Court of Appeal
Supreme Court
New South Wales
- Amendment notes
Medium Neutral Citation: Oneflare Pty Ltd v Chernih [2017] NSWCA 195 Hearing dates: 19 June 2017 Decision date: 07 August 2017 Before: Meagher JA at [1];
Gleeson JA at [95];
Leeming JA at [96]Decision: Appeal dismissed with costs.
Catchwords: CONTRACTS – construction – informal and partly oral contract to provide search engine optimisation services – where service provider instructed to undertake “aggressive” strategy including link building – where “unnatural”, “artificial” or “spammy” links to target website created in violation of Google Webmaster Guidelines – where algorithmic and human demotion in search results applied by Google – whether “aggressive” strategy entailed impugned link building
CONTRACT – remedies – damages – assessment – where marginal profit calculated assuming initial sales revenue from before revenue loss period and growth rate from period after consequences of breach ceased – whether appropriate to apply discount for endogeneity problem, apparent difference in growth trend lines and counterfactual possibility of adverse competition and harmful conduct by plaintiff
EVIDENCE – witness evidence – cross-examination – rule in Browne v Dunn – reliability and truthfulness – where adverse credibility findings made against directors of plaintiff – where substantial points of difference between significant affidavit evidence of plaintiff’s directors and defendant – where truthfulness of plaintiff’s directors put in issue by opening statements and cross-examination – whether denial of procedural fairnessCases Cited: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664
Browne v Dunn (1893) 6 R 67
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 90 ALJR 770
Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361; [2011] HCA 11
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
McCartney v Orica Investments Pty Ltd [2011] NSWCA 337
Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219Category: Principal judgment Parties: Oneflare Pty Ltd (Appellant)
Nicholas Chernih (First Respondent)
Linkbuild SEO Pty Ltd (Second Respondent)Representation: Counsel:
Solicitors:
NJ Kidd SC (Appellant)
MK Condon SC, DW Robertson (First Respondent)
Levitt Robinson (Appellant)
Robertson Saxton Primrose Dunn (First Respondent)
File Number(s): 2016/301512 Decision under appeal
- Court or tribunal:
- Supreme Court
- Jurisdiction:
- Equity – Commercial List
- Citation:
- [2016] NSWSC 1271
- Date of Decision:
- 13 September 2016
- Before:
- McDougall J
- File Number(s):
- 2014/336363
Headnote
[This headnote is not to be read as part of the decision]
The appellant company retained the respondents to devise and implement an “aggressive” search engine optimisation strategy to improve the ranking of its website on Google. The contract between the parties was partly oral, and the evidence of the appellant’s directors and the respondents as to its terms differed substantially. The respondents proceeded to generate links to the appellant’s website which were described as “unnatural”, “artificial” or “spammy” and violated the Google Webmaster Guidelines. Upon identifying these links as non-compliant, Google algorithmically and then manually demoted the appellant’s website in its search rankings. The appellant’s sales revenue thereafter declined.
The appellant brought proceedings against…
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- AGLC
- Oneflare Pty Ltd v Chernih [2017] NSWCA 195
- Case
- [2017] NSWCA 195
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the court were: first, whether the respondent's link-building activities were within the scope of the "aggressive" strategy contemplated by the contract; and second, the appropriate method for assessing damages for the loss of business suffered by the appellant, including whether certain discounts should be applied to the calculated marginal profit. The court also considered whether the appellant's directors had been denied procedural fairness during cross-examination, particularly in light of adverse credibility findings made against them.
The Court of Appeal found that the contract did not expressly or implicitly permit the creation of "unnatural" or "spammy" links, which were in violation of Google's Webmaster Guidelines. The court reasoned that an "aggressive" strategy did not extend to conduct that would foreseeably harm the appellant's online presence. Regarding damages, the court determined that the appellant's method of calculating marginal profit was flawed, particularly in its assumptions about initial sales revenue and growth rates, and that a discount for endogeneity, differing growth trends, and the possibility of adverse competition or harmful conduct by the appellant was appropriate. The court also found no denial of procedural fairness, as the truthfulness of the appellant's directors was a central issue and was properly raised during cross-examination.
The appeal was dismissed, and the appellant was ordered to pay the respondent's costs.
Orders
Orders of the court
Appeal dismissed with costs.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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