This post follows on from my Inforrm post on 22 January (Defamation Act 2013: The value of corporate reputation), which considered the difficulties corporate claimants may face in establishing serious harm by demonstrating serious financial loss, pursuant to sections1(1) and 1(2) of the Defamation Act 2013.
According to Louise Lambert’s recent post (Defamation Act 2013: not all bad news for corporate claimants):
“It is not clear yet exactly what evidence will be required to demonstrate “serious financial loss“, but this is likely to include evidence of loss of custom, loss of sales or a general decline in business”.
There is, without doubt, a lack of clarity as to what evidence will be required to demonstrate serious financial loss. Lambert’s assessment correlates with the opinion of Paul Farrelly who, during the Public Bill Committee’s Parliamentary Debate on the Defamation Bill, argued that loss of reputation can only be derived from a company’s profit and loss and sales.
However, using Moore-Bick LJ’s judgment in Tesla Motors Limited and another v British Broadcasting Corporation ( EWCA Civ 152) as an illustration of how corporate claimants may be affected by the section 1(1) and 1(2) provisions going forward, it is submitted that evidence of loss of custom, loss of sales or general decline in business may not be sufficient.
Tesla argued that, in comparison with Lotus’ Elise, sales were lower for the Roadster in the UK than in the EU and USA, due to a review of the car given by Top Gear’s Jeremy Clarkson. In relation to investor confidence, Tesla referred to a ‘roadshow’ held in 2010 as part of preparations for its stock market flotation. The company alleged that, although overall 75% of those who had expressed initial interest in buying shares requested an allocation, in London only 36% did so. Moore-Bick LJ dispensed with both arguments due to acute issues with causation.
Establishing causation by demonstrating serious financial loss will not be overly problematic where there is one defamatory imputation clearly linked to a drop in sales. However, this ‘ideal’ situation is just that; idealistic. The challenge posed by causation, as illustrated by Tesla, is where a number of imputations are made, all of which may have contributed to a ‘loss’, but only one is actually defamatory. To overcome this causation challenge the claimant would have to prove that this single imputation was the cause of the loss. If the claimant successfully jumps this hurdle, they then have to quantify what loss that individual imputation has caused. Consequently, as in Tesla’s case, it may prove impossible for a corporate claimant to separate what loss is linked to the defamatory imputation and what is linked to other, legitimate damage, to its reputation.
As demonstrated by Tesla, this acute issue with causation is likely to lead to an increase in applications by defendants for summary judgment, pursuant to CPR 24 (on the grounds that there is no real prospect of the claimant being able to demonstrate at trial that it has suffered any quantifiable loss by reason of actionable statements), and for statements of case to be stuck out, in accordance with CPR 3.4 (on the basis that the particulars of claim disclose no reasonable grounds for bringing the claim).
In her post Lambert states that:
“The better view may be that the effect of subsection 1(2) in relation to corporate claimants is simply to exclude what may be regarded as trivial claims in financial terms and ensure that claims for defamation are limited to serious allegations.”
The unsatisfactory position outlined above demonstrates that this is only one side of the argument. To the contrary, the requirement to establish serious financial loss, and the potentially insurmountable causation challenges that this will pose, could leave corporate claimants open to defamatory attack by publishers who are encouraged by a claimant’s prospects of not being able to overcome CPR 3.4 and 24.2.
Ultimately, this could lead to poorly researched and irresponsible journalism. Journalism of this kind could result in the devaluation of legitimate and justified criticism of companies (which has been judicially recognised as at least as important in a democracy as criticising government (per Baroness Hale in Jameel v Wall Street Journal Europe Sprl  1 AC 359 at ), as the public may not be able to differentiate between legitimate criticism and spurious comments.
Peter Coe is a Senior Lecturer in Law at Buckinghamshire New University, and a Barrister (Door Tenant) at East Anglian Chambers.
For greater analysis of the issues outlined above, and more, see his forthcoming paper in April’s edition of Entertainment Law Review: “The Defamation Act 2013 and CPR 3.4 and 24: A sting in causation’s tail”.