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Trademark Lawyers Australia – Full Federal Court – Madden v Seafolly

Madden v Seafolly Pty Ltd [2014] FCAFC 30 (24 March 2014)

This case reinforces the need to take time to properly ascertain the facts before publishing an allegation and to not over react when responding to such an allegation.

The swimwear designer, Leah Madden, had wrongly asserted in September 2010 that Seafolly had copied her designs through posts on her personal and business Facebook accounts as well as in an email to media outlets. Seafolly immediately responded by publishing two press releases asserting that Madden’s claims were false and made with malicious intent to damage Seafolly.

Contrary to Madden’s assertions, Seafolly’s designs were independently created and had been released to the market, or were at an advanced stage of development, before the alleged copying had occurred. Madden had failed to make appropriate enquiries.

The primary judge found that Madden’s assertions constituted misleading or deceptive conduct under the Trade Practices Act. Although Seafolly’s responses were defamatory because they asserted Madden had acted in a malicious way to harm Seafolly’s commercial interests, they fell with the defences of justification and qualified privilege (but not fair comment). Seafolly’s claims for injurious falsehood and copyright infringement were dismissed. The judge awarded Seafolly damages in the amount of $25,000.

On appeal, the Full Federal Court essentially agreed with most of the primary judge’s conclusions, but did find in Madden’s favour on one point.

It was correct to separately consider Madden’s publications and treat them as three instances of conduct, rather than one. The two Facebook publications did convey representations that Seafolly (1) had copied Madden’s swimwear designs, (2) did not create its swimwear designs and (3) had used underhanded means to obtain photographs of Madden’s swimwear. Madden’s email also conveyed the first two representations, but not the third. The Full Court relied on this to reduce the damages award from $25,000 to $20,000.

The ordinary reasonable reader of the Facebook publications is unlikely to read just the latest posts, but would place them in context having regard to earlier posts.

Each of Madden’s representations included statements of historic or present fact which were false. They were not expressions of opinion. Madden’s publications contained incorrect dates of public release of Seafolly’s swimwear designs. They were misleading or deceptive because Madden got these critical facts wrong and this did not justify expressing an opinion about these false facts.

Statements made on Madden’s personal Facebook account had a trading or commercial character and were not private. As such, they were made ‘in trade or commerce’ for the purpose of the Trade Practices Act.

Madden’s statements were also made in connection with the supply of goods for the purpose of the Trade Practices Act because she was communicating to others that they should purchase her swimwear as the original, rather than Seafolly’s alleged copies.

An award of damages was appropriate. Madden had made a serious assault on the business integrity and reputation of Seafolly. The amount was reduced because it is likely Madden’s media articles received wider readership than her Facebook pages and they did not contain the false allegation of Seafolly obtaining photographs in an underhanded manner. Marshall J dissented on this aspect and considered there was no basis to interfere with the primary judge’s assessment.

The Full Court did agree with the primary judge that Seafolly had made good its defence of qualified privilege. It was entitled to hit back and defend itself. The press releases were “commensurate with the occasion”. Success with the qualified privilege defence meant that Seafolly was not liable to Madden in defamation.

However, the Full Court disagreed with the primary judge in finding that Seafolly’s press releases were misleading or deceptive under the Trade Practices Act. The facts did not support the conclusion that Madden made her claims maliciously (in the ordinary and natural meaning of that word, rather than its technical legal meaning in the law of defamation) with the deliberate intention of harming Seafolly. Consequently Seafolly could not justify the imputations made in their press releases that Madden knowingly made false claims that Seafolly copied some of her swimwear designs. Rather, Madden believed in the truth of what she had published, notwithstanding her failure to make further enquiries. A reckless disregard for making appropriate enquiries was not sufficient to establish Madden acted with the malicious intent of damaging Seafolly. As a result, Madden was successful on this ground of appeal and this aspect was referred back to the primary judge for an assessment of loss or damage.