Tuesday, 21 May 2013

Be careful about what you post in investment forums: lawsuits bite!

Most of us who are interested in finance and investing find ourselves in discussions about investing with our friends family and colleagues.  Naturally part of this discussion centres around venting when things do not go our way or when we feel we have been cheated or when corporate executives or directors of companies we have invested in undertake actions that we feel are not in our best interests.

Given the important of the internet in modern communications, more and more of these communications are happening online through investment forums (such as HotCopper) or through people expressing views on their own blogs (such as I do on this one) or by commenting on other people's blogs. As readers of this blog would know I have frequently criticised companies - both listed (such as FKP over their rights issue) and small er companies(though less so the small companies - only when I think they are real scams).

However...keep in mind that speech is not free and that you can be sued for defamation

When you post something on the internet it never goes away - we all know that.  It's the reason we are all so careful about our Facebook and other privacy settings.  However we seem to forget this when we are on investment forums talking to other 'hard done by' investors.  What you always need to keep in mind, however, is that you can be sued for these comments.

Although the story seems to have died down somewhat now, this issue got a fair bit of publicity when Susanne Deveraux, a retired nurse from Queensland, was sued by Empire Oil and Gas for defamation in
the West Australian courts for comments she had posted on the HotCopper discussion forums which were critical of that company's management.  You can read a summary of the story here (Michael West has done some other great pieces on this saga so make sure you have a read of them too).

If that story does not give you pause before you start posting abuse of the management teams on the internet then I don't think you appreciate the implications of what you are doing.

Companies cannot sue individuals for defamation...but there is a loophole

While it is true that in Australia, large companies cannot sue individuals for defamation (a measure introduced to stop large companies using the law to bully individuals) there is a loophole.  What companies do is to get the management teams and directors of the companies to sue their shareholders in the name of the individual directors or management.

That way it is an individual suing an individual.  But here is the rub...these litigation suits are often funded by the company themselves.  Although legally you are being sued by an individual, who theoretically has the same financial resources as you...in reality you are being sued by a large corporation whose pockets are deeper than yours.

...but 'I only posted the truth'

The truth is a complete defence to a defamation lawsuit but you need to consider some things:

  • Do you have every single piece of evidence necessary to support your claim of truth?  
  • Are you posting emotionally or because you are angry?  If you are then the chances are that your 'truth' is more subjective than objective
However the biggest thing you need to consider is that defending a lawsuit is expensive even if you are right!  You will have to pay your lawyers costs, court costs, travel costs, take time off work etc.  AND even if you do win the case you will only ever get ~30% of your costs back (an award of costs is almost never for the full 100% of your costs)

If you lose then you're up for your costs (as above), the other parties costs AND the damages awarded against you.  That would send most of us bankrupt or chew through most of what we have worked so hard for.

So before you post a negative post about a company online...

Think about whether it is worth it given what I have said above.  If you are really intent on posting it (as in the posts I have done) then make sure
  1. You have some pretty strong evidence to back up what you are saying...and keep this evidence is a safe place
  2. Even if you feel very strongly about something...soften your language.  You do not need to be overly emotive when giving the facts - people will get the general idea
  3. Be wary of making blanket statements
As an aside - this is why I moderate comments on this blog and why I do not post half the scams or exposes which are emailed through to me.  I'll definitely have a look at materials you send through but if I cannot independently verify the important stuff...I'm not going to post it.

You May Also Be Interested In:

Businessprofiles.com - Unethical but probably legal

No comments:

Post a Comment