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A recent decision handed down in the high profile Rebel Wilson case has significantly changed how damages are awarded in defamation proceedings.

Justice John Dixon this week found where aggravated damages are awarded in defamation cases, the statutory cap for general damages no longer applies. The decision will effectively abolish the cap on damages in most defamation cases.

The Supreme Court awarded Wilson a record $4.5 million in overall damages after a jury found Bauer Media, publisher of Woman’s Day, defamed her by accusing her of lying and inventing fantastic stories in order to make it in Hollywood.

The statutory cap

Uniform defamation laws came into force on 1 January 2006. A key feature of the reforms was to impose a statutory cap on non-economic damages.  The cap was set at $250,000 indexed in line with inflation.  The cap is currently $389,500.

The cap operates to limit the amount of ‘general damages’ a plaintiff can receive.  General damages are non-economic damages for damage to the plaintiff’s reputation and hurt feelings.  They usually make up the bulk of the damages in defamation proceedings.  Prior to the uniform laws plaintiffs could receive general damages of $800,000 or more.  The statutory cap significantly reduced the amount recoverable.

While the statutory cap imposes a limit on general damages, it was always open to the Court to give an award of ‘aggravated damages’ over and above the cap.  Aggravated damages are usually an extra 20% to 30% on top of general damages and are awarded where the defendant’s conduct after publication have added to the hurt suffered by the plaintiff.  The Courts also retained the power to award uncapped ‘special damages’ for economic loss, such as lost income.  But economic losses are quite rare in defamation cases.  Most defamation cases involve an award of general damages plus a small award of aggravated damages.

Following Justice Dixon’s decision, the position on damages has drastically changed.  His Honour found that when aggravated damages are awarded, the statutory cap no longer has any effect.

To properly understand this development, consider the following example.

Before the Rebel Wilson decision defamation practitioners had always understood the cap to operate as follows.  If a person was gravely defamed, a Court might consider they were entitled to an award of $800,000 in general damages plus aggravated damages of $100,000.  By operation of the statutory cap, the plaintiff would be precluded from receiving the full amount.  Instead, they would receive a capped amount of $389,500 plus $100,000.  Aggravated damages would be applied above and beyond the statutory cap.

However, following Justice Dixon’s finding that an award of aggravated damages effectively eliminates the statutory cap, this hypothetical plaintiff would now receive the full $800,000 plus $100,000.

This is a significant development. Technically it only applies in cases involving aggravated damages.  But aggravated damages are very commonly awarded when a defendant fights a matter to trial and loses.

Justice Dixon’s reasons

Justice Dixon’s finding turned on a plain language interpretation of section 35(2) of the Defamation Act, which he found was “unambiguous”.  Section 35(2) states:

(2)  A court may order a defendant in defamation proceedings to pay damages for non-economic loss that exceed the maximum damages amount applicable at the time the order is made if, and only if, the court is satisfied that the circumstances of the publication of the defamatory matter to which the proceedings relate are such as to warrant an award of aggravated damages.

His Honour found that the plain language of this section was to do away with the cap altogether in cases where aggravated damages are to be awarded.  He rejected numerous arguments from Bauer Media that such an interpretation was inconsistent with the purpose of the cap, including an argument that it was plainly inconsistent with the second reading speech and Parliament’s intended operation of the provision.  His Honour found that the text of the provision was so clear, it was not necessary to look beyond it for further interpretation.

However, his Honour indicated the threshold for an award for aggravated damages is relatively high.  He found that, in order to give rise to an award of aggravated damages and to free an entitlement of general damages from the statutory cap, the defendant’s conduct must be “malevolent, spiteful, lacking in bona fides, unjustifiable or improper”.

What does this mean for publishers?

The size of Wilson’s payout is likely to increase the expectations of plaintiffs and plaintiff lawyers in future.  Plaintiffs will start looking back to cases decided before 2006 in which damages awards of $800,000 or more were awarded.  Publishers may choose to exercise greater caution from a defamation standpoint, as aggrieved persons may be more encouraged to sue.

While there is a high chance this decision will be appealed, publishers should be alive to this issue early in litigation, especially in the context of apologies.  A refusal to apologise or offer to apologise is often used as a basis for aggravation.  Publishers should, at a minimum, consider apologies more carefully and at the earliest opportunity after receiving a defamation complaint.

We recommend publishers contact us if they are facing potential defamation claims to discuss all options.

This article was written by John-Paul Cashen, Principal Lawyer – Litigation and Dispute Resolution (Media).