Commerical litigation & dispute resolutionContracts

Under Australian common law, there are limited circumstances where an individual or company can claim damages for loss of reputation from the breach of a contract, tort or from the engagement in misleading or deceptive conduct under the Australian Consumer Law (Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332). Legally these losses are not so much for loss of reputation itself but for the loss of publicity that flows from the defendant’s breach (see Herbert Clayton and Jack Waller Ltd v Oliver [1930] AC 209). Generally, this award is not novel but remains ‘unusual’ in the Australian context (Mothership Music Pty Ltd v Darren Ayre and Flo Rida (No 2) [2012] NSWDC 11).

A. Requirements for the Award of Damages for Loss of Reputation

Tobias AJA in the case Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 established a set of principles a plaintiff needed to establish to maintain a claim for loss of reputation:

  • Proof on the balance of probabilities of some loss or damage to the plaintiff – usually through demonstrating the breach prevented future non-trivial commercial activities; and
  • Evidence of what the plaintiff would have done if it had known about the problem/breach; and
  • Evidence of the value of the chance that is alleged to have been lost as a result of the defendant’s conduct; and
  • Evidence the prospect of loss is substantial and not simply speculative.

Therefore, the exact value of the loss sustained does not have to be proved, however, the damages are strictly pecuniary based on bad publicity not for mere reputational loss. Losses must also not arise as a result of the plaintiff’s own conduct or commercial choices.

B. Cases Regarding Damages for Loss of Reputation in Australia

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2008) 72 NSWLR 559: The plaintiff contended loss of reputation among his friends and family, and his loss of future employment opportunities required compensation from the defendant. The New South Wales Court of Appeal found damages cannot be awarded for purely hurt feelings or from the mere difficulty finding new employment after termination.

Ramsey v Annesley College [2013] SASC 72: The plaintiff alleged that after her unfair dismissal from her employment she lost the opportunity to be employed in similar roles or the ability to obtain an executive position in the future. To advance her claim she could not provide any evidence of relevant jobs being offered or denied to her on the basis of her unfair dismissal. Therefore, the South Australian Supreme Court found the plaintiff had not adduced capable of proving any pecuniary loss of a real or significant value.

Mothership Music Pty Ltd v Darren Ayre and Flo Rida (No 2) [2012] NSWDC 11: In this case the defendant (Flo Rida) was a late ‘no show’ at a concert organised by the plaintiff, which they alleged damaged their reputation to hold high-profile events in the future. This was largely a result of social media backlash the company faced from the concert’s cancellation that had a domino effect for future events. The plaintiff’s produced evidence of the loss of ticket revenue and food and drink revenue from the following year’s event to prove the loss. The New South Wales District Court accepted that evidence and awarded damages of $302,800 to the plaintiff for the loss of reputation stemming from the breach of contract.

C. Conclusion

These cases illustrate there is a high bar to running a successful case for loss of reputation. Despite there being no requirement to prove an exact quantum of damages, courts will not award damages for loss of reputation unless a real or significant pecuniary loss can be proved by the plaintiff. Therefore, any prospective plaintiff must be able to conclusively prove such damages in order to succeed in an action to receive damages for loss of reputation.

General outlines, such as this, are no substitute for legal advice. If you need further advice on potential damages for loss of reputation please get in touch today using the form below this article. For further information about Litigation or Contracts check out our Resources Centre!

This article was authorised by Warwick Heeson.

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