Creating a defamation free zone: contractual exclusions to defamation upheld

White Background, Orange Underscore Ampersand

FOS a defamation free zone

In a decision1 that offers significant learnings for any organisation operating an internal complaints resolution service, the District Court of NSW has concluded that by initiating a complaint to the Financial Ombudsman Service (FOS), homeowner Ms Imielska consented to FOS's investigation and consideration of her complaint and was therefore contractually prevented from bringing a claim for defamation against the respondent to the complaint, an employee of Westpac.

This article provides an overview of the Court's findings and what this means for organisations operating or participating in an investigation or complaints resolution process.

Imielska v Morgan - background

In February 2014, following a fire at her home, Ms Imielska made a claim on her building insurance policy. Westpac declined the claim. Ms Imielska subsequently lodged a complaint with FOS, which investigated and rejected her allegations. Ms Imielska commenced further unsuccessful proceedings against FOS, as well as a separate claim for defamation against Westpac's employee who had been responsible for responding to the original FOS complaint.

On 22 November 2017, the District Court of NSW summarily dismissed Ms Imielska's claim for defamation. The bases upon which the dismissal was granted are noteworthy, for the reasons discussed below.

Contractual exclusion to defamation

By making a complaint to FOS, Ms Imielska agreed to be bound by FOS's Terms of Reference. Such terms provide that information obtained through FOS is "without prejudice" and may not be used in any subsequent court proceedings unless required by an appropriate court process.

In summarily dismissing the Ms Imielska's defamation claim, the Court found that the contractual effect of FOS's terms was to preclude Ms Imielska from bringing defamation proceedings in relation to correspondence generated by Westpac for the purpose of the FOS proceedings. The Judge concluded that Ms Imielska's initiation of the complaint also constituted consent to Westpac's publication of material responding to that complaint, providing a further unassailable defence to her claim of defamation.

Principle of proportionality also warranted dismissal

In the United Kingdom, where defamation laws are considerably less plaintiff-friendly than in Australia, it is not uncommon for cases to be dismissed on the principle of proportionality. This principle provides that summary dismissal may be warranted where the likely costs, complexity and duration of a proceeding is out of all proportion to the issues at stake. In Australia, the principle has to date received limited support.

In dismissing Ms Imielska's claim, the Court noted that as the correspondence complained of was published to only a very limited audience comprising employees of FOS and Westpac, and Ms Imielska's son, and having regard to the fact that the defamatory imputations would be "at the bottom of the range in terms of seriousness", this was an example of the "exceptional" category of case in which the principle of proportionality warranted summary dismissal.

Limiting defamation risk in investigations and complaints procedures

Allegations of defamation in the course of complaints or investigation processes are not uncommon. Whilst a defence of qualified privilege will commonly apply, assertions of malice can make applications for summary dismissal of such claims difficult and time consuming.

The findings in this case suggest that Australian courts may be becoming more willing to dispose of minor defamation claims on a summary basis where the costs involved in defending such actions are not warranted having regard to the seriousness and extent of the defamation alleged.

For organisations offering internal complaints resolution processes, or associations whose rules and by-laws create domestic tribunals for the investigation and determination of member disputes, there is much to be said for including a contractual bar to claims for defamation. While such a provision may not succeed in all instances, the existence of an additional consent based defence such as that relied upon by Westpac can significantly assist in ensuring frivolous or unmeritorious claims of defamation are disposed of as quickly and efficiently as possible.

1 Imielska v Morgan [2017] NSWDC 329

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

Key contacts

Johnathan Quilty

Partner & Practice Group Leader