Feldman v IAC/InterActiveCorp

HER HONOUR: These are proceedings for defamation commenced by Rabbi Yosef Yitzchak Feldman by statement of claim filed 11 February 2016. The first defendant named in the Statement of Claim is IAC/InterActiveCorp, a company listed on the NASDAQ Stock Exchange and apparently incorporated in one of the States of the United States of America. An amended statement of claim was served personally on the company in New York.

Before the Court today is an application by that entity to have service of the amended statement of claim set aside pursuant to rule 12.11 the Uniform Civil Procedure Rules 2005 (NSW).

Rule 11.2 of the rules provides that originating process may be served outside Australia in the circumstances referred to in Schedule 6 to the rules.

The application to set aside service was initially based on the contention that the statement of claim disclosed no cause of action in New South Wales. The relevant alleged publication is an article placed on the “Daily Beast” website operated out of New York. The statement of claim identified no person within the State of New South Wales who had downloaded the article, with the consequence that publication was not established in accordance with the principles stated by the High Court in Dow Jones v Gutnick (2002) 210 CLR 575; [2002] HCA 56.

The plaintiff has subsequently rectified that deficiency by serving an affidavit sworn by Eleazar Solomon on 2 August 2016 deposing to having downloaded the article within a few weeks after the date it bears, namely, 12 February 2015.

The first defendant, however, maintains the application to have service set aside on the basis that the claim has insufficient prospects of success to warrant putting an overseas defendant to the time, expense and trouble of defending the claim: see Agar v Hyde (2000) 201 CLR 552 at [55]; [2000] HCA 41. The basis for the contention that the claim as against IAC has such poor prospects of success is that IAC is the parent of the entity that operates the Daily Beast website, a company named the Daily Beast Company LLC. The relevant corporate structure is proved by the affidavit of Justine Munsie sworn 15 July 2016. As submitted by Ms Barnett, who appears for IAC on the present application, it is trite law that a corporate entity is not responsible for the acts of its subsidiary, being in the position of a shareholder, not a director or operator of the business of the subsidiary.

Rabbi Feldman resisted those contentions by relying, first, upon a statement appearing on the Daily Beast website which says, "the Daily Beast is based in New York and is an operating business of IAC". As submitted by Ms Barnett, that statement is entirely consistent with the legal position established by Ms Munsie's affidavit. First, the evidence establishes that the Daily Beast is an operating business which, as stated in the “terms of use” of the website, operates the website. Secondly, the evidence establishes that it is a company owned by IAC. It does not follow from anything stated on the website that IAC would bear legal responsibility for material published by the subsidiary on the website.

Separately, Rabbi Feldman submitted that the reason he wishes to keep IAC in the proceedings is because it is a large corporate entity publicly listed, whereas the subsidiary may be a smaller company without the means to meet any judgment against it. That, however, does not inform the legal position I have outlined.

I am satisfied that the claim against IAC enjoys insufficient prospects of success to warrant its being put to the expense of defending the claim against it and, on that basis, that the service of the originating process on IAC should be set aside, with the inevitable consequence that the proceedings as against IAC should be dismissed.

Rabbi Feldman has asserted in argument that the article remains on the website and that he is aware of its having been downloaded recently. He says that, on that basis, he would like to make an application to join the subsidiary which operates the website. Having regard to the fact that the proceedings were commenced as long ago as February 2016, with little progress since that date, I consider it appropriate to limit the time within which any such application may be made.

Separately, I note that there is a second defendant named in the statement of claim, Ms Emily Shire, under whose by-line the matter complained of was published. Rabbi Feldman has not served the originating process on her, stating that he has been unable to locate her. Her position should be determined one way or the other, noting that at present the originating process is no longer valid for service as against her.

In the circumstances, the appropriate orders are as follows: