The High Court awarded £444,000 in damages for loss of business in a defamation claim for defamatory comments made against the claimant by a competitor in an attempt to steal customers. This is one of the first cases to be heard in light of the Defamation Act 2013 and provides useful guidance on the Court’s approach to damages. It is noteworthy that the damages award included £66,000 in relation to the fees of public relations consultants hired by the claimant to help mitigate reputational damage in the marketplace. ReachLocal UK Ltd v Bennett  EWHC 3405 (QB), 21 October 2014.
The case involved an application for final relief following default judgement being entered against the defendants, who had “orchestrated a sustained campaign of denigration” against a rival online marketing and advertising company, ReachLocal UK Limited. Although the merits of the defamation claim were not heard, the judgment on damages provides a strong indication on how the Court will assess recoverability of losses under the Defamation Act 2013.
In March 2014 ReachLocal issued claims for defamation, malicious falsehood, breach of confidence and breach of contract.
A year earlier, on 13 March 2013 the parties had entered into an affiliate agreement by which it was agreed that the defendant would refer potential customers to the claimant. However, the defendant began a campaign of defamation using emails, website publications, blog posts and telephone calls to customers which made “serious allegations of grave dishonesty” and alleged that the claimant had inflated their prices and were scamming their customers. This “calculated and cynical campaign” by the defendants caused substantial losses to ReachLocal and “damaged their trading reputation”.
The High Court awarded damages which included an award for special damages for loss of business, payments to customers and PR advisors and general damages by way of vindication. The loss of business which was based on the customers’ decision not to proceed with advertising they had booked, but not yet paid for. ReachLocal had lost 71 customers that had cancelled their commitment to advertising during the period of February to September 2014. However, the court made a 20% discount because it was accepted that the impact of the defamatory communications was only one of the reasons advanced by customers for cancelling their advertising commitments.
The claimant was also able to recover £60,728 that it has paid to their customers to encourage them to stay, and the £66,600 it had cost to employ a public relations consultant to address the reputational damage that ReachLocal had suffered.
The court also took into account the gravity of the allegations in assessing the general damages. HHJ Richard Parkes QC explained that the tactic of explaining the defamatory allegations against ReachLocal were made “out of a sense of high ethical purpose” would make the allegations even more persuasive and convincing. The claimant was also not a long-established business and therefore was especially vulnerable to attack.
The case is a warning to businesses that engage in negative marketing campaigns designed to win customers from competitors. It also shows the Court’s willingness to adopt a pragmatic approach when assessing damages and, in particular, the recovery of damages in relation to PR consultants employed to mitigate reputational damage.