Oneflare Pty Ltd v Chernih

Oneflare Pty Ltd (the appellant) and Mr Chernih (the respondent) were parties to a contract for the provision of search engine optimisation (SEO) services. The dispute concerned whether the respondent's implementation of an "aggressive" SEO strategy, which involved creating "unnatural," "artificial," or "spammy" links to the appellant's website, constituted a breach of contract. This strategy led to the appellant's website being demoted in Google search results, causing a loss of business. The appeal was heard by Meagher, Gleeson, and Leeming JJA in the Court of Appeal of New South Wales.

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.