Gutnick v. Dow Jones

On 10 December 2002, the High Court of Australia handed down its judgment in the Internet defamation dispute in the case of Gutnick v. Dow Jones.

United States publisher Dow Jones & Company published an article titled "Unholy Gains" in its business journal Barrons Magazine in October 2000. The article implied amongst other things that Victoriann businessman Joseph Gutnick had laundered money through the jailed Victorian money launderer Nachum Goldberg. The relevant copy of Barron's Magazine sold approximatly 300,000 copies. Of these only a very small number came to Australia, but some of them were in fact sold in Victoria. The article was also available on Dow Jones' website, www.wsj.com.

Mr Gutnick sued Dow Jones in a Victorian court. In order to obtain leave to proceed against an overseas defendant, a plaintiff must subsequently demonstrate that the process makes claims of a kind that are supported by the applicable court rules, unless the defendant does not submit to the jurisdiction by filing an unconditional appearance. The defendant may ask the court to decline to exercise its jurisdiction or set aside service. This is done by entering a conditional appearance. So in other words, Dow Jones had the right to appear in court to dispute Victorian jurisdiction, and by doing so did not necessarily submit to the jurisdiction of the Victorian court in relation to an actual defamation proceeding.

At first instance, the Supreme Court of Victoria had to decide whether or not it could exercise jurisdiction over the dispute. On the 28 August 2001 the Supreme Court of Victoria allowed Mr Gutnick to sue the US publishing company in his home forum, Victoria. Dow Jones sought leave to appeal the matter to the Court of Appeal of the Supreme Court of Victoria. The Court of Appeal concluded that the decision was plainly correct and refused leave to appeal, and thereby confirmed the judgment of the primary judge.

Dow Jones was granted limited special leave to appeal to the High Court and the case was argued before the full bench of the High Court of Australia on the 28 May 2002. At the High Court proceeding, a group of 18 businesses and organisations were granted leave to intervene. The interveners included, amongst others, Yahoo, News Limited and Amazon.com. Not surprisingly the interveners' submission was supportive of the appellant, Dow Jones.

All of the seven High Court judges dismissed the appeal. The majority judgment was supported by four of the judges. Justice Michael Kirby stated:

"Whatever else is in doubt, it is uncontested that the respondent's proceedings alleged that the respondent had suffered damage in Victoria. Once this is shown, the only question to be answered, to attract par (j), is whether such damage was "caused by a tortious act or omission wherever occurring"."

Consequently, there is no problem in finding at least one ground for jurisdiction – that of damages suffered within the forum.

The majority's judgment of the High Court concluded that since Mr Gutnick limited his claim to publications within Victoria, the case relate to a tort committed within Victoria.

The issue of choice of law was the focus of the judgment. Dow Jones wanted US law to apply, as they could enjoy the protection of free speech provided for under the First Amendment of the US Constitution.

The current choice of law rule in Australia, for torts, is the so-called lex loci delicti rule – the law to be applied is the law of the place of wrong. That is a fairly new rule in Australia, and was not established for international cases until about a year ago. Hence, this rule is still rather untested in Australia. Moreover, it does not say much about which law should be applied in a matter like the Gutnick case. It is, consequently, necessary to identify what is the place of wrong in defamation cases.

Under defamation law, the "wrong" is the publication. No wrong is committed unless the defamatory material enters the mind of a third party. So, the choice of law rule points to the place of wrong, defamation law defines the wrong as the publication, and case law shows that publication takes place where and when the defamatory material enters the mind of a third person.

Thus, following existing law, the applicable law is the law of Victoria and a Victorian Court can rightfully claim jurisdiction – all as a consequence of the place of publication. Of course it is possible, as the counsel for the Dow Jones did, to come to the opposite conclusion; that is, that publication took place in New Jersey or New York. But in order to do so one would inevitably have to depart from the well-established traditional approach that publication takes place where the defamatory material is made manifest to the receiving third party, in a form that the receiver can comprehend.

It could be said that Dow Jones was fighting an "uphill battle" all along – if the Court applied existing law, Dow Jones would lose. Dow Jones had to try to convince the Court that Internet defamation cases needed to be treated differently. In the words of Justice Callinan:

"The question which this case raises is whether the development of the Internet calls for a radical shift in the law of defamation."

Dow Jones placed great significance on the fact that the role played by a web publisher is relatively passive compared to other publishers, for example newspaper publishers. It was further suggested that publishers would avoid publishing in Australia if Dow Jones were to lose this case. Dow Jones also argued that it was unreasonable for publishers to take into account the laws of all forums from which the Internet can be accessed. In this context, Dow Jones argued for a single point of publication, similar to the single publication rule applied in US law. A problem for Dow Jones here was that the article was uploaded in New Jersey, while the editorial control was exercised in New York, and Dow Jones did not really seem willing to decide which of these forums and consequently laws they argued to have the closest connection to the case.

The interveners argued that, for the choice of law at least, in relation to the publication of defamatory material on the World Wide Web publication occurs at the point at which there is a last opportunity for the publisher to take steps to exercise control over publication, that is, they said, the point at which final editorial decisions are made and final technical work is done to upload material.

In most common law countries, a court will decline jurisdiction if there is another more appropriate forum, while in Australian a court will decline jurisdiction only if the court is a clearly inappropriate forum. This restrictive approach, in Australia, has been criticised and in a case last year two of the judges of the High Court clearly took the view that Australia should apply the more appropriate forum-test as is done in the majority of the common law world. Nevertheless, in the Gutnick case, the clearly inappropriate forum-test was reaffirmed and, consequently, it will probably not be departed from in the near future.

The court did not find reason to decline jurisdiction in the Gutnick case. In the words of Justice Mary Gaudron:

"If a plaintiff complains of multiple and simultaneous publications by a defendant of the same defamatory matter there is, in essence, a single controversy between them, notwithstanding that the plaintiff may have several causes of action governed by the laws of different jurisdictions. Accordingly, if, in such a case, an issue arises as to whether an Australian court is a clearly inappropriate forum, a very significant consideration will be whether that court can determine the whole controversy and, if it cannot, whether the whole controversy can be determined by a court of another jurisdiction. As the respondent has limited his controversy with the appellant to the publication of defamatory matter in Victoria, the controversy is one that can be determined in its entirety by the Supreme Court of that State and there can be no question of multiple suits in different jurisdictions."

In effect, when Mr Gutnick sued only in relation to publications and damages in Victoria and undertook not to sue anywhere else, he effectively "disconnected" all other forums. Of course in doing so, a plaintiff also potentially limits the damages he/she may be awarded.

The judgment has gained worldwide attention, much of which has been negative. Many publishers are anxious about the increased legal liability that they may face as a result of this decision, especially if it becomes a trend among nations. Where previously major Internet defamation cases turned on a company maintaining a business presence within a given jurisdiction, Gutnick discards this requirement-- in effect, exposing the entire world to Australian defamation claims. Some have pointed out, however, that there was no dramatic increase of jurisdictional claims after the Yahoo! decision in France, so it might be reasonable to assume that there will most likely not be any such increase after the Gutnick case either.

There have been some more dramatic claims, for instance that the Gutnick decision can be seen as a validation of various dictators' arrest of foreign journalists. Such concerns are dubious, however. Gutnick dealt with civil rather than criminal penalties, and more to the point cannot be seen as a valid indication of how the courts in 190 other nations will decide similar disputes.

Others have pointed out that if this judgment appears frightening for those who "value freedom of expression", a judgment in favour of Dow Jones could presumably appear equally frightening to those who values the right of reputation – another basic human right widely considered just as important as freedom of expression.