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EUGENE CLARK[*]
AND GONZALO VILLALTA PUIG[**]
The appellant, Dow Jones & Company Inc, prints and publishes for profit the Wall Street Journal, a daily financial newspaper, and I, a weekly magazine, which is also concerned with financial matters. Since 1996, Dow Jones has operated WSJ.com, a subscription news web site on the World Wide Web. The information at WSJ.com includes Barron's Online in which the text and pictures published in the current printed edition of Barron's magazine are reproduced.
Subscribers who pay an annual fee are able to obtain access to that web site at its address 'www.wsj.com'. At the time the action was brought, the web site had about 550,000 subscribers. The appellant has an office in New Jersey, in the United States of America, where it has a web server on which its web site is stored. It was conceded by Dow Jones that it could not identify the addresses of all of its subscribers but that 1,700 or so of them paid subscription fees by credit cards whose holders had Australian addresses.
The edition of Barron's Online for 28 October 2000 contained an article by a journalist working for Dow Jones headed 'Unholy Gains' and sub-headed 'When Stock Promoters Cross Paths with Religious Charities, Investors Had Best Be on Guard' in which several references were made to the respondent, Mr Joseph Gutnick. A large photograph of Mr Gutnick appeared on the first page of the magazine.
Mr Gutnick is a businessman. He is involved in philanthropic, political, sporting, and religious affairs. His business activities have extended beyond Australia. He lives in Victoria and has many friends and associates there. He is the chairman of a corporation, shares in which are traded in the United States. He has sought investment in that corporation from investors in the United States.
The article reports that some of his business dealings with religious charities raise 'uncomfortable questions'.[1] It states that a Barron's investigation found that several charities traded heavily in stocks promoted by Gutnick.[2] The article associates Mr Gutnick with Mr Nachum Goldberg who is, apparently, a convicted tax evader, and another person awaiting trial for stock manipulation in New York. Further, the article claims that an intercepted communication from the convicted tax evader was taken by Australian prosecutors to mean that Mr Gutnick was the former's 'biggest money-laundering customer'.[3]
Mr Gutnick contended that part of the article defamed him.
Mr Gutnick brought an action in the Supreme Court of Victoria against Dow Jones claiming damages for defamation.
On service of the writ and statement of claim in the United States, Dow Jones entered a conditional appearance and applied to have service of the writ and statement of claim set aside or, alternatively, to have Mr Gutnick's action permanently stayed.
The primary judge, Hedigan J, concluded that the statements of which Mr Gutnick sought to complain were 'published in the State of Victoria when downloaded by Dow Jones subscribers who had met Dow Jones' payment and performance conditions and by the use of their passwords'.[4] He rejected Dow Jones' contention that the publication of the article in Barron's Online occurred at the web servers maintained by Dow Jones in New Jersey in the United States. Being, therefore, of the opinion that the defamation of which Mr Gutnick complained had occurred in Victoria, Hedigan J concluded that Victoria was not a clearly inappropriate forum for trial of the proceeding and dismissed Dow Jones' application.
Dow Jones applied for leave to appeal to the Court of Appeal of Victoria. Buchanan JA and O'Bryan AJA, who constituted that Court, also rejected Dow Jones' arguments. Their Honours said:
The authorities establish that defamatory material is published at the time and in the place where it is made manifest in a form capable of being comprehended by a third party. That is sufficient to dispose of this case….[5]
Leave was, therefore, refused on the basis that the trial judge's decision was plainly correct.
By special leave, Dow Jones appealed to the High Court of Australia.
The High Court, constituted by Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne, and Callinan JJ, unanimously ordered that the appeal be dismissed with costs.
The question which Gutnick raised before the High Court is whether the development of the Internet calls for a radical shift in the law of defamation. Choice of law or 'forum shopping' was not the issue before the High Court. The issue did not arise as, in the course of the proceedings before the primary judge, Mr Gutnick offered an undertaking to sue in no place other than Victoria in respect of the matters which founded his proceeding. In this respect, Hedigan J recorded in his reasons that Mr Gutnick "seeks to have his Victorian reputation vindicated by the courts of the State in which he lives [and that he] 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".[6]
The authorities establish that defamatory material is published at the time and in the place where it is made manifest in a form capable of being comprehended by a third party. For the most part those authorities pre-date the Internet,[7] but the High Court considered that the established principles are appropriate to this new form of communication.
Gleeson CJ, McHugh, Gummow, and Hayne JJ
In a joint judgement, Gleeson CJ, McHugh, Gummow, and Hayne JJ reviewed the essential elements of the tort of defamation which, at least as understood in Australia, are: firstly, that damage to reputation is essential for the existence of the tort of defamation; secondly, that mere composition and writing of words is not enough to constitute the tort; that is, those words must be communicated to a third party who comprehends them; thirdly, that each time there is such a communication, the plaintiff has a new cause of action; and fourthly, that a publisher is liable for publication in a particular jurisdiction where that is the intended or natural and probable consequence of its acts.
If the place in which the publisher acts and the place in which the publication is presented in comprehensible form are in two different jurisdictions, where is the tort of defamation committed? Asked this question, their Honours answered:
... ordinarily, defamation is to be located at the place where the damage to reputation occurs. Ordinarily that will be where the material which is alleged to be defamatory is available in comprehensible form assuming, of course, that the person defamed has in that place a reputation which is, thereby, damaged. It is only when the material is in comprehensible form that the damage to reputation is done and it is damage to reputation which is the principal focus of defamation, not any quality of the defendant's conduct. In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed.[8]
However, their Honours appreciated that some development of the common law defences in defamation may be necessary or appropriate 'to recognise that the publisher may have acted reasonably before publishing the material of which complaint is made' according to the laws of the jurisdiction in which the uploading occurred.[9]
Gaudron J
The High Court rejected the single publication rule in terms of the place of uploading as the place of publication of allegedly defamatory material on the Internet, which would also govern the choice of applicable law.
Gaudron J further discussed the single publication rule in the context of justiciability in Australia:
It may be accurate to apply the description 'legal fiction' to a rule that deems multiple publications to be a single publication.[10]
…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.[11]
Kirby J
Kirby J expressed some unease about the decision reached:
The notion that those who publish defamatory material on the Internet are answerable before the courts of any nation where the damage to reputation has occurred, such as in the jurisdiction where the complaining party resides, presents difficulties: technological, legal and practical.[12]
Notwithstanding, his Honour refused to cross the boundaries of judicial office:
In default of local legislation and international agreement, there are limits on the extent to which national courts can provide radical solutions that would oblige a major overhaul of longstanding legal doctrine in the field of defamation law.[13]
Callinan J
Callinan J was openly critical of the imposition of American legal hegemony on Australian law:
If people wish to do business in, or indeed travel to, or live in, or utilise the infrastructure of different countries, they can hardly expect to be absolved from compliance with the laws of those countries.[14]
His Honour concluded:
I agree with the respondent's submission that what the appellant seeks to do, is to impose upon Australian residents for the purposes of this and many other cases, an American legal hegemony in relation to Internet publications. The consequence, if the appellant's submission were to be accepted would be to confer upon one country, and one notably more benevolent to the commercial and other media than this one, an effective domain over the law of defamation, to the financial advantage of publishers in the United States, and the serious disadvantage of those unfortunate enough to be reputationally damaged outside the United States.[15]
As Gutnick only sued on the basis that he had been defamed in Victoria, the court did not consider whether he could have sued for defamations which may have occurred on the basis of publication in other jurisdictions. However, by way of 'obiter', Callinan J indicated that, for himself, he could see no immediate reason why, if a person has been defamed on the internet in more than one jurisdiction, he or she, if so advised, might not litigate the case in each of those jurisdictions.[16]
The High Court of Australia’s decision in Gutnick is a significant one, especially given the court’s standing in legal circles and the fact that it is the most senior court in the world that has considered the issue of Internet defamation.
The short term impact may be some slight 'chilling' effect on publication in Australia. For example, some publishers with 'sensitive' material may choose to manage the risk of defamation suits by editing out that material so that Australian audiences will not have access to it. Other publishers with a small market in Australia or in recognition of the fact that Australia itself is a small market in global terms may choose not to publish in Australia at all, given the risk of defamation litigation. Only time will tell how much 'chill' will result, but it could be significant given that profit margins in publishing are tight and it would not take much of an increased risk to tip the balance in favour of withdrawing from the market all together.
At the same time, publishers have not helped by overstating the likely harm that will follow as a consequence of this decision. It must be realised that there are many limitations that will militate against a rash of similar defamation actions against international online publishers. For example, a court must find that Australia is a convenient forum considering the location of the parties and witnesses and the interests of the forum in deciding the case.
