Online reviews and defamation - what can I do?
Summary
Debt to equity swap can be an effective way to restructure a company’s capital and borrowings if it is in financial difficulty.
Contractual (i.e. non-statutory) debt for equity swaps can be simple and flexible.
Debt for equity swaps implemented using a statutory procedure can be complex, costly and are generally administered by an insolvency practitioner, meaning that the company and its directors have significantly less control over the process.
Important to be proactive and engage with your creditors before they take action to recover the debt
Carefully planned engagement with shareholders and creditors is crucial to successfully undertaking a debt for equity swap.
Introduction
For a company that is in financial difficulty, but which is still ultimately a viable going concern, a debt for equity swap can be an effective way to restructure its capital and borrowings and, in doing so, strengthen its balance sheet and deal with issues such as over gearing.
A debt for equity swap involves a creditor converting debt owed to it by a company into equity in that company. The effect of the swap is the issue of the equity to the creditor in satisfaction of the debt, such that the debt is discharged, released or extinguished.
For a creditor, a debt for equity swap may be a way of avoiding the costs associated with commencing processes to recover debt (which may not be fully recoverable in the current environment) and may provide a means by which a creditor can participate in any future growth of the company.
Debt for equity swaps can be utilised in numerous situations, including:
to restructure debt with a major non-bank creditor;
to change the proportion of debt and equity held by shareholders to strengthen the company’s balance sheet; or
to create a strategic alliance with a major supplier.
Regardless of the circumstances, debt for equity swaps provide an opportunity for a company to deal proactively with creditors before creditors take steps to recover debts and, in the case of secured creditors, enforce its security and/or appoint an external administrator.
Examples of successful defamation claims for online reviews
In Asbog Veterinary Services Pty Ltd v Barlow [2020] QDC, a veterinarian based in Queensland sued a former customer who had left a number of online comments on Facebook, Twitter and True Local after receiving a bill for $427 for services provided to her dog, which had been attacked by another dog. She claimed that she had been overcharged “400% mark-up” on medicines, and alleged that the vet was grumpy and should not be dealing with people or animals. The matter could not be resolved between the parties and ultimately the District Court awarded the vet $25,000 plus interest and costs.
In Cheng v Lock [2020] SASC14, a review was posted on Google My Business which stated among other things, “stay clear of this place! Gordon [Cheng] brings shame to all lawyers and is infamous for his lack of professionalism amongst the Law Society in Adelaide. He is only concerned about how to get most of your money.” This review was also published in Chinese. Mr Cheng had never actually acted for the reviewer, Lock, and the two had never met. Mr Cheng gave evidence that he had lost around 80% of his clients and had suffered irreparable damage to his reputation. The Supreme Court awarded Mr Cheng $750,000.
In Tavakoli v Imisides (No4) [2019] NSWSC717 a claim for defamation was made by a plastic surgeon, against a person who left a Google review that alleged the plastic surgeon had charged for work that he did not perform, acted improperly and acted incompetently. The Court found that the allegations in the review were plainly untrue. The plastic surgeon was awarded a total amount of $530,000 which included aggravated damages.
In Dean v Puleio [2021] VCC848 a number of Google reviews were posted by a former patient of a periodontist after the periodontist had terminated the doctor patient relationship. There were four reviews, made over the course of one week. The former patient accused the doctor of being unprofessional and undermining and failing to diagnose various illnesses from which she was suffering, over charging, making ludicrous suggestions as to treatment, and being someone who bullied and berated her patients. A secondary review referred to the doctor providing “unprofessional and undermining service”. A third review falsely stated that the doctor had “apologized for the negligence of my care however the outcome is unsatisfactory”. The doctor suffered a downturn in new patient referrals following the reviews. The doctor was awarded $170,000 for damages.
What are your options when a negative or potentially defamatory review is posted online?
There are various options that can be used to deal with or lessen the impact of adverse reviews. The best approach to adopt will depend on the individual circumstances and on the seriousness of the adverse review or defamatory publication.
Due to often emotional charge, it is almost inevitable that at some time a negative review will be received. When such a review is received, the main choices are to either do nothing or to post a reply to the review. Whether or not it is best to post a reply or to do nothing is a judgment call and is likely to depend to some extent on what the negative review actually says and how inflammatory it is.
If the negative review is just one bad review among many positive reviews, it will often be best to do nothing. Most rational people will accept that the person who left the negative review is an anomaly and in the circumstances, it is unlikely that significant damage will be caused.
If a decision is made to post a reply to the review, it is important not to be aggressive or rude. This is the case even if the review itself was aggressive or rude. A calm response to a negative review is much more likely to lead to anyone who reads the exchange to conclude that you or your business are reasonable and that the negative review is out of the ordinary. It is very important to you come across as being entirely reasonable. This can significantly help to defuse the situation.
A response to the review could for example say something like: “We are sorry to hear of your experience. We would be grateful if you would contact us so that we can discuss your experience with you”. Alternatively and depending on the circumstances, you could say something like: “We are sorry to hear about your experience. What you have described does not accord with our recollection of what occurred.” However, you should be careful not to disclose any private personal information about the author of the review in any response.
At the other end of the scale of adverse reviews is a review, or a series of adverse reviews, which make outrageous allegations which are clearly false. The problem with such reviews is the risk that there will be people who believe that the matters raised in the review are true, even if they are not certain whether they are true or not, they will decide as a matter of caution to take their business elsewhere.
If these kinds of reviews are received, the two main choices are to either do nothing, and hope that most people who read the review(s) will not take them seriously, or you ask a lawyer to send a concerns notice to the author of the review.
If the outrageous review is essentially one bad review in the company of many very good reviews, it may well be reasonable to conclude that most readers of the review will not take it too seriously. Once again, it depends on what the review actually says.
As can be seen from most of the cases referred to in this article, a very bad review can result in very significant emotional harm and to potentially catastrophic economic loss being suffered by the person or business the subject of the review.
It is our experience that when an author of an outrageous review receives a well drafted concerns notice from a solicitor, in most cases they are prepared to take steps to remove the review and to offer an apology. If this does not occur, and assuming that you are able to establish that you have suffered or are likely to suffer serious harm from the review, the commencement of defamation proceedings may be the only option left
If you would like any further information on your options of dealing with negative or potentially defamatory social media posts/reviews, please contact:
Chris Burrell
Partner
chris@fuselaw.com.au
+61 417 832 153
Kate Cantrell
Partner
kate@fuselaw.com.au
+61 401 370 179