In June 1994 a libel trial began in the Royal Courts of Justice in London that would ultimately become the longest case in English legal history. Lasting 313 days, it pitted McDonalds, the fast food giant and multi-billion dollar company, against Helen Steel and David Morris, two activists of modest means who had distributed leaflets which were critical of the company.

Throughout, McDonalds was represented by a legal team including leading and junior counsel and solicitors. The defendants, who couldn’t get legal aid for a libel case, got some pro bono assistance from friendly lawyers but largely represented themselves. After deliberating for 6 months the Trial Judge gave judgment for McDonalds in a 762 page judgment, finding that the defendants had been unable to prove the truth of a number of allegations. McDonalds was awarded £50,000 in damages (McDonalds did not seek its costs).

After the Court of Appeal had dismissed their appeal, Steel and Morris took their case to the European Court of Human Rights, with the assistance of their pro bono legal team (Keir Starmer, Anthony Hudson and Mark Stephens).  In Steel v United Kingdom ((2005) 41 EHRR 22) the Court found violations of Article 6 and Article 10 ECHR. The combination of the lack of legal aid, the enormous burden of proving the truth of the allegations and the strong public interest in freedom of expression about the activities of powerful companies infringed their rights to a fair trial and to freedom of expression. The Court also found that the damages award itself breached Article 10, noting that under English law McDonalds had not been required to prove that it had suffered any financial loss as a result of the publications.

The absence of the need to prove financial loss arose from what was known as the “presumption of harm” in English libel law. In 1894, in a case in which a newspaper been sued for libel after criticizing the way a colliery owner housed its workers, the Court of Appeal had held that the presumption of harm applied to companies as well as to human beings (South Hetton Coal Co Ltd v North-Eastern News Association Limited [1894] 1 QB 341 (CA)). That had been the law for the previous 100 years.

Jameel v Wall Street Journal Europe

In 2006, one year after the European Court of Human Rights’ judgment in Steel, a case came before the House of Lords which directly challenged the presumption of harm for corporate claimants. A Saudi businessman, Mr Jameel and a related company sued the Wall Street Journal Europe for libel relating to an article concerning money laundering. The House of Lords allowed the appeal on the basis of the WSJE’s public interest defence. But the UK’s highest court was also asked to decide, for the first time, whether a company should have standing to sue in libel without having to show financial loss.

In the case of Jameel (Mohammed) and another v Wall Street Journal Europe Sprl [2007] 1 AC 359 (HL) the House of Lords was split on the issue, but by a 3-2 majority (in judgments which were strictly obiter) they reaffirmed the presumption of harm for companies. The majority (Lords Bingham, Hope and Scott) held that a company’s good name was a thing of value and that the presumption of harm was necessary because it was difficult for a company to prove financial loss arising from a libel. In their minority judgments, Lord Hoffman and Baroness Hale argued that a presumption of harm in libel cases was anomalous and inappropriate and that it had a disproportionate impact on freedom of expression, limiting the ability of the media and campaigners to hold corporate power to account.

Lord Hoffman summed up his criticism of the presumption of harm as it applied to companies:

“In the case of an individual, his reputation is a part of his personality, the “immortal part” of himself and it is right that he should be entitled to vindicate his reputation and receive compensation for a slur upon it without proof of financial loss. But a commercial company has no soul and its reputation is no more than a commercial asset, something attached to its trading name which brings in customers. I see no reason why the rule which requires proof of damage to commercial assets in other torts, such as malicious falsehood, should not also apply to defamation.” [91]

Baroness Hale also emphasized that the rationale for the presumption of harm in relation to individuals, namely hurt feelings and damage to social relations caused by reputational harm, did not apply to companies. She noted that the distinguished tort expert Professor Tony Weir had criticized the presumption of harm for companies, quoting from an article of his that, “To prefer the interest in maintaining the corporate image to the right of the citizen to say what he reasonably believes to be true is a grim perversion of values.” She recorded that as far back as 1975 the Faulks Committee on Defamation had recommended that companies should not be able to sue for libel unless they could show actual or likely financial loss.

She argued that the same reasoning that had led the House of Lords to prevent central and local government from being able bring libel claims in Derbyshire v Times Newspaper [1993] AC 534, namely the chilling effect of libel claims on freedom of expression, was also a strong argument in favour of restricting the ability of companies to sue in libel. A requirement for companies to show likely financial loss in libel claims would, in her view

“achieve a proper balance between the right of a company to protect its reputation and the right of the press and public to be critical of it. These days, the dividing line between governmental and non-governmental organisations is increasingly difficult to draw. The power wielded by the major multi-national corporations is enormous and growing. The freedom to criticise them may be at least as important in a democratic society as the freedom to criticise the government.” [158]

The chilling effect of potential libel claims by companies was one of the major concerns of the Libel Reform Campaign in the run up to what would become the Defamation Act 2013. The Government decided to change the law, adopting Baroness Hale’s invitation to strike a new balance between freedom of expression and the protection of corporate reputation by introducing a requirement to prove financial loss. The mechanism for this was to be a new serious harm test for companies in s.1(2) of the Defamation Act 2013.  In Part 2 I will look at the impact of this provision.

Guy Vassall-Adams QC is a member of Matrix Chambers, practising the field of media and information law. He intervened for the Media Lawyers Association in the Supreme Court in Lachaux. Back in 2006 he was a junior for the WSJE in Jameel in the House of Lords.

This post is published on the Matrix Media website.