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Corporate Claimants in Libel: Part 2, The Defamation Act 2013 and its Impact by Guy Vassall-Adams QC

Related Member(s):
Guy Vassall-Adams QC
Related Practice Area(s):
Media and Information Law

Parliament decided to legislate in relation to corporate libel claimants by tackling head on the presumption of harm. By s.1(1) of the Defamation Act 2013, Parliament established the well-known serious harm test: “A statement is not defamatory unless its publication has caused or is likely to cause serious harm to reputation”. By s1.(2), it was provided that “harm to the reputation of a body that trades for profit is not serious harm unless it has caused or is likely to cause serious financial loss”.

A number of cases involving corporate libel claimants were decided before the Supreme Court’s decision in Lachaux v Independent Print [2020] AC 612 finally settled the meaning of the “serious harm” test.

In Brett Wilson LLP v Persons Unknown [2015] EWHC 2628 (QB), Warby J was prepared to find in an application for default judgment that publication of a highly defamatory posting on the Solicitors from Hell website which had ranked high in Google Search results for 6 months and had led to the loss of one customer and in all likelihood deterred others had caused “serious financial loss” to a small, boutique solicitor’s firm. In Pirtek (UK) Limited v Jackson [2017] EWHC 2834 (QB), the company also succeeded in obtaining default judgment on its libel claim. In Seventy Thirty Limited v Burki [2018] EWHC 2151 (QB), the much publicised libel case about the disappointing dating agency,  HHJ Richard Parkes QC accepted that serious financial loss had been established where one client and his fees had been lost to a very small company. However, in Alexander-Theodotou & Others v Kounis [2019] EWHC 956 (QB), Warby J held that a libel claim brought on behalf of a small solicitor’s firm would have failed on s.1(2) because there was insufficient evidence of financial loss.

Lachaux v Independent Print

However, until the Supreme Court’s judgment in Lachaux there had been no discussion of the proper interpretation of s.1(2) by the appellate courts. Lachaux itself did not involve a corporate claimant and until it reached the Supreme Court the case focussed exclusively on s.1(1), the serious harm test that applies to all claimants. However, because the two provisions were related to one another, they had to be construed together.

In relation to s.1(1), the Supreme Court allowed the appeal against the Court of Appeal’s judgment and upheld Warby J’s judgment at first instance. Lord Sumption (giving the Court’s unanimous judgment) held that s.1(1) “not only raises the threshold of seriousness above that envisaged in Jameel (Yousef) and Thornton, but requires its application to be determined by reference to the actual facts about its impact and not just the meaning of the words”.

In relation to s.1(2), Lord Sumption had this to say about its meaning at [15]:

“The financial loss envisaged here is not the same as special damage, in the sense in which that term is used in the law of defamation. Section 1 is concerned with harm to reputation, whereas (as I have pointed out) special damage represents pecuniary loss to interests other than reputation. What is clear, however, is that section 1(2) must refer not to the harm done to the claimant’s reputation, but to the loss which that harm has caused or is likely to cause. The financial loss is the measure of the harm and must exceed the threshold of seriousness. As applied to harm which the defamatory statement “has caused”, this necessarily calls for an investigation of the actual impact of the statement. A given statement said to be defamatory may cause greater or lesser financial loss to the claimant, depending on his or her particular circumstances and the reaction of those to whom it is published. Whether that financial loss has occurred and whether it is “serious” are questions which cannot be answered by reference only to the inherent tendency of the words. The draftsman must have intended that the question what harm it was “likely to cause” should be decided on the same basis.”

In summary, the Supreme Court found that s.1 of the Act means what it says: to bring a claim for libel a company must show serious reputational harm under s.1(1) and serious financial loss, whether actual or likely, arising from that harm under s.1(2).

Gubarev v Orbis

The recent judgment of Warby J in Gubarev v Orbis [2020] EWHC 2912 (QB) illustrates the impact of applying s.1(2) in the manner indicated by the Supreme Court. That case concerned a claim for libel brought by a Russian businessman and one of his companies (Webzilla Limited) in relation to the dossier produced by former diplomat Christopher Steele concerning Donald Trump and his links to Russia. While the claims failed principally on the ground that Orbis was not responsible for the dossier’s publication, the judgment also focussed on whether Webzilla had met the serious harm test.

Warby J summed up the effect of s.1(2) on corporate standing in libel claims at [42]:

“In principle, all cases that fall within s.1(2) require proof of serious reputational harm that results from the statement complained of and financial loss that is (a) serious and (b) consequent on the reputational harm”

In that case, while Warby J accepted the company’s case that that there had been substantial republication of the defamatory allegations in the EU and was prepared to infer that this had caused serious injury to the reputation of the company, the company’s claim nonetheless failed as it had not been shown that that these publications led or were likely to lead to substantial financial loss.

Warby J also agreed with the company’s submission that strict proof of financial loss was not always required; as in other areas of law, there was potentially room for inference on the right facts. However he emphasised:

“But inference is not the same thing as speculation; there must be a sound evidential basis on which to infer that the publication is more likely than not to have caused serious financial loss. Proof that a statement with a seriously defamatory tendency was widely published in the relevant jurisdiction(s) is not likely to be enough. More evidence, and a more detailed examination of the context, will normally be required. The claimant also bears the burden of proving that any loss it proves is more likely than not to be a result of the publication complained of, rather than some other cause or causes.” [44]

Concluding Remarks

It is clear from Gubarev v Orbis that for a company to establish serious financial loss arising from a particular libel will often be evidentially difficult. But it is particularly hard for large companies, for two main reasons. First, in a large company with complex corporate structures and financial affairs, the factors influencing its bottom line will be many and various, so establishing that a particular publication caused or is likely to cause loss, becomes very difficult. Secondly, “serious” financial loss should be judged by reference to the size of the company; what would be serious for a corner shop will not be serious for McDonalds, hence, the larger the company, the larger the loss must be in order to qualify as serious.

Conversely, small companies with straight-forwarded finances that depend on a small number of customers may find it easier to show, as in Brett Wilson, that a particular publication actually had the effect of causing clients to withdraw their services and that, because of their small size, this caused serious financial loss. In addition, because s.1(2) only applies to a body that trades for profit, charitable or other companies that do not trade for profit will not have to meet the s.1(2) test as part of any libel claim.

This outcome has a certain logic in terms of Article 10 and the countervailing interest in the protection of corporate reputation. The main driver for legal reform in the 2013 Act was the strong public interest in free expression about the activities of multi-national companies, some of which are as wealthy and powerful as countries, and the potential chilling effect of enabling them to bring libel claims. Section 1(2), as interpreted by the Supreme Court in Lachaux, makes it very difficult in practice for such companies to bring successful libel claims. Yet the door remains ajar for a small business severely affected by a particular libel to bring a successful claim, on the right facts.