Blogs: protecting your business from damaging posts

The Federal Court of Australia has handed down a valuable decision for business owners concerned their business reputation is being damaged by a competitor’s misleading online blog posts. 

The decision of Nextra Australia Pty Limited v Fletcher [2014] FCA 399 establishes that, in certain circumstances, the posting of a misleading online blog article regarding a business competitor can amount to conduct which is prohibited under the Australian Consumer Law.  With recent reports indicating there are now more than 150 million blogs in existence, the decision is a timely reminder for those operating a blog for commercial reasons.

The applicant in the case, Nextra, is the franchisor of a newsagency franchise operating throughout Australia.  The respondent, Mr Fletcher is a director and 50% shareholder of NewsXpress, another newsagency franchise system, and competitor of the Nextra franchise.  Mr Fletcher operates an internet blog under the name ‘Australian Newsagency Blog’.  On 27 April 2011, Mr Fletcher posted an article on the Blog entitled ‘Nasty campaign from Nextra misleads newsagents’ (Article), and referred to a flyer which had been distributed in print form by Nextra.

After publication of the Article, Nextra commenced proceedings seeking orders that the Article be removed from the blog, that Mr Fletcher be restrained from publishing the Article in any other form and that Mr Fletcher publish a retraction of the Article with an apology to Nextra. 

To succeed in its case, Nextra was required to satisfy the Court that the contents of the Article were ‘misleading and deceptive’, and that the posting of the Article occurred ‘in trade or commerce’.

The Court concluded that the Article published by Mr Fletcher, when viewed as a whole, would leave a reasonable reader with the impression that Nextra had distributed false information in its promotional campaign.  The evidence was that Nextra had not, in fact, distributed false information in its promotional campaign.  

As to whether the posting of the Article occurred ‘in trade or commerce’, Mr Fletcher submitted the Article was merely published in a public forum for matters affecting the newsagency industry.  The Court dismissed this submission and instead found that Mr Fletcher had sought to promote his own commercial interests in posting the Article. 

Accordingly, the Court found that the posting of the Article was done with an inherently commercial motive which gave the conduct the requisite commercial character. 

The Court ultimately ordered that Mr Fletcher remove the Article from the blog and be restrained from publishing the Article in any other form.  In so ordering, the Court remarked that readers of the Article would be misled to form erroneous and negative conclusions about Nextra and added that it was in the public interest for such misleading and deceptive material to be removed from the public forum.

Readers should note that the mere publication of an article should not, of itself, be seen as constituting conduct ‘in trade or commerce’.  Importantly, as in the Nextra case, the particular blog or forum on which the article is published must be one where its owner seeks to promote its own commercial interests.  

Often a misleading or deceptive blog article (whether in stock forums, private blogs or Facebook posts) can be simply and inexpensively removed or retracted through directed legal correspondence with the blog’s owner or the service provider.  If this approach is not successful, remedies such as those used in the Nextra case may also be available to affected business owners.

Andrew Poulton, Tim Case

Time to start thinking about your AGM

Although it may seem that the AGM season is still some months away, for companies with a 30 June year end, the lead up to calling the AGM is fast approaching.

Set out below are some key considerations, tips and timeframes to think about when preparing for your AGM.

Corporations Act changes

This year has seen comparatively less regulatory change.  Accepted market practices have now developed around disclosure of chairman, ‘key management personnel’ and proxy voting restrictions.  However, practices for meeting procedures continue to evolve (including polling on the ‘remuneration report’ and in some cases, all resolutions).  You should consider your preferred approach for your AGM. 

New ASX Corporate Governance Principles

The Third Edition of the Corporate Governance Principles and Recommendations were recently released by the ASX Corporate Governance Council as referenced in our earlier post.
 

Although the new Principles and Recommendations are effective from the financial year ending 30 June 2015 (for companies with a 30 June balance date), some companies are seeking to adopt the Principles and Recommendations at an earlier date. 

For early adopters, this may have repercussions for the AGM.  For example, there is now a requirement that background checks be completed on new directors with the outcome of those checks to be disclosed in the notice of meeting.  If applicable, you should allow sufficient time for these checks (which may include police checks) to be completed.

Key steps and timeframes

The time required for preparing a notice of meeting and coordinating the mail out to shareholders is often underestimated. 

The following timeline may assist as a quick reference for the relevant steps (set out in further detail below):  



AGM timeframes - click to view larger image

1. Preparing the notice
   Depending on the number of resolutions that are expected, a prudent approach is to allow 3 to 4 weeks to prepare the notice of meeting.  Some possible resolutions to consider are summarised further below.
    
2. Meeting venue
   Many public companies tend to convene their AGM toward the end of November each year, which means adequate venues can be in short supply, particularly where large numbers of shareholders are expected to attend.  Brisbane based companies should also be aware that the G20 Summit in November will place additional demands on venues and accommodation.  You should ensure to book an appropriate venue well in advance of the preferred meeting date to avoid disappointment. 
    
3. Auditor
   A company’s auditor needs to be present at the AGM and available for a reasonable time for questions from the shareholders.  This means auditors will be attending a number of AGMs for other public companies in October and November.  You should make arrangements with your auditor early to avoid conflicts.
    
4. ASX review
   For a listed company, it is likely that the notice will need to be lodged with ASX for review before it is finalised and posted to shareholders.  ASX requires a minimum of five business days for its review.
   
   ASX becomes particularly busy toward the final five to six weeks of the AGM season and lodging documents early will ensure that sufficient time is provided for the ASX review.
    
5. ASIC review
   Certain matters of special business, including proposed related party benefit and/or financial assistance transactions, may require the notice and other documents to be given to ASIC for review.  ASIC generally has 14 days for its review. 
   
   For listed companies, an additional complicating factor is ASIC’s insistence on ‘final’ signed documents being lodged, which requires ASX’s review (5 business days) to occur before lodgment with ASIC.
    
6. Printing and postage
   Sufficient time also needs to be given for printing (e.g. 3 to 5 days) and postage (e.g. 2 to 3 days) and you should make appropriate arrangements with your share registry, public relations firm or printers (as required) at an early stage.
    
7. Notice period
   For a listed company, 28 clear days notice is required.  For an unlisted company it is 21 clear days.  For clear days you do not count the day of the mail out or the last day of the notice period (so, for example, 21 clear days is actually 23 days).

Resolutions

In addition to the usual resolutions (financial statements and reports, and retirement, appointment and/or re-election of directors), some other possible resolutions are: 

• related party benefit and/or financial assistance approvals
• increasing the directors’ fee pool, and
• pre-approval for any termination benefits for directors or key management personnel (e.g. the issue of performance rights, where such a benefit might trigger on termination in excess limits allowed by the Corporations Act).

 

For listed companies, also consider resolutions for:

• adoption of the remuneration report – this resolution will vary depending on whether the company has received a strike on its remuneration report at the prior AGM
• any issue of securities above the company’s 15% placement capacity (Listing Rule 7.1) or the ratification of previous allotments to refresh this capacity (Listing Rule 7.4)
• for companies outside the S&P/ASX 300 that also have a market capitalisation of $300 million or less, whether approval is sought for the additional 10% placement capacity (Listing Rule 7.1A) -  this requires a special resolution, which can only be obtained at the AGM, and
• any issue of securities to directors, which requires the approval of shareholders (Listing Rule 10.11, Listing Rule 10.14 and/or related party provisions of the Corporations Act).