To a large extent the issues raised in Gutnick and the risks to publishers can be 'managed' by contractual provisions such as choice of forum and choice of law clauses which have generally been held to be enforceable. However, such contractual devices do not always work, especially when consumers are involved. In the European Union, for example, a Council Regulation came into effect in March 2002 which declares such provisions unenforceable in relation to consumer contracts.[17] There are also practical limitations, for instance, there may not be any assets in the preferred jurisdiction
From a regulatory perspective,[18] this case raises the question about how best to encourage the growth of Internet commerce and a global knowledge economy. For business to business (B2B) commerce, contract will remain king. In other words, the parties will continue to specify in their contractual arrangements what laws are to govern the relationship and where any disputes are to be tried and by what forum. Countries, such as member states of the European Union, maintain that Internet commerce will grow significantly only when consumers have the confidence that they will be able to use their local courts to resolve disputes.[19] Consumer groups, having in recent decades just won access to the courts, are understandably reluctant to see that access eroded. In contrast, countries such as the United States argue that the greater risks in use of the Internet for business to consumers (B2C) commerce are faced not by consumers but by business, especially small business. Small and middle-sized businesses are likely to be excluded from the Internet if they run the genuine risk of being hauled into court all over the world.
From a free speech and public policy perspective,[20] this decision shows that the law is always about achieving a balance of interests. While freedom of speech is likely to be given greater weight in American jurisprudence,[21] Australia's High Court in Gutnick was not prepared to overthrow long-standing case law in order to adopt the American position. This does not mean that present Australian law reflects an appropriate policy balance.
However, it is also interesting from a comparative perspective to note that American courts have similarly been proactive in protecting its citizens from international activity with national effect. This was exactly the case in Cable News Network LP v Cnnews.com. The plaintiff was a cable television broadcaster, Cable News Network LP of Atlanta, and held the trademark rights to 'CNN'. In 1999, an employee of a Chinese company, Maya Online Broadband Network (HK) Co of Hong Kong, registered the domain name 'cnnnews.com' with Network Solutions Inc and Maya licensed its use to its parent company, Shanghai Online Broadband Network Co, also a Chinese company. Shanghai Online used the domain name to provide news and information along with its other websites using domain names 'cnnmaya.com', 'cnnav.com' and 'cnsport.com'. CNN brought suit under the 'in rem' provision of the Anti-Cybersquatting Consumer Protection Act 15 USCs 1125(d), which empowers a trademark holder to bring an action to transfer or cancel a domain name registration that incorporates its trademark. In concluding that it had jurisdiction because of its 'effect on American commerce', the court noted several considerations: firstly, the global nature of the Internet; secondly, the presence of people in the United States who could understand Chinese; thirdly, the fact that the '.com' is essentially an American top-level domain; and, finally, the relative popularity of CNN in the United States.
Therefore, notwithstanding the fact that the 'cnnews.com' website neither sells nor offers any goods outside of China, the 'cnnnews.com' website nonetheless offers news and information (that is, commerce) to persons with Chinese language skills in the United States and worldwide. Accordingly, American commerce is affected. Where the action is properly categorised as 'true in rem', there is no requirement that the owner of the 'res' have minimum contacts with the forum and it is not necessary that the allegedly infringing registrant have minimum contacts with the forum.[22]
Rather than engage in policy formulation, Gutnick highlights the inherent conservatism of courts and the tendency of courts to leave 'reform' to the democratically elected parliament. At the same time, the judgment (especially that of Justice Kirby) points to the 'less than satisfactory' nature of the decision, thus sending a message to legislators that Australia’s laws arguably need to be reformed to take into account the global nature of the Internet.[23]
The ‘less than satisfactory’ nature of the decision also highlights the important role played by the law as part of the infrastructure to enable e-commerce and a global information age. If the legal uncertainties are significant, the growth of e-commerce is unlikely to be taken up.[24]
While the decision in Gutnick rejects the notion of the 'sui generis' or unique nature of the Internet, it does not impede Parliament from providing this protection through appropriately drafted legislation.[25] Unlike a book, an Internet publication is almost impossible to control where it is available. It is open to Australian legislators to consider whether this and other differences warrant a new and special treatment of Internet commerce.
