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Article - After Gutnick - Jurisdiction on the Internet (January 2002)

• Introduction
• Publication
• Jurisdiction
• Authorities on jurisdiction
  • Lee Teck Chee v Merrill Lynch
  • Kitakufe v Oloya Ltd
  • Godfrey v Demon Internet Ltd
• Forum non conveniens
  • Henry v Henry
  • Schapira v Jonothan Ahronson and Others
• Application of forum non conveniens in Gutnick
• Conclusion

Chris Connolly, Galexia

Related Galexia services and solutions Specialised Legal and Regulatory Consulting. Read more » Published Internet Law Bulletin, volume 4, number 4, 2002

Introduction

On 29 August 2001, Justice Hedigan of the Victorian Supreme Court handed down the decision in Gutnick v Dow Jones.[1] The Melbourne Businessman, Joseph Gutnick, was suing the US publishing company, Dow Jones for defamation following the publication of an article on the Internet. The full judgment appears at http://www.austlii.edu.au/au/cases/vic/VSC/2001/305.html.

The article - ‘Unholy Gains’- appeared in both the hard copy and online version of Barrons magazine. Mr Gutnick sued for defamation in Victoria as the article had been downloaded by a small number of subscribers in Victoria. Dow Jones argued that the case should be heard in New Jersey, USA, where the Dow Jones website is located.

In his judgement, Justice Hedigan ruled that the article was published not only in New Jersey but also in Victoria. He held that the Victorian Supreme Court had jurisdiction to hear the case. This case sets a precedent where any online publisher might be subject not only to the defamation laws of the nation in which it operates, but also to the laws of other countries where its website can be accessed. This case continues the trend of Australian courts having a significant impact on the common law as it relates to the Internet.

Publication

The ‘Unholy Gains’ article was sub-headed ‘When stock promoters cross paths with religious charities, investors had better be on guard’. Barrons Magazine sold more than 300,000 copies, a small number of which were sold in Victoria. However, Barrons also appears online at http://www.wsj.com. This is a subscriber site with 550,000 subscribers. Dow Jones conceded that around 1700 subscribers were probably from Australia (they used Australian credit cards to pay their subscription fees). The defendant also admitted that several hundred subscribers were from Victoria and that they included ‘significant persons’ from finance, business and stockbroking.

Jurisdiction

The defendant argued that the Internet publication of ‘Unholy Gains’ occurred when and where the material was uploaded in New Jersey, that is, when it was pulled from the server in New Jersey. The argument was that downloading is a result of an ‘independent action for which the defendant cannot be held properly responsible’. However, in this case, Dow Jones charged fees for access to the information, and this seemed to weigh against them in the Judge’s mind.

The plaintiff attacked the submission of the defendant that any downloading of the article which occurred in Victoria was the result of the independent action of subscribers. They argued that the downloading was ‘a calculated and intended consequence of the defendant procuring subscribers to its Website from Victoria and placing the article on its Web server’.

Justice Hedigan gave detailed consideration to the jurisdiction issue. It is worth noting at this stage that His Honour displayed some interest in the wider policy considerations of the question of Internet jurisdiction as it applied to defamation, however, he specifically resisted attempts to use such policy considerations to sway him from the strict application of the law. A striking example of his response to these arguments is contained in the following passage:

‘The [defendant’s] submission lacked nothing on the score of boldness, it being claimed that the Internet offered Australians the greatest hope of overcoming the tyranny of distance and that it would be contrary to the national interest for a State court in Australia to assume to exercise jurisdiction over material placed on websites overseas... This he claimed might lead major international publishers of informational websites to deny subscriptions to Australians out of commercial concern that they would be dragged into this jurisdiction to fight expensive defamation actions. The suggestion that I had a national duty to decide that there was no jurisdiction in Australia even if I had a legal view to the contrary, might be thought by some to be remarkable for its ambition.’

Authorities on jurisdiction

His Honour considered three recent cases on jurisdiction as it related to defamation on the Internet.

Lee Teck Chee v Merrill Lynch

Lee Teck Chee & Anor v. Merrill Lynch International Bank Ltd is a Malaysian case involving material placed on a newspaper Website in Singapore. On the facts in this case there was no evidence of accessing the Internet in Malaysia and the words with respect to the slander allegation were not spoken to any person situated in Malaysia. However, the judgment appears to indicate that if there had been evidence that someone had accessed the material on the Internet that would have been sufficient to meet the test of publication in Malaysia. Justice Hedigan, in effect, merely noted this case in passing.

Kitakufe v Oloya Ltd

In Kitakufe v. Oloya Ltd., the Canadian Court assumed jurisdiction in a defamation case arising from publication in a newspaper published in Uganda and on the Internet. The plaintiff was of African-Canadian descent having been born in Uganda, and the defendant was also African-Canadian born in Uganda. He worked as a reporter for ‘The New Vision’ and wrote the article ‘Uganda Doctor Arrested in Toronto’.

The defendant argued that Uganda was a more convenient and natural forum, and that the proceeding had a real and substantial connection to Uganda. The defendant argued that the Uganda Court was better fitted to deal with the allegations, raising as they did issues of malice, ethnic rivalry and defence credibility. It was also argued that there would be significant expense and inconvenience involved for the defence credibility witnesses to travel to Canada. Reliance was also placed on the fact that the defendant was based in Uganda and had its assets there.

The Court rejected the defendant’s argument that the forum of convenience was Uganda and concluded that it was ‘not satisfied that the plaintiff would not be deprived of a legitimate personal and juridical advantage’.

Justice Hedigan described this case as an example of a case in which ‘a superior court assumed jurisdiction over a defamation suit on the basis of access to the Website and its reception (that is, downloading) in Ontario, Canada’.

Godfrey v Demon Internet Ltd

In Godfrey v Demon Internet, the plaintiff was a science lecturer resident in England and the defendant was an Internet service provider carrying on business in England and Wales. The case was primarily concerned with Usenet. Internet users worldwide can read and download Usenet postings, which may originate from anywhere in the world.

In this case the defendant carried a particular news group which stored postings for a fortnight. An unknown person made a posting which purported to be written by the plaintiff, Godfrey. The posting was a forgery and was defamatory. Shortly after the posting, the plaintiff informed the defendant that the posting was a forgery and requested its removal within ten days. The defendant did not and it remained on the server until its expiry two weeks later.

Moreland J. held that the transmission of a defamatory posting from the storage of a news server constituted a publication of that posting to any subscriber who accessed the news group containing that posting. His Honour concluded that the defendant was not only the owner of the device through which the posting had been transmitted, but had also published the posting whenever a subscriber accessed the news group:

‘In my judgment the defendant, whenever it transmits and whenever there is transmitted from the storage of its news server a defamatory posting, publishes that posting to any subscriber to its ISP who accesses the news group containing the posting. Thus every time one of the defendant’s customers accesses ´stock.culture.thai’ and sees that posting defamatory of the plaintiff there is publication to that customer.’

Justice Hedigan noted that his Honour specifically said ‘sees that posting defamatory of the plaintiff’ which he deemed to be equivalent to downloading. He therefore leaned heavily on this case in his judgment.

Forum non conveniens

Once Justice Hedigan had concluded that Victoria was the correct jurisdiction for this matter, he still had the discretion to rule that another jurisdiction would be more convenient, using the principle of forum non conveniens. The test is whether the jurisdiction under attack is ‘a clearly inappropriate forum’. In such matters, the burden generally lies on the defendant to persuade the Court to exercise this discretion.

Justice Hedigan considered two key cases on forum non conveniens.

Henry v Henry

In Henry v. Henry, it was stated:

‘A stay should be granted if the local court is a clearly inappropriate forum if it be the case if continuation of the proceedings in that court would be oppressive, in the sense of ´seriously unfair and burdensome prejudicial or damaging’, or vexatious, in a sense of serious and unjustified trouble and harassment.’

Schapira v Jonothan Ahronson and Others

In Schapira v Jonothan Ahronson and Others the plaintiff was an Israeli citizen who had been resident in London and was a British citizen since 1985. He had an English wife, his children went to school in England. His father had an Israeli carpet company which, after it went into liquidation, the plaintiff worked for in Israel until 1981 to 1993. Part of that business involved distribution and marketing in the United Kingdom and Europe. The plaintiff had a wide circle of friends and business associates in England.

