Solicitors:
K & L Gates (Plaintiff)
Atanaskovic Hartnell (Defendant)
File Number(s): 2015/305715
[2]
Judgment
HIS HONOUR: The plaintiff, DHR International Inc ("DHR"), seeks an interlocutory injunction in the following terms:
"3. Upon the giving of the usual undertaking by the plaintiff and without any admission by the defendant:
(a) the defendant must immediately take such steps within his power as are necessary to prevent access by members of the public to the internet blog accessible from the Blog URLs (as defined in paragraph 1 of the Summons) until after the conclusion of the final hearing of the matter or further order of the Court; and
(b) must not until after the conclusion of the final hearing of the matter or further order of the Court publish or cause or authorise others to publish any false statements regarding DHR International, Inc., its related bodies corporate, directors, officers or employees that are intended to cause, or will or are likely to cause, damage to the business of DHR International, Inc."
DHR is a US corporation. I was told and infer from its evidence that it is in the business of providing services for the recruitment of executives. There was no direct evidence as to the nature of its business, nor as to how its business is carried on. Nor was there evidence as to the geographical reach of its business, as distinct from businesses that might be conducted by subsidiaries.
DHR complains about an internet blog. It says the defendant, Mr Challis, is responsible for the establishment and maintenance of the blog. He has made no admissions, but there is a strong prima facie case that it will be established at trial that Mr Challis is the user of an anonymous email address through which the blog was established and maintained. The blog targets DHR.
Mr Challis was the chief executive officer of an Australian subsidiary of DHR. He had a minority shareholding in the subsidiary. He was employed as CEO from April 2010 to September 2012. The chairman of the board of DHR, Mr David Hoffmann, deposed:
"26. I decided in or around September, 2012 that DHR International ask Mr. Challis to step down as Managing Director of its Australian operation as a direct consequence of the opinion I formed about the likelihood that the Australian business was not viable under Mr. Challis' leadership.
27. In October or November 2012 after attempting to continue the Australian operation under new leadership, I decided to close the Australia operation. The shutdown of the operation was the direct consequence of the disruptions caused by Mr. Challis during his period of 'gardening leave' after he had been relieved of his operating responsibilities."
Mr Challis claims to be owed $252,422 in unpaid commissions, superannuation, annual leave and in respect of other matters. A company of which he is said to have been a former director, HDRN Pty Limited, has submitted a proof of debt in the liquidation of the Australian subsidiary for more than $2 million.
A blog has been established through numerous websites around the world to which anonymous messages have been posted. Although there is no direct evidence that Mr Challis is the author of all or many of the messages posted to the blog, there is a strong prima facie case that he has published the messages, both those of which he may be the author, and those authored by others (Godfrey v Demon Internet Limited [2001] QB 201; Byrne v Deane [1937] 1 KB 818; Kaplan v Go Daddy Group [2005] NSWSC 636 at [33]).
The blog was first published on 12 December 2014. It is highly critical of DHR and its directors. Many of the messages posted contain little more than general abuse. DHR is accused of lying, of lacking ethics, of being dishonest, of being comprised of a bunch of individuals who are unscrupulous, of being a house of cards, and so on. But many of the messages posted condescend to greater particularity. DHR's principal complaints on this application concern allegations of "churning" of consultants and the posting of photographs in what has been called in one post a "wall of shame".
Mr Hoffmann says that he founded the company in 1989 and was CEO from 1989 to 2012. He addressed a message posted on 8 October 2015 under the heading "Massive consultant churn at DHR International". The post listed hundreds of names that were said to have been "Consultants who have left DHR International in recent years". In introducing the list the anonymous person who posted the information to the blog stated:
"We would encourage any potential recruits considering joining DHR International to use the list below to find people they might know, call them, and take references on DHR. This is what competent search consultants do in their day to day - why don't you do it when it comes to your own career?
An anonymous insider posting a comment to an item on the 'revolving door' at DHR International noted:
'I am currently an Executive Vice President at DHR International and we often note the fanfare of internal emails and external media releases when new consultants join. More often than not, these new consultants disappear in the middle of the night and there's not even an internal email to notify us.'
This got us to thinking: can we build a list of DHR International consultants who have been the subject of a DHR International press release, been listed on then removed from the DHR web site, have sued or been sued by DHR, or have DHR in their LinkedIn profile?
Well, we can. And guess what? We have been able to identify a staggering 506 consultants (and increasing) who have left DHR International over recent years, often within a year of joining. The list can be found below the fold.
This level of churn is extremely high and seemingly higher than any other executive search firm. Why is this? It is because of 'The DHR International Way'.
Some notes on the list:
We do not claim this is a complete list. Please lets [sic] us know if you know people we've missed or we have misspelled names.