The Gutnick decision also says something about internationalisation. While the High Court refused to overturn well-established Australian case law, it is nevertheless important to note the increasing trend of the Court in its decision making to refer to the jurisprudence (that is, cases and legislation) from other countries.[26] As a small jurisdiction, it is often the case that there are no reported Australian decisions covering any one particular issue. It is a tribute to Australia's High Court that it is increasingly willing to look for guidance from the best jurisprudence, wherever it can be found. In a world that is increasingly inter-connected and where domestic actions increasingly have international impact, this is a positive development.
The lesson for legal educators[27] and practitioners[28] is that they will have to sharpen their international legal research skills and become increasingly familiar with comparative and international trends in this important area of legal development. Crowded law school curricula will also have to find room for discussion of such developments. Indeed, some have argued that law lecturers in every subject should monitor international developments and introduce international/ comparative dimensions into every law school subject.[29]
The reality is that the issues raised by Gutnick will only be resolved through international cooperation. Unfortunately, progress on such cooperation has been slow as evidenced by the years of debate involving The Hague Convention on Jurisdiction and the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.[30] From Australia’s perspective, it is crucial that government continues to play an active role in these developments so that national interests are protected and the cause of international law reform is advanced. For it is only when the legal infrastructure is in place that the dreams for Internet commerce will become a reality.
If international agreement cannot be reached, technology may hold out hope of a solution. New technology is being developed which can allow a business to select their customers and jurisdictional reach. Coming from the other direction, software may also allow consumers to designate the countries, laws, or protections desired and an expert system will match those preferences with websites that meet the specified criteria.
Finally, the Gutnick decision represents but one attempt by one part of the legal system to deal with the challenges that the Internet poses for the legal system as whole. In reality, there are many models and options for regulation, including no regulation, statutory law, case-by-case decision making, industry regulation, and regulation by technology controls.[31] In our view, so pervasive and diverse is the Internet that all of these regulatory mechanisms will play a part as countries come to grips with the information age. In this regard, the decision in Gutnick is but one small step in a continuing journey.
[*] Head of School and Professor of Law, University of Canberra: Eugene.Clark@canberra.edu.au.
[**] Gonzalo Villalta Puig BA LLB (Hons) GradDipLegPrac (With Merit) (ANU), LLM (Canberra) is a Barrister and Solicitor of the High Courts of Australia and New Zealand and a Solicitor of the Supreme Court of England and Wales. He practises in corporate and commercial law in the area of major projects within the Government Services Group at the Canberra office of national law firm, Clayton Utz.
[1] B Alpert, 'Unholy Gains' Barron's, 30 October 2000 at 24.
[2] Ibid.
[3] Ibid at 30.
[4] Gutnick v Dow Jones & Company Inc [2001] VSC 305 at [60].
[5] Dow Jones & Company Inc v Gutnick [2001] VSCA 249.
[6] Gutnick v Dow Jones & Company Inc [2001] VSC 305 at [127].
[7] The most notable example is Duke of Brunswick v Harmer [1849] EngR 915; (1849) 14 QB 185.
[8] Dow Jones & Company Inc v Gutnick [2002] HCA 56 at [44].
[9] Gutnick [2002] HCA 56 at [51].
[10] Gutnick [2002] HCA 56 at [58].
[11] Gutnick [2002] HCA 56 at [64].
[12] Gutnick [2002] HCA 56 at [165].
[13] Gutnick [2002] HCA 56 at [166].
[14] Gutnick [2002] HCA 56 at [186].
[15] Gutnick [2002] HCA 56 at [200].
[16] Gutnick [2002] HCA 56 at [202].
[17] Official Journal C 027, 26/01/1998 p 0001-0027. European Commission, Explanatory Memorandum to the Proposal for a Council Regulation on Jurisdiction, COM (199) 348 of 14 July 1999, <http://www.europa.eu.int/comm/justice_home/pdf/com1999-348-en.pdf> .
[18] See Weber, Rolph H, Regulatory Models for the Online World, The Hague, Kluwer Law International (2002) (Chapters include: Law as a Structural System; Challenges of the Online World for Legal Systems, Models of Regulation, Rulemaking Approaches in an Online World). See also Netanel, Neil (2000) 'Cyberspace Self-Governance: A Skeptical View from Liberal Democratic Theory', 88 California Law Review 395-498; Reidenberg, Joel R 'Governing Networks and Rule-Making in Cyberspace', 45 Emory Law Journal 911-930; Rice, Denis T (1999) 'The Regulatory Response to the New World of Cyberspace', 51 Administrative Law Review 901-952; and Salbu Steven R (1998) 'Who Should Govern the Internet? Monitoring and Supporting a New Frontier', 11 Harvard Journal of Law & Technology 429-480.
[19] Note that this is a ‘regulation’ as opposed to a ‘convention’ or ‘directive’. Council Regulations are binding in their adopted form in all member states. A convention is negotiated between the states and a directive must be implemented individually by each member state. This could lead to differences in the various jurisdictions. The European Union sought uniformity on the jurisdiction question and thus the stronger form of 'regulation' was adopted.
[20] See, for example, Berman Paul Schiff (2000) 'Cyberspace and the State Action Debate: The Cultural Value of Applying Constitutional Norms to Private Regulation' 71 University of Colorado Law Review 1263-1310.
[21] See generally, Covell, Rebecca L (2000) 'Problems with Government Regulation of the Internet: Adjusting the Courts Level of First Amendment Scrutiny', 42 Arizona Law Review 777-801.
[22] Cable News Network LP v Cnnews.com, ED VA, No 00-2022-A, 12/21/01, found at: <http://www.Pub.bna.com/eclr/002022.htm> .
[23] See, for example, Delacourt, John T (1997) 'The International Impact of Internet Regulation' 38 Harvard International Law Journal 207-235; Froomkin, A Michael (1999) 'Of Governments and Governance', 14 Berkeley Technology Law Journal 617-633; Gibbons, Llewellyn J (1997) 'No Regulation, Government Regulation or Self-Regulation: Social Enforcement or Social Contracting for Governance in Cyberspace' 6 Cornell Journal of Law and Public Policy 475-551; Gilligan, Francis A and Imwinkelreid, Edward J (1998) 'Cyberspace: The Newest Challenge for Traditional Legal Doctrine' 24 Rutgers Computer & Technology Law Journal 305-343; Goldsmith, Jack L (1998) 'Against Cyberanarchy' 65 University of Chicago Law Review 1199-1250.
[24] See generally, Abramovicz, Michael (2001) 'Cyberjurisdiction', 86 Iowa Law Review 533-599. See also Calvert, Clay (1998) 'Regulating Cyberspace: Metaphor, Rhetoric, Reality and the Framing of Legal Options', 20 Hastings Communications and Entertainment Law Journal 541-66.
[25] Many writers have argued that the Internet is so unique that it necessitates a whole new regulatory approach. See, for example, Johnson, DR and Post, D (1996) 'Law and Borders - The Rise of Law in Cyberspace' Stanford Law Review, vol 48(2) p. 1367. See also Burk, DL (1997) 'Jurisdiction in a World without Borders' Virginia Journal of Law and Technology Vol 1, p. 1522.
[26] On the issue of jurisdiction in an Internet context see, for example, Zippo Manufacturing Co v Zippo Dot Com, Inc, 952 F Supp 1119 (WD Pa 1997); Playboy Enterprises, Inc v Chuckleberry Publishing Inc (1999) F. Supp 1032. See also Bensusan Restaurant Corp v King,d/b/a The Blue Note, 937 F Supp 295 (SDNY 1996). See generally, Clark EE, Cho, G and Hoyle A (eds) (2001) E-Business: Law and Management for the 21st Century, Canberra, Info-Sys Law International.
[27] See Clark, EE (1996) 'Internationalisation and its Impact upon the Teaching of Legal Skills' Australasian Professional Legal Education Council International Conference, Skills Development for Tomorrow's Lawyers: Needs and Strategies, Sydney, 4-8 September, 1996 (Vol. 1). pp. 71-94; Clark, EE (1995) 'Internationalisation: Its Impact on Australian Law Schools' Proceedings of the 49th Australasian Law Teachers Association Conference. R. Piotrowicz (Ed.), University of Tasmania Law Press, Hobart. pp. 1293 – 1304.
[28] See Clark, EE and Blay, S (1999) 'The Internationalisation of Legal Practice and Education', Australian Law Journal, November, pp. 791-795.
[29] Ibid.
[30] See The Hague Convention on Jurisdiction and the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters:
<http://www.hcch.net/e/workprog/judgm.html> .
[31] Weber, above note 16.
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