The Defamation Act 2013 (“the Act”) reformed the law relating to slander and libel in England. It was heralded by a Justice Minister as “the end of a long and hard fought battle to ensure a fair balance is struck between the right to freedom of expression and people’s ability to protect their reputation.” Many assumed that it would have a significant impact on potential defamation claimants, especially commercial entities seeking redress.
A key reason for this was that Section 1 of the Act created a new entry requirement for those wishing to bring a claim: a claim can only be brought if the relevant publication “caused or is likely to cause serious harm” to the complainant’s reputation. In the case of bodies trading for profit (“corporates”) the Act goes on to make clear that the serious harm test will not be met unless the harm has caused or is likely to cause “serious financial loss.”
But should potential claimants in the commercial sphere, in particular corporates, treat the new entry requirement introduced by section 1 as a significant bar to bringing a defamation claim? In fact, despite initial appearances, the new entry requirement is neither as new nor as restrictive as it may at first seem:
- The requirement is not that the corporate claimant necessarily be able to prove that it has suffered “serious financial loss.” It is enough to be able to show that it is likely that the publication will cause it such loss. That is hardly surprising since, otherwise, the corporate might be left unable to sue for any remedy at all until sufficient time had passed following the offending publication for evidence to emerge to demonstrate the presence of serious financial loss caused by it. That would be particularly hard on a corporate where the offending statement continues to be repeated and, in some cases, where it does not yet know the extent to which the offending statement has been distributed.
- Corporates have always faced the difficulty that, even where they could sue to prevent repetition of a defamatory statement and secure vindication of their reputation (in many cases, the main objectives), securing damages for defamation was problematic, and probably feasible only in the most serious of cases. Defamation damages for corporates were, and remain, available only in practice if they prove actual damage to their reputation as a consequence of the publication of the defamatory words. That is not always going to be easy to do but, in that respect, all that has changed is that under the Act, corporates will only retain the opportunity to seek any remedies for defamation, whether or not they wish to pursue a claim for substantial damages, if they can show at minimum that it is likely that the publication has caused it serious financial loss; if it cannot do that, it is at risk of its claim being struck out at an early stage.
- Against that, even before the passing of the Act, judge-made law meant that the courts were able to (and did) sift out at an early stage of proceedings those cases where the harm done was not so real and substantial as to justify the case being allowed to continue. So, even under the old law, a case where there was very limited publication of a libel or where the anticipated damage caused was relatively small was susceptible to being struck out at an early stage of proceedings. A good example of this arose in November 2014 in one of the few judgments to date since the Act came into force: a defamation action had been brought by a member of the Royal Family of the Kingdom of Saudi Arabia and by a Saudi listed company (through which he held much of his wealth). The claim by the company was dismissed. This was not because of the impact of the Act, but because the words complained about were insufficiently serious to amount to defamatory allegations about the company.
So what can the would-be claimant do if it wishes to contemplate proceedings for defamation? The answer lies in part in good preparation and evaluation and, in part, in assessing other available solutions.
It is plain good sense that any would-be claimant (whether a corporate or not) should think carefully before embarking on any defamation claim. In doing so, three important topics should be considered. First, has the offending publication caused or is it likely to cause serious harm? If it has not, then apart from raising the obvious challenge of whether the claim should be pursued at all, other possible claims or remedies should be explored. If though the publication has “caused or is likely to cause serious harm,” the prospective claimant should examine what the objectives of litigation would be and the risk profile of using litigation to achieve that objective. Taking these questions in turn:
Has the publication caused, or is it likely to cause, serious harm?
Following another of the few judgments so far delivered on the impact of section 1 of the Act, as the law currently stands supervening events, such as the publication of a swift retraction and apology, can be taken into account in assessing whether a defamatory statement has caused, or is likely to cause, serious harm. Unless and until that issue is tested in a higher court, it follows that a publisher of a highly damaging libel might escape liability altogether if it publishes a swift apology. Assuming, though, that no such apology is published, how should a claimant approach the need to prove that the publication has caused or is likely to cause, serious harm?
Where the claimant is a natural person, whether a publication has “caused or is likely to cause serious harm” may be as obvious to the claimant as it will be to a court and would be readily inferred. For example, it is hard to see how anyone could seriously question whether a statement in a respected newspaper to the effect that a company director, who works in a highly regulated sector, had committed an act of fraud met this test.
But where the claimant is a corporate, unless the offending publication is so extreme that the likelihood of serious financial loss would in all likelihood be inferred by the court, it will be important to explore whether evidence will be available to demonstrate this. This will be so even if the claimant has no ultimate objective of recovering damages, being more concerned with vindication of its reputation and avoiding repetition of the libel, so as to counter the prospect of an early attempt to strike out the claim. What type of evidence will be needed will vary from case to case but it might consist of statements from those who have declined to enter into contracts with the claimant as a consequence of the offending publication, or perhaps statements from experts in the field of brand valuation and assessing the impact on their value of damaging occurrences. In the event of an early application to strike out the claim for not passing the new entry requirement described above, that type of evidence will have to be prepared and served quickly.