We have tried to exclude people still at DHR International. Please let us know if you are still there and we will remove you from the list.
We have tried to include only client-facing consultants i.e. Vice Presidents, Principals, etc.
We have tried to exclude Associates (Researchers), Internal Recruiters, EAs, functional heads (mainly PR and accounting people at DHR; they don't believe in HR and training) and Interns (gee, DHR have had lots and lots of interns; do they pay them?).
An amazing number of people that were listed on DHR International's website or in press releases have expunged DHR from their LinkedIn profile. We guess they regard it as embarrassing to have worked for DHR International.
We will remove innocent people from this list if they request us to do so, and mark them as '(Name removed on request)' to ensure that the scale of departures is shown. Please see this post for more information."
Mr Hoffmann deposes that the list "… significantly overstates the total number of consultants that have left DHR, let alone the number that have left 'over recent years'". He deposes that "many" of the names listed were never "Consultants" at DHR and gave two examples. He said that one entry was for an entry-level research associate, not a Consultant, and the other was a researcher associate and principal and not a Consultant. He said that the misrepresentation of DHR's turnover rate had damaged its reputation in the industry because top candidates tend to prefer working for a business that has a lower, rather than a higher, turnover of consultants.
In the absence of express evidence as to what a "Consultant" is or does, I infer that he or she is engaged either as an employee whose remuneration includes commission, or as an independent contractor, either to provide clients looking for executives to employ, or providing potential recruits for executive positions, or both.
Whilst Mr Hoffmann and other witnesses gave evidence as to the damage done by the allegations of "churn", DHR did not otherwise adduce evidence to attempt to show that the rate of turnover of consultants depicted in the blog was materially false. The blog itself acknowledged that it was based on incomplete information and that the author had "tried to exclude" associates (researchers) and others who were not "client-facing consultants". Thus the post recognised that amongst hundreds of names listed there might be some which were not "Consultants". The identification of two such persons by the plaintiff does not demonstrate material falsity in the statements made.
A second complaint concerned postings about what is said to be DHR's acquisition of parts of a recruitment company called CTPartners. Mr Hoffmann deposed that in July 2015 DHR acquired a portion of the recruitment firm CTPartners. He said that:
"14. … Some of those former CTPartners employees have since left DHR. The Attack Blog states that this is 'particularly amusing'. The author of the Attack Blog attempts to mobilise further departures from DHR in a blog post that one anonymous internet commenter termed the 'Wall of Shame' ('Wall of Shame Post'). The Wall of Shame Post is exhibit [sic] to me and marked 'DH-2'.
15. Of particular concern to me, and of particular damage to DHR, is the fact that the Wall of Shame Post questions those employees' abilities. It states: 'we would expect any decent search consultant would have done their homework before transferring from CTPartners to DHR International. Did those who joined DHR International from CTPartners do their due diligence?'
16. The Wall of Shame Post states that it will remove from the Attack Blog the pictures of any former CTPartners employees that leave DHR. I have observed that the author of the Attack Blog has, indeed, removed the pictures of former CTPartners after they left DHR. The Wall of Shame Post states: 'True to our word, we have removed these departures from this post. If others leave soon, we will remove them too.'
17. The Wall of Shame Post's negative publicity regarding specific DHR employees has made it difficult to retain the employees listed on the Wall of Shame Post at DHR and it has made it difficult to recruit other former employees of CTPartners.
18. The Wall of Shame Post has also harmed DHR's reputation with the public. The top anonymous internet comment below the Wall of Shame Post states: 'What a great wall of shame. Which clients would be stupid enough to engage this firm or these individuals?'"
Mr Hoffmann cited a posting dated 9 October 2015 that stated:
"Yet more CTPartners consultants who joined DHR International have already left DHR
Update October 9, 2015: more consultants have left DHR London, and a reliable source has told us that only two of the CTPartners transfers are left: Alex Bennett and Laurence Vallaeys.
As a second source said, 'It is great timing. What makes this particularly amusing and well timed by the CT guys is Geoff Hoffmann was due to come over next week to give the ra-ra speech in the new combined offices around how successful the integration has been!! Will he still do so?'
The number of CTP people joining DHR has peaked and it did so way, way below the numbers publicly claimed by DHR. True to our word, we have removed these departures from this post. If others leave soon, we will remove them too.
So far, everyone we have said was leaving has indeed left. It must annoy DHR that we know more about what's going on in some of their offices than they do!
At the start of February, 2015, there were about 267 consultants listed on the CTPartners web site. Then DHR made its move on DHR and 21% of CTP consultants left the firm to avoid DHR. That still left 79% of consultants at CTP on June 30, 2015. All were reportedly offered jobs by DHR International but the vast majority of these decided to go elsewhere.
