his Honour’s finding that the representations contained in the Seafolly press releases were true was in error. They were therefore were apt to mislead or deceive.
The author was junior counsel for Seafolly at trial and on appeal.