The plaintiff sued a daily Israeli newspaper for defamation. The paper had a circulation of 59,000 but there were only 141 subscribers in the United Kingdom.

The defendants applied to stay the proceedings on forum non conveniens grounds. Eventually the Court of Appeal set out the following principles:

• the stay would only be granted where the court was satisfied there was some other available forum having competent jurisdiction in which the case could be more suitably tried for the interests of all the parties and the interests of justice;
• the burden rested on the defendant to show there was another available forum which was clearly or distinctly more appropriate than the English forum; and
• in considering the question of the appropriate forum the court looked for connecting factors which pointed to some other forum as being that with which the action had the most real and substantial connection.

The Court concluded that ‘England, where the plaintiff lived and carried on business, and where he wished his reputation to be vindicated was the appropriate forum for the actions.’

Application of forum non conveniens in Gutnick

Dow Jones argued that it would be more burdensome for them to fight the case in Australia, with the difficulties of calling witnesses, producing documents and accessing material. They argued that the plaintiff would not have these difficulties if the case was tried in the United States, as most of the (practical) evidentiary burden in a defamation trial falls on the defendant. Dow Jones also argued that the article was ‘indelibly American, written by Americans for Americans interested in the stock market and its affairs’.

Justice Hedigan stated that ‘the weakness in [these arguments] is that the aspect sued on by Mr Gutnick is indelibly Victorian, connected with no other place and that any documentation or evidence concerning the matter will all be found in Victoria’. He set out six specific reasons for rejecting the use of the forum non conveniens discretion in this case:

• The publication of the defamatory statement was in Victoria, where it was downloaded and where the print publication was also sold.
• The plaintiff is a resident of Victoria, has his business headquarters here, his family here, his social and business life here, and seeks to have his Victorian reputation vindicated by the courts of the State in which he lives.
• The plaintiff is indifferent to the other substantial parts of the article and desires only that the attack on his reputation in Victoria as a money-launderer should be repelled and his reputation re-established.
• The plaintiff has undertaken to sue in no other place. ‘This undertaking destroys at a stroke the defendant’s claim that New Jersey is to be the preferred jurisdiction because of its capacity to award worldwide global damages.’
• The evaluation of the plaintiff’s case must be made upon the basis of the case which has been commenced.
• The juridical advantages which the plaintiff has by suing in Victoria and which would not prevail in the United States are:
  • falsity is presumed in Victoria (and indeed in all Australian jurisdictions) but has to be established by the plaintiff under United States Law and New Jersey law of defamation, and all American States; and
  • if it were concluded that the plaintiff was a public figure in the United States then the plaintiff would be obliged to establish in addition that the article was written maliciously.

Conclusion

Justice Hedigan concluded that the appropriate jurisdiction was Victoria, and that there were no good reasons for him to use his discretion under the forum non conveniens principle:

‘Weighing up and balancing all of these factors, I reach a clear conclusion that the State of Victoria is both the appropriate forum and the convenient forum. Many of the defendant’s claimed difficulties are more imagined than real, but, at the end of the day, the most significant of the features favouring a Victorian jurisdiction is that the proceeding has been commenced by a Victorian resident conducting his business and social affairs in this State in respect of a defamatory publication published in this State, suing only upon publication in this State and disclaiming any form of damages in any other place... I have concluded that the law in defamation cases has been for centuries that publication takes place where and when the contents of the publication, oral or spoken, are seen and heard, (i.e. made manifest to) and comprehended by the reader or hearer.’

The implications of this case should not be underestimated. It is clear that the law of jurisdiction in defamation cases can be applied logically and sensibly to Internet publications in a way which presents significant challenges for online publishers. If publishers wish to obtain a different legal result, they must now turn their attention to the legislators.

Dow Jones may attempt to appeal to the High Court, after their application for leave to appeal in Victoria was turned down.

Chris Connolly
Galexia

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[1] Gutnick v Dow Jones & Co Inc [2001] VSC 305

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