Particularly where there may be doubt about the claimant's ability to establish that the publication has caused, or is likely to cause, serious harm, what other possible claims or remedies might be explored?
In cases where the obvious claimant is a corporate, it will be worth considering whether the defamation is sufficiently broad to enable (for example) senior executives from within the corporate to bring a claim either as well as or instead of the corporate. So, for example, the publication of words suggesting financial mismanagement by a corporate might well enable the corporate to sue for libel but they might also enable its CFO, or perhaps its entire board of directors, to do so (if the sting of the libel is such as to call into question the competence of those charged with financial management of the corporate).
If a claim can be brought by natural persons, that course is likely to be worth consideration, with thought to be given to at least the following issues arising:
Will it be easier for the executives to prove that the publication has caused or is likely to cause serious harm to them than for the corporate to demonstrate that the publication has caused or is likely to cause it serious financial loss.
Would the ability of the executives to claim for general damages for hurt feelings (which is not available to corporates) be a useful weapon in addition to a claim by the corporate for damages for loss to the business? Conversely, if the executives alone sue, they will not be able to claim for damage suffered to the business: does that matter?
If the claim is brought only by the executives and they are successful at trial, will their vindication be sufficient vindication for the corporate too?
Sometimes defamation is not the only possible cause of action available and any alternative causes of action should be considered.
For example, if the offending statement comprise factual inaccuracies which have been published maliciously (meaning, at minimum, that they have been published with wilful disregard to whether they are true or not), with the intention of damaging the claimant, a claim in malicious falsehood might lie. A good example might be a series of advertisements by one business making false claims about the prices or qualities its products compared to those of another business. A claim in malicious falsehood would fall outside the scope of the Act but, again, damages will only be recoverable in so far as the claimant proves that damage has been suffered which was caused by the offending publication.
Other possibilities include seeking intervention by one of the new bodies set up in the aftermath of the Leveson Inquiry (for example IPSO or, when it is functioning, IMPRESS).
Alternatively, and whilst this will not always be seen as a satisfactory alternative, complainants can consider forms of self-help. For example, asking a newspaper to provide a right of reply and publish a response to the defamatory statement from the complainant; or offering an interview to a publication prepared to publish the interview which may in itself provide the vehicle to respond to the defamatory statement; or, possibly, as a response to false comparative advertising, taking out an advertisement with the objective of demonstrating the falsity of the original comparison.
None of these remedies will necessarily be appropriate or adequate in a particular case but they can be considered where the litigation alternative is either unpalatable or appears to be unavailable. In doing so, it will usually be instructive to analyse what the objective would be of suing and, of course, the risk profile of doing so.
What is the objective of suing?
The principal objective of suing will vary from case to case. For example, if a corporate is faced with what it perceives to be a campaign of false comparative advertising (or “knocking copy”), its principal motivation in bringing a claim may be to prevent further repetition. In other cases, a claimant (whether a corporate or not) may feel that the defamatory statement is so serious that the vindication a judgment can provide is essential to restore its reputation. The recovery of damages may also be a key motivating factor but, at least where the claimant is a corporate, the prospects of actually being able to prove that substantial damage has resulted need to be carefully considered.
The risk profile of suing
Litigation risk needs to be considered in relation to any claims to be brought before the courts. Experienced litigators know that there is no such thing as an inevitable outcome in litigation. So, evaluating the prospects of success, which defences would be likely to be raised and their prospects of defeating the claim, whether the particular objectives set for the case will be achieved, and the anticipated legal costs at stake is essential. But in defamation cases, the risk profile extends beyond these matters because reputations are being put on the line and under the gaze of public scrutiny. The result is that it becomes not a simple equation of winning or losing the litigation but assessing what the impact of the trial might be for the claimant certainly if the claim fails, and sometimes even if it succeeds. Many will view the much-publicised outcome of the (unsuccessful) recent action brought by the Rt Hon Andrew Mitchell MP against News Group Newspapers over the so-called "Plebgate” affair as an example of this.
Any legal proceedings for defamation must be instituted within one year of an offending statement being published (which, of particular relevance to internet based publications, now runs from the day the offending statement first appeared). Typically though complainants want to, and are well advised to, react far more quickly than that when they become aware of a defamatory statement. The Act has made it all the more important for complainants to seek out specialist advice at an early stage given the need to assess the viability of litigation, as against alternatives, including whether the new entry requirements can be met and, where appropriate, whether there are ways of mitigating their restrictive effect.