Three months later, how many of those 267 are now at DHR according to DHR's web site or LinkedIn? It peaked at 59 or 22%. It is now at 17% and falling fast.
The majority of those who joined have not even added DHR to their LinkedIn profiles! Only 18% of the 37 Partners joining DHR actually acknowledged their new employer publicly in their profiles. including some who have since left. Are they ashamed to have joined DHR? Or are they only there for a short while to finish off existing assignments before joining another firm or setting up their own. It is a clear signal that these people will not be at DHR International for long. Indeed readers continue to email us to say that quite a few have left and many other[s] are trying to secure interviews wherever they can.
Contrast this to David Hoffmann, sometime Chairman of DHR International, made the bold claim in a press release, on July 13, 2015:
'The integration of our recent additions of CTPartners' personnel from around the world has gone smoothly'.
And his son, CEO Geoff Hoffmann, claimed on August 10, 2015:
'The biggest attraction for us was the European footprint, which we were able to secure largely intact'.
The statistics don't lie: a rapidly declining 17% success rate is hardly a 'smooth' integration or a 'largely intact' acquisition when they originally claimed to have added 250 employees and (at various times) 17 offices.
And so many of those that joined refer in their LinkedIn profiles to DHR International acquiring CTPartners. This is not true. DHR bought some assets from CTP's lenders. This is not an acquisition and, again, the statistics tell the truth.
Our prediction is that DHR will be lucky if there are 20 of the claimed '250' CTPartners transfers there by the end of the year!
A note for new clients transferring from CTPartners to DHR International
We encourage any client of DHR International to ask a consultant on the list below:
1.What checks the consultant did before joining DHR. Perhaps they might ask the consultant whether they had seen this web site and the many relevant press articles on DHR
2.What guarantees they have as a client that the consultant will still be there at the end of the search, given DHR's market leading churn rate, particularly at the 6 month point when DHR typically fire consultants if they don't bring in enough revenue
3.Whether they, as a client, will have to sue DHR or whether they will be sued by DHR
4.Whether the team at DHR are being truthful or not on their resumes
5.Whether the claims DHR and their new recruits make are accurate or not
We will continue to update this post to show those who have joined from CTPartners. It is clear that DHR did not achieve the claimed 175 in Europe or 250 employees overall. In fact, they are moving backwards!"
The posting made detailed statements under the heading "CTPartners consultants who have joined DHR International since July 1, 2015" by regional location. DHR International did not attempt to address whether the details stated were accurate or not.
The reference to a "Wall of Shame" appears in an anonymous post on an earlier version of the article lodged on 25 June 2015 in which the author said:
"What a great wall of shame. Which clients would be stupid enough to engage this firm or these individuals?"
There is evidence that numerous potential candidates declined to joined DHR because of the negative statements about it in the blog. Thus a Ms Priya Patel gave evidence of a telephone "exit interview" with a Mr Quinton on 12 October 2015 in which he said that the blog was:
"definitely one of the reasons for a lot of the UK resignations. … It is a big issue. Everyone seemed to be speaking about it so this caused more negativity and negative discussions than positive ones. I'm on the wall of shame and it doesn't make me or others feel good about being on there. It's very unsettling to have my face posted on it both on a personal and professional level. You want to work at a firm that has good publicity and the Blog takes the good away."
The blog contains a lot of other material. Thus in a post of 10 July 2015 the author states that he or she had identified at least 24 lawsuits over the last few years where DHR had been involved. These were listed by what was said to be the names of the parties to the litigation. The purpose was to accuse DHR of being excessively litigious and unethical. Thus in the following post on 11 July 2015 the author said that according to publicly available information in the lawsuits some consultants were on an annual commission plan where commissions are paid in April of the following year. The author said that where disputes arise they tend to happen in the lead-up to the commission payment in April and DHR would get to keep over a year's worth of commissions. It was said that very often DHR and a consultant would end up in a dispute as shown by the number of court cases.
A solicitor for the plaintiff, Richard Gunningham, said he reviewed the blog and identified a "sample of assertions through the blog that I believe are relevant to these proceedings". He summarised those assertions as follows (page references are to a 446-page exhibit being the contents of the blog from time to time):
"Page 101 - 'it would appear DHR International fired a Principal who was working diligently and earned decent commissions. DHR had the benefit of the "float" and then fired her [so] that David Hoffmann could fund his private jet. Or perhaps, as alleged, it was because she was a woman.'
Page 104 - '… DHR has a long standing practice of acting to avoid paying earned commissions and bonuses. Specifically, principles [sic] are routinely terminated after they have generated earned commissions and before the commissions have been paid out'.
Page 116 'DHR International have been deliberately misleading their clients and potential recruits for many years. This is another example of "Hoffmannitis"[']
Pages 153-154 'Hoffmannitis (noun) A syndrome where one embellishes one's resume while simultaneously point out others doing the same …'
Pages 15-155 - various assertions of 'lies', 'some might argue each lie on its own does not mean much, but when taken as a whole it is clear there is a pattern of behaviour with an utter disregard for the truth'
Page 165 '… at DHR International, "Diversity", is not a value but a separate Practice Group, like "sports" or "financial services"'
Page 184 '… if there is a profit share arrangement, DHR International (as it is owned by one family) are not transparent as to the financial [sic] and ensure the books for the region or practice group show they are loss making'
Page 192 'Did Geoff Hoffman[n] rescind his father's Chairmanship? The fact that David Hoffman[n] stood down as Chairman of DHR within three days of our original post suggests this. Is this quote from Marissa Martin also a clue that David Hoffman[n] has lied about his education?'
Page 212 '… the Caldwell Partners' fee earners, who are the core asset of the business, are unambiguous in saying they do not want to work for DHR International, the "ISIL of the executive search world". This means that if there were to be an acquisition by DHR, these individuals would leave Caldwell/DHR thus deflating the purchase price and destroying value for Caldwell's shareholders'
Page 219 'Of course, in typical DHR fashion lied about it on their website… DHR did not aquire [sic] CTPartners but bought "certain" of CRPartners' [sic] assets and not from the company but its lenders…. like buzzards, DHR picked through the rotting flesh of CTPartners'
Page 221 'We also note that Geoff Hoffman[n] believed "The value system and culture of DHR aligns well with those of CRPartners [sic] employees". In other words: any CTPartners consultants who join DHR lack any values other than unadultered greed even if it means cheating clients and employees.'
Page 264 '…David Hoffman[n] himself is the master of embellishing resumes!'
Page 270 'There is a coordinated effort between DHR International, its leadership (including Steve Stine) and its Australian employees to deceive'
P. 279-280 'What we don't (yet) know is why DHR are not allowed to operate in Australia. Did they lose the lawsuit in Australia? Is there a regulatory reason where DHR International are [sic] not allowed to operate unless they have a license [sic] and, instead of getting one, they are hiding the fact they are operating from the Australian regulator?'
P. 291 'DHR International lie to clients'
P. 294 'DHR and its eat what you kill model are not know [sic] for "collaboration". There has been no integration plan, although apparently Christine Greybe is in charge. Will she be as hated by the DHR employees in Europe as she is here in the US?'
P. 317 'We try to avoid rumours unless we have some degree of proof. In fact we have received many emails from with [sic] non-public information on DHR - these detailed stories of married MDs at DHR sleeping with their employees. However we haven't published these'.
P. 353 'Part of DHR International's modus operandi is creating and disbanding corporate entities. So, if a former client or employee sues the company DHR International will quickly move their business in a particular market to another entity. This approach has worked for DHR in lots of countries outside the US, particularly in Europe'.
P. 364 'Geoff Hoffman[n] hides from staff and gets others to do his dirty work' … 'DHR don't care much for diversity'"
It may be noted that a number of these statements are defamatory of at least Mr David Hoffmann. He is not a party. The passages extracted contain a number of allegations of fact which should be capable of being proved or disproved. Apart from responding to the general charge that employees or officers of DHR lied or were unethical DHR has not attempted to refute allegations made insofar as they were made with sufficient particularity that they could be refuted if untrue. This is surprising because in a number of cases the author sought to support his or her accusations with some detailed facts. Thus the first quoted accusation (page 101) is part of a post made on 26 March 2015 headed "Discrimination at DHR International: a Principal sues DHR in Silicon Valley". The post stated that a former (unnamed) principal had sued DHR. It said that the principal was set to receive her yearly bonus and her pay cheque from DHR on 11 April 2014 (sic) but on the afternoon of 5 April 2015 she noticed that her company iPhone was wiped and removed for content and her corporate email also did not work on her laptop. The author of the post said that DHR fired the principal without showing her the decency of telling her face to face but locked her out of their systems owing her at least $43,000. It said that Priya Patel told the principal that "DHR would not pay her the remaining salary, bonus, commissions and expense that she was owed" and that they had not done so. Neither Priya Patel nor Mr Hoffmann addressed the circumstances of the case or sought to establish the falsity of the report. The quote from page 104 extracted above was a comment on this article.
The passages quoted from pages 116 and 153-154 of the exhibit as extracted above refer to "Hoffmannitis". The author of the blog uses this word frequently to describe alleged cases of misrepresentation. Thus in a post of 16 April 2015 the author accused DHR of misrepresenting the scale of its international operations. He or she said:
"We've written before about DHR International's bogus offices: offices with zero consultants that exist just so DHR can claim they have more than 50 offices.
They don't let up and like to 'bulk up' offices, particularly if they are important commercial cities.
An example is Singapore. If you look at the DHR International website, there are eight consultants there, which seems like a healthy number.
Guess what? There are only two people actually based in the office. The other listed consultants are based as far away as India or Australia. …
[Eight names are then listed and the claimed whereabouts of six of them are stated].
This [is] another example of what is called Hoffmannitis. There are similar bulking up going on in London, Frankfurt, New York, San Francisco, etc. etc."
In a post on 28 April 2015 the author claimed that DHR had published on its website a claim that the firm was "now the fifth largest executive search firm in the United States … as ranked by Executive Search Review". The blog continues at some length to seek to establish that this claim was wrong, that it was ranked sixth, not fifth, and that the ranking was in any event based upon inaccurate figures, at least as to the number of consultants. In the post of 14 June 2015 (at pages 153-154) the author lists 10 specific cases in which it is claimed that DHR or Mr Hoffmann have lied. DHR has not addressed the particular alleged lies.
In relation to the acquisition of assets of CTPartners, according to a blog post of 22 July 2015 CTPartners ceased doing business as at 30 June 2015 and its bank sold certain of its assets to DHR pursuant to its security. The blog asserted that on its website DHR had stated that "DHR International agrees to terms of acquisition of CTPartners". This was said to be a lie because DHR did not acquire the company, but bought only certain of its assets not from the company but its lenders. The author of the blog stated that DHR only hired some of CTPartners' staff and "Like buzzards, DHR picked through the rotting flesh of CTPartners". DHR was accused of unethical behaviour in, so it was asserted, announcing an intention to buy the company as a whole, obtaining inspection of its books, and then doing a deal with the lenders to CTPartners to acquire only certain assets. Again, DHR did not address the specific accusations made in the blog.
One of the more serious accusations made in the blog was at page 353. The message was posted on 29 September 2015 as the extracts quoted by Mr Gunningham stated (see para [17] above). The author of the blog stated that:
"Part of DHR International's modus operandi is creating and disbanding corporate entities. So, if a former client or employee sues the company DHR International will quickly move their business in a particular market to another entity. This makes it hard for the former client or employee to enforce a judgment. This approach has worked for DHR in lots of countries outside the US, particularly in Europe."
The author of the blog went on to assert examples of the alleged behaviour. He or she said:
"1. DHR International UK Limited; incorporated in 2006; secretary Geoff Hoffmann; dissolved in 2010 due to compulsory strike-off; subject to compulsory strike-off action in 2009
2. Hoffmann Acquisition Limited; incorporated in 2011; director David Hoffmann; dissolved in 2015 due to compulsory strike-off; subject to compulsory strike-off action in 2013
3. DHR Global Limited; incorporated in 2010; director David Hoffmann; subject to compulsory strike-off actions in 2013, 2014 and 2015
4. Jobplex UK Limited; incorporated in 2007; directors David Hoffmann, Geoff Hoffmann; dissolved in 2009 due to compulsory strike-off
5. Barrett Webb Limited (acquired by DHR); incorporated in 1989; directors David Hoffmann, Sue Rossiter, Nicholas Rossiter; dissolved in 2014 due to compulsory strike-off; subject to compulsory strike-off action in 2013"
Similar accusations had been made in respect of the Australian subsidiary in a post published on 1 June 2015 in which the author summarised what was said to have been contained in an article in the Sydney Morning Herald. The author of the blog stated:
"The article gives us some answers to what's been going on down under and explains that DHR:
withdrew $293,264 from DHR Australia's bank account in November 2012 and sent it offshore, presumably Chicago
Signed off on the financial statements that DHR Australia was solvent in March 2013
despite being solvent, claimed to go 'belly-up' in Australia in 2013 so that it could fire the DHR Australian team less than a month later in April 2013 and then did not pay them their entitlements
removed equipment from the DHR Australian offices, including all the computers and legal records, and sent these to (presumably South) Korea - they 'shut up shop so quickly and completely even staff peanut butter was taken'
transferred Australian clients to another DHR entity in Hong Kong, including a contract with a paint company called Wattyl
had a 'racy departure' from Australia, and their creditors and liquidator are still chasing them
stripped the assets of the business and did a 'phoenix job'
continue to operate in Australia, have Australian phone numbers but have 'no living Australian corporate incarnation'
are completing assignments for Australian clients searching for Australian candidates for Australian-based roles, but operate out of the 'tax haven of Singapore'
are relying on the Australian taxpayer to pay for employee entitlements: Kevin Kummer of DHR sent an email to Australian employees on April 20, 2013, saying: "As of April 2nd DH International ceased operations and terminated all employees. As such we want to make sure we take the correct legal steps to shut down the business to ensure all former employees are properly paid either by DH or by the Australian Government scheme Fair Entitlements Guarantee'. According to LinkedIn, Kevin Kummer worked for DHR between January 2012 and March 2014, leaving as 'Vice President of Accounting & Finance'"
The Australian subsidiary is called DH International Pty Limited (in liq). Administrators were appointed to it by Mr Hoffmann on 25 June 2013. In their report to creditors the administrators stated that at the time of their appointment the company was insolvent. On 30 July 2013 the creditors resolved that the company be placed in liquidation. The administrators have been appointed as liquidators. In their report to creditors dated 22 July 2013 the administrators reported that the only assets of the company available to them was cash at bank of $53,433. There were outstanding employee entitlements of $157,420 and other claims of unsecured creditors. In their report dated 4 December 2014 the now liquidators stated that the Australian Government Department of Employment had paid $89,369 for outstanding entitlement claims of employees under the Fair Entitlements Guarantee. In their first report the administrators stated that according to the company's MYOB accounts as at 31 December 2012 the company had a surplus of current assets over current liabilities of $348,005. This was after payment of a fully franked cash dividend in the financial year ended 31 December 2012 of $550,000. A balance sheet as at 30 April 2013 in the company's own MYOB accounts referred to the existence of certain debtors and other receivables and of fixed assets. According to the administrators neither receivables nor fixed assets was included in Mr Hoffmann's Report as to Affairs. According to them, his Report as to Affairs stated that $41,051 was owing to unsecured creditors. The administrators reported that as at 22 July 2013 they were aware of unsecured claims totalling $738,618.
The moneys left in the company's bank account were insufficient to fund the liquidators' pursuing inquiries, or making claims against third parties. However, they reported that on 4 December 2014 HDRN Pty Limited and Mr Challis had proposed a funding arrangement to conduct public examinations with a view to ascertaining whether any recovery action should be initiated. The liquidators recommended that the proposed funding agreement be approved by creditors. There was no evidence as to whether or not that approval was given.
The administrators/liquidators' reports might provide a reasonable basis for the comments in the blog of 1 June 2015. DHR did not address the accusations made in the message posted to that blog, nor in the message posted on 29 September 2015.
DHR did not submit that it would be entitled to sue Mr Challis for defamation. Section 9 of the Defamation Act 2005 (NSW) relevantly provides:
"9 Certain corporations do not have cause of action for defamation
(1) A corporation has no cause of action for defamation in relation to the publication of defamatory matter about the corporation unless it was an excluded corporation at the time of the publication.
(2) A corporation is an excluded corporation if:
(a) the objects for which it is formed do not include obtaining financial gain for its members or corporators, or
(b) it employs fewer than 10 persons and is not related to another corporation,
and the corporation is not a public body."
DHR did not submit that it was an "excluded corporation" within the meaning of s 9(2). Rather, it submitted that it was entitled to sue Mr Challis for the tort of injurious falsehood and for misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law.
The elements of the tort of injurious falsehood were considered by the High Court in Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388. All members of the Court were agreed that a necessary element of the tort is that the defendant publish a statement which is false. There was no unanimity on the second element. The false statement must concern "the plaintiff's goods or business" (per Gummow J at [52]) or "the plaintiff or its property" (per Kirby J at [114]) or be made in reference to "the [plaintiff], its property or business" (per Hayne J at [154]) or concern "the plaintiff or his or her property" (per Callinan J at [192]).
The third element of the tort is that the statements be published maliciously. Brereton J summarised this element in AMI Australia Holdings Pty Ltd & Anor v Fairfax Media Publications Pty Ltd [2010] NSWSC 1395; [2011] Aust Torts Rep 82-077 at [31]-[32]):
"[31] Again unlike in defamation, in injurious falsehood malice is also an essential element of the cause of action, to be proved by the plaintiff. While the notion of 'malice' in the context of this tort is not easy to define [Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 291 (Pincus J)], it is a question of motive, intention or state of mind and it involves the use of an occasion for some indirect purpose or indirect motive such as to cause injury to another person [British Railway Traffic & Electric Co Ltd v CRC Co Ltd & London County Council [1922] 2 KB 260 at 269; Browne v Dunn (1893) 6 R 67 at 72; Dickson v Earl of Wilton (1859) 1 F&F 419 at 427; (1859) 175 ER 790; Stuart v Bell [1891] 2 QB 341 at 351; Shapiro v La Morta [1923] All ER Rep 378; Schindler Lifts Australia Pty Ltd v Debelak, 291]. The English Court of Appeal has said that the criteria for malice in injurious falsehood are the same as at common law for libel and slander [Spring v Guardian Assurance PLC [1993] 2 All ER 273 at 288; reversed on other grounds Spring v Guardian Assurance PLC [1995] 2 AC 296]]. Its content has been variously described as 'an intent to injure another without just cause or excuse' or 'some indirect, dishonest or improper motive' [J Fleming, The Law of Torts, 9th ed (1998) LBC Information Services at 780; Palmer Bruyn, 423 [108] (Kirby J)], or 'a purpose or motive that is foreign to the occasion and actuates the making of the statement' [cf Roberts v Bass (2002) 212 CLR 1 at 30; [2002] HCA 57, [75] (Gaudron, McHugh & Gummow JJ)]. It involves that the statement was made mala fide or with a lack of good faith. In this context, while a person who acts in good faith is not liable [Joyce v Sengupta [1993] 1 All ER 897], malice may exist without an actual intention to injure [Wilts United Dairies Ltd v Thomas Robinson Sons & Co Ltd [1957] RPC 220; Wilts United Dairies v Thomas Robinson [1958] RPC 94].
[32] As motive must often be inferred from what the defendant did or said or knew, malice is commonly proved by inference [Horrocks v Lowe [1974] 1 All ER 662 at 669 (Lord Diplock)]. Malice may be inferred from the 'grossness and falsity of the assertions and the cavalier way in which they were expressed': Joyce v Sengupta, 905-6. Proof that the defendant knew that a statement was untrue is ordinarily conclusive evidence that its publication was actuated by an improper motive [Roberts v Bass, 31 [76]]. On the other hand, mere lack of affirmative belief in truth is insufficient of itself to establish malice [Roberts v Bass, 31 [78]]. But malice can be inferred not only where the false publication was made with knowledge of its falsity, but also where it was made with reckless indifference as to whether it was true or false [Schindler Lifts Australia Pty Ltd v Debelak Browne v Dunn Greers Ltd v Pearman & Corder Ltd (1922) 39 RPC 406 at 417; Shapiro v La Morta; Kaye v Robertson (1990) 19 IPR 147 at 152; Joyce v Sengupta, 905]."
The fourth element is that the maliciously false statements be calculated in the ordinary course of things to produce and do produce actual damage, such damage being wilfully and intentionally caused by the defendant's publication (Ratcliffe v Evans [1892] 2 QB 524 at 527 to 528; Ballina Shire Council v Ringland (1994) 33 NSWLR 680 at 692 to 694; Palmer Bruyn & Parker Pty Ltd v Parsons at [1], [52], [57], [114], [154] and [192]). An injunction can lie to restrain the commission of a tort to prevent such damage (Swimsure (Laboratories) Pty Ltd v McDonald [1979] 2 NSWLR 796 at 802).
In the present case there is prima facie evidence that allegedly false statements in the blog were published by the defendant, that they concern the plaintiff or its business, that they are calculated in the ordinary course of things to produce actual damage, and that such damage would be wilfully and intentionally caused by the defendant's publication. If there were a serious question to be tried from the evidence adduced by the plaintiff that the statements in the blog were materially false, then I would accept that there would also be a serious question to be tried that the blog was published by the defendant maliciously and not just to provide assistance to potential recruits. What is lacking is evidence that the statements published in the blog are materially false. The only evidence adduced by DHR directed towards the falsity of specific allegations in the blog related to the allegations of "churn". But its evidence did not show any material falsity in what was stated in the blog.
This is not to say that the statements in the blog should be accepted as true. Rather, the evidence adduced by the plaintiff on the application for an interlocutory injunction has not shown that there is a serious question to be tried that the statements in the blog are materially false. The plaintiff has not sought a limited injunction to restrain the defendant from publishing statements concerning the rate of "churn" of its consultants. Instead it has sought a mandatory injunction to require the defendant to remove the blogs. The blogs contain many allegations about the defendant's conduct which, on this application, DHR has not attempted to show are false.
In defamation cases an interlocutory injunction is only granted in very clear cases and with caution lest the grant of an interlocutory injunction interfere with the right of the community in general to discuss in public matters of public interest and concern (Chappell v TCN Channel Nine Pty Ltd (1988) 14 NSWLR 153 at 163-164). In Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 (a defamation case) Gleeson CJ and Crennan J said (at [32]):
"It is one thing for the law to impose consequences, civil or criminal, in the case of an abuse of the right of free speech. It is another matter for a court to interfere with the right of free speech by prior restraint. In working out the consequences of abuse of such freedom, the law strikes a balance between competing interests, which include an individual's interest in his or her reputation. When, however, a court is asked to intervene in advance of publication wider considerations are involved. This is the main reason for the 'exceptional caution' [Bonnard v Perryman [1891] 2 Ch 269 at 284 per Lord Coleridge CJ] with which the power to grant an interlocutory injunction in a case of defamation is approached."
The same caution is not necessarily shown in cases of an application for an interlocutory injunction to restrain an injurious falsehood, at least where questions of public interest, free speech and liberty to press are not involved (AMI Australia Holdings Pty Ltd v Fairfax Media Publications Pty Ltd at [39]-[41] and cases there cited and discussed). Nonetheless, the "exceptional caution" applied to an application for an interlocutory injunction to restrain the publication of defamatory matter (Australian Broadcasting Corporation v O'Neill at [31]-[32]) is relevant in this case where in substance the Court is asked "to exercise the powers of a censor" (Fleming v Newton (1848) 1 HL Cas 363 at 371; 9 ER 797 at 801, cited in Australian Broadcasting Corporation v O'Neill at [31]).
It is unnecessary to pursue this issue because DHR has only attempted to demonstrate that a small number of the statements published in the blog critical of it are false. An injunction requiring the defendant to remove the blog could not be sustained on the ground that it sought an injunction to restrain the repetition of injurious falsehoods.
For the same reason, the injunction in the terms sought could not be granted to restrain misleading or deceptive conduct.
I should add that in any event it is doubtful that the evidence shows a triable issue that the publications were made "in trade or commerce" within the meaning of s 18 of the Australian Consumer Law. Counsel for DHR asserted that the publication was made in the course of a competing executive recruitment business carried on by Mr Challis. The administrators' report to creditors of 22 July 2013 stated that Mr Hoffmann had provided a summary to the administrators in relation to the history of the Australian subsidiary, which summary included a statement that in December 2012 Mr Challis and another man started a competing firm. There was no other evidence that Mr Challis carried on or was involved in a competing business. Mr Hoffmann gave no evidence about it. It is unnecessary to pursue this question.
DHR submitted that faced with the need to move urgently to obtain interlocutory relief after it had obtained satisfactory evidence that Mr Challis was the publisher of the blog, it could not be expected to adduce evidence to establish that there was at least a serious question to be tried that allegations of particular facts in the blog were false. It submitted that the matter would be appropriately dealt with by the making of the second order set out at para [1] above, that is, that the defendant be restrained from publishing or causing or authorising others to publish false statements regarding DHR International, its related bodies corporate, directors officers or employees that were intended to cause or would or would be likely to cause damage to the business of DHR International.
I do not accept that it would be appropriate to make an order in those terms. In Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 the Full Court of the Federal Court said (at 575) that:
"…where the injunction is in the form of an interlocutory order, it is undesirable to frame the injunction in such a way as to leave the issues in the case open for determination on a contempt proceeding, rather than at the final hearing: see generally Epitoma Pty Ltd v Australasian Meat Industry Employees Union (1984) 3 FCR 55 at 65-6 ; 54 ALR 730 (Full Court); Trade Practices Commission v Glo Juice Co Pty Ltd (1987) 73 ALR 407 at 412-16 (Burchett J) and Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 75 ALR 331 at 347 (Pincus J)."
Although it has been said to be a counsel of perfection rather than a mandatory standard that an injunction be granted in clear and unambiguous terms so that the person subject to it is in no doubt as to what he or she is required to do or not to do (Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 348-349), that does not mean that the defendant should be forced to defend claims that he has committed and is committing the tort of injurious falsehood by publishing false statements concerning the plaintiff's business which are calculated to cause injury to the plaintiff, and to defend claims that he has engaged in misleading or deceptive conduct in trade or commerce, under threat of fine or imprisonment if his defence fails.
The plaintiff's evidence does not show a serious question to be tried that the claims in the blog which descend to some particularity are false, or at least materially false. That being so it would not be appropriate to require the defendant to remove the blog. Nor would it be appropriate to grant the second form of injunction sought.
The parties had agreed to a timetable for pleadings and service of evidence. DHR sought an order requiring the defendant to preserve documents relating to the establishment and maintenance of the blog. Counsel for Mr Challis said that such an order was unnecessary having regard to Mr Challis' obligations not to destroy potential evidence. However, I think it better to make the order sought so that he is not left in doubt as to his position. In taking that course I bear in mind that Mr Challis has sought to protect himself by the veil of anonymity. That could reasonably raise in the plaintiff's mind a concern that relevant documents might not be preserved. I think it better to deal with the matter expressly.
In submissions the plaintiff's counsel suggested that if injunctive relief were refused on the ground that the plaintiff had not adduced sufficient evidence to establish a real issue as to the falsity of much of the material published on the blog, it could be necessary for the plaintiff to make a further application once necessary evidence had been marshalled. I express no view on whether it would be open to the plaintiff to make a further application for interlocutory injunctive relief.
For these reasons I refuse the plaintiff's application for the interlocutory injunctive relief sought as set out at para [1]. I will hear the parties on costs.
[3]
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Decision last updated: 23 October 2015
Parties
Applicant/Plaintiff:
DHR International, Inc a company incorporated in Delaware in the United States of America