Under English law, defamation occurs when there is publication to a third party of words or matters containing an untrue imputation against the reputation of individuals, companies or firms which serves to undermine that reputation in the eyes of right thinking members of society. The tort of defamation exists to afford redress for unjustified injury to reputation. The injured reputation is vindicated by a successful action.

The law presumes damage upon the proof of publication of the words that are defamatory of the Claimant. Further the presumption of damage is irrebuttable. However, there is not necessarily a presumption that material on the internet has been published to anyone.

Case study
We now turn to consider the hypothetical situation where Company A has posted an article on its website stating that Company B has been defrauding customers.

On the assumption that the article was made without any proper basis and was, in fact, defamatory, we consider:

a.       what remedies (if any) Company B would have against Company A in England; and

b.       whether the position would be any different in this jurisdiction if (i) one of Company A's directors (Mr A) had also defamed Company B; or (ii) the article posted by Company A also defamed a director of Company B (Mr B).

On the facts of the case study, Company A has posted a defamatory entry on its website and does not have any legitimate defence to the defamatory publication (e.g. justification, fair comment or privilege). As long as Company B can show that a third party has accessed Company A’s website then there will exist a cause of action in defamation.

The following remedies would, potentially, be available to Company B:

a.        damages; and/or

b.       an injunction restraining Company A from continuing to publish the defamatory comments, or similar allegations, on its website; and/or

c.       permission for Company B to read a statement in open court with the aim of vindicating Company B’s reputation.

In addition, although not ordered by the Court, Company B could by negotiation obtain from Company A an apology and retraction which will generally be made in the same media as the original publication. Further, the parties may agree to a reading of a joint statement in open court. If Company B accepts the offer of an apology it should be careful to reserve its right to proceed with the defamation claim.

Compensatory damages

Compensatory damages are categorised as general and special damages. General damages serve three functions, namely: (i) to act as a consolation to the Claimant for the distress he has suffered; (ii) to repair the harm to his reputation; and (iii) as a vindication of his reputation.

A company, unlike an individual, cannot claim aggravated damages for distress or hurt as it is not deemed to have feelings. Therefore, unless Company B has suffered any actual damage, any award for loss of reputation will generally be low. Any award would depend on the number of people who reviewed the website, the identities of those people (a higher level of damages will be possible if they were customers or potential customers of Company B), the seriousness of the defamatory content and the steps taken by Company A to rectify the situation.

The position in relation to the level of general damages would be different if the message posted by Company A also defamed Mr B, a director of Company B. Mr B, as an individual, could also claim damages to compensate for any distress and / or hurt suffered. The likelihood would be that the level of general damages payable by Company A to Mr B would be much higher than to Company B.

If Mr A, one of Company A’s directors, also defamed Company B then he would be jointly liable. The general principle is that anyone who participates in or authorises a defamatory publication is jointly liable, unless their involvement is so limited that they will be covered by the defence of secondary responsibility under s.1 of the Defamation Act 1996. In effect, Company B could bring a claim against both Company A and Mr A, with the likelihood being that Company A would pay the damages and both would apologise and “put in a retraction”.

Offer of amends

In addition to the analysis above, this article briefly examines below how Company A might respond to a claim brought against it by Company B:

As, on the facts, Company A has no substantive defence to the libel it would be advised to make an “offer of amends”, which is effectively an offer by Company A to settle the matter.

This procedure, created by sections 2 to 4 of the Defamation Act 1996, has been in force since 28 February 2000. It has been used more and more by media defendants to provide what Eady J has called “a fair and reasonable exit route for defendants”.

An offer of amends requires Company A to make a suitable correction and apology and to pay damages to be agreed (or assessed by a Judge) and costs. The advantage of making an offer of amends is that if Company B rejects the offer, Company A has a complete defence to the claim unless Company B can show malice on Company A’s part.

If Company B accepts the offer of amends the claim is brought to an end, although compensation will need to be agreed or assessed by the Court. If an offer of amends has been made, a Judge assessing the level of compensation will generally reduce the amount payable by the infringing party as it has sought to settle the matter without the need for determination of liability